Media reports of Apple's iPhone 4's reception-challenged antenna appear to be hurting gray-market sales and affecting prices of the device in China.

The price of the smuggled US version iPhone 4 in China's gray market dropped by about 70 percent from 20,000 yuan to 6000 yuan within the last month as antenna-related problems surfaced in the media.

The main reason for the sluggish sales may be Chinese customers are waiting for a clear-cut fix for the new product.

This may be bad news for Apple, which is set to launch the iPhone 4 in Hong Kong at the end of this month. Local media has also speculated that Apple and its Chinese partner, China Unicom, will launch the iPhone 4 in the mainland by the end of this year. Vendors say potential buyers have been spooked by the media reports.

"We sold the first iPhone 4 in Beijing's Zhongguancun for 20,000 yuan on June 25, and a private individual bought it," said Liu Hailing, one of the biggest Apple vendors in Zhongguancun.

However, sales have dropped significantly since "antenna gate" - a blitz of negative publicity about the iPhone 4's reception - broke out.

"Countless customers have inquired about the phone, but the device's signal problem is always the very first question they ask. After that the price drops dramatically," said Liu. Even with the US version pricedat 6,000 yuan, "very few people buy it - even after we assure them that the signal is no longer a problem".

Liu said most buyers want an iPhone 4 before official sales take off as this group is looking to show off the device or give it as a pricey gift.

Scared of a negative reaction from peers, many steer clear. Vendors said those fears stem from questions like: "Is the signal of your iPhone 4 really that bad? Why would you buy a phone that cannot make phone calls?"

Prices for the device have also been a deterrent.

"High gray market prices are another reason keeping customers away, but compared with earlier versions of iPhones, sales of the iPhone 4 are sluggish at best.

This has made vendors leery of maintaining large inventories, as they may never sell.

"We would rather sell other phones, because at least customer won't complain after delivery," said Wang Huan, a vendor in Zhongguancun.

When the iPhone 4 was launched in late June, Chinese consumers felt snubbed at not being able to buy them at the same time as the rest of the world.

But now vendors said consumers are happy that the device's bugs are being dealt with overseas and they can wait for a better version.

Although Steve Jobs announced that only 0.55 percent of customers have complained to Apple about the signal issue, Chinese iPhone fans appear to be far from believing the problem is resolved.

"Why would I need a phone which has already been found to have a design fault? I will stick with my old first generation iPhone until the company solves the problem completely," said Xiao Bing, a customer who put off buying an iPhone 4 last month.

Previously, it wasn't a problem for Apple that Chinese customers bought more iPhones in the gray market than they did in official Apple stores, "Apple sold phones anyway, no matter where they bought them", said Liu.

But now the Chinese are not sure about the iPhone 4 in general, no matter where it is being sold, official or unofficial sales, said Liu, who reportedly sold only 15 iPhone 4s last one month.

On WeiPhone BBS, a popular Apple product website in China, the signal issue is the hottest topic for iPhone fans. They are all eager to know exactly how the antenna and signal work on the iPhone 4.

On July 20, Apple posted record-breaking revenue of $15.7 billion in its fiscal third quarter ending Jun 27 and a net quarterly profit of $3.25 billion. International sales accounted for 52 percent of the quarter's revenue. Mac sales in China increased 144 percent.

"It was a phenomenal quarter that exceeded our expectations all around, including the most successful product launch in Apple's history with iPhone 4," said Apple CEO Steve Jobs in a company press release on Monday.