Start by clarifying the question. In this case you might want to confirm whether the question is how many iPhones are in operation, or how many are being used at that this current moment. Once the interviewer clarifies this question, identify the variables to apply to this problem.

Solve with the following assumptions:

Population of China: Approximately 1.4 billion people.

You can take several approaches at this point. One approach would be to make assumptions around the number of people that can afford iPhones. You may assume that even though the country is experiencing tremendous economic growth, a majority of the population is still low-income, hence cannot afford an iPhone. Correspondingly, you might assume that 20% of the population could afford an iPhone.

Therefore, the total potential market size is:

 20% × 1.4 billion = 280 million iPhones.

Market penetration

China is a manufacturing hub for the entire world, hence it is safe to assume that there are many other home-grown, cheaper products that compete with iPhones. Perhaps, you’ve also read that the Chinese are very brand-focused. Correspondingly, Apple is an extremely trusted and desirable brand in China. Therefore you safely estimate that 20% of this segment is currently using an iPhone.

Using these assumptions, in China, there are:

 20% × 280 million = 56 million iPhones