The company’s products, apparently, are no longer welcomed by the government it has tried very hard to appease.
Apple is having a terrible, no good, very bad week. Why? Because the Chinese government told its employees to stop using their iPhones for work, or even from bringing them into the office, that’s why!
If you’re Apple CEO Tim Cook, you’re probably growing a huge ulcer right now. I don’t know. Maybe this kinda thing just sheds off fabulously wealthy business titans, like water from a duck’s back. Anyway, from the Wall Street Journal on Wednesday evening:
In recent weeks, staff were given the instructions by their superiors in workplace chat groups or meetings, (people familiar with the matter said). The directive is the latest step in Beijing’s campaign to cut reliance on foreign technology and enhance cybersecurity, and comes as China seeks to limit flows of sensitive information outside of China’s borders.
The move by Beijing could have a chilling effect for foreign brands in China, including Apple. Apple dominates the high-end smartphone market in the country and counts China as one of its biggest markets, relying on it for about 19% of its overall revenue.
That’s right – the Chinese market makes up about a fifth of the company’s revenue. But even as some shrug at this development, this almost certainly isn’t meant to be a direct assault on the company’s sales inside China. As a CNBC correspondent suggested on Thursday, it likely says more about the political climate Apple must now navigate through in the huge Chinese market that it values so much:
The question here isn’t so much about how many iPhone sales this would impact when it comes to the government; but it actually is bringing up a question as to just how politically correct Apple iPhones will be in broader society.
Think about that – the politics of using Apple products in China – with how major Chinese tech and communications companies are received in Washington: Huawei and TikTok have faced restricted access to western technology via the Biden administration’s export controls on high-end tech products and the potential for an outright ban across the U.S, respectively.
That context suggests that the ban Apple is now facing is indeed at least partially political in nature, despite the suggestions the Chinese government is doing this for national security reasons, or because it wants to support homegrown tech champions like Huawei.
This, of course, is no consolation at all to Apple, which has lost something like $200 billion in market value in response to the ban. And Huawei, meanwhile, is releasing a new phone model that will purportedly rival the newest version iPhone in computing power – despite being developed under that aforementioned Western tech ban.
A couple of other things should also be noted. First, it was reported a few years ago that Apple in 2016 cut a deal with the Chinese government in which it would invest roughly $275 billion into the country via more collaboration with Chinese software companies, an increased use of Chinese-made components in its iPhones (which are already largely made in China), more research and development projects with Chinese universities, and more training for its Chinese workforce. In exchange, the government granted the company “regulatory exemptions,” which meant it wouldn’t go after its Apple Pay, iCloud, and App Store businesses operating in the country.
With the announcement of these bans, though, it can be assumed the goodwill Apple tacitly purchased with that deal has dried up.
Secondly, though, it should be pointed out Apple is famously committed to the privacy concerns, at least to those of its American customers. For example, in 2015, it pointedly resisted helping the FBI access the password-locked iPhone of a suspect after a mass shooting in southern California, even after being served with a subpoena (The FBI, eventually, figured out how to get into the phone without the company’s help).
But that dedication to privacy clearly doesn’t go far to appease the Chinese government, which now considers Apple products a national security threat, just as the U.S. government sees some of China’s tech champions.
Wall Street is apparently shrugging at the news of China’s ban, but that ban on use of the iPhone meanwhile has expanded to employees of local governments and state-owned enterprises, as well as other Apple products too. This story will likely look different again after this weekend. But one thing is clear: Even Apple, a hugely influential American company and the world’s largest in terms of market capitalization, isn’t at all immune from the tit for tat trade and economics fight between the U.S. and China.