China Unicom agreed to buy 5m phones for $1.5B, or $300 each. (UPDATE: or not?) We haven't heard what Apple's revenue-sharing agreement is with China Unicom, though. If the reported (low) up-front cost is accurate, Apple is presumably angling for participation down the road; China Unicom may have agreed to obtain a competitive position against its rivals. After all, iPhone users are a premium slice of the subscriber market. (Assuming the numbers are correct as initially reported, and there is no service revenue sharing, and Apple's incremental cost to make the phone is $175, Apple presumably adds at least $625M -- the margin on the minimum order -- to its bottom line over the life of the deal.)
Given the confusion in the media about the terms of the deal, it's premature to speculate what it means for Apple. Supposing that Apple is selling the phones cheaply in China, consider some of the other sources of revenue Apple might tap. The App Store is a ten-figure-a-year business before considering Chinese software demand, for example.
Imagine application demand with Chinese and Indian developers fighting for a share of that pie, competing against each other on cost to make the iPhone more and more useful for less and less money. Imagine the effect on iPhone's value as a platform. (Of course, American programmers will answer: in China and India they can't code anything you will like using; and if this is true, Americans will be selling to China and India rather than the other way around -- but at American per-unit prices, it's doubtful that the unit volume would be very high. Talk to Microsoft about that.) The point is that the App Store as a property is much more interesting when it services a platform that is so much more widespread. This turns Microsoft's old platform argument against it: with Apple's platform so vastly more numerous (and in the hands of such predominantly premium users, who will actually buy apps and services), why would any programmer choose to target a different platform first, or with superior effort?
Interesting, eh? Apple as a dominant platform vendor. How the worm turns.
The fact that the iPhone's development environment is Cocoa, and requires a Mac to code, suggests interesting things about the future of that platform as iPhone dominates the mobile universe. (Note: John Gruber predicts that iPhone will eclipse MacOS X development next year, though he notes that iPhone developers seem interested in becoming Mac developers.)
NOTE: Those wishing to follow this story might check out this site, where Apple's phones in Asia get lots of time and attention.