from the raising-marketshare,-eyebrows,-and-concerns dept
More troubling news has surfaced about Apple’s and China’s relationship. Apple relies on Chinese manufacturing to make its phones and the Chinese government relies on its massive amount of power to leverage deals that allow it to achieve its ends, many of which are oppressive.
An exclusive report by The Information (paywalled) details a $275 billion deal Apple struck with the Chinese government, apparently in hopes of exempting the company from new regulations that would have negatively affected its products and services. That deal was signed in 2016 and apparently includes an option for a sixth year, which would extend it through 2022.
Here’s what appears to have been the end result of this deal, which required Apple to invest heavily in China and work with the government to develop new technologies and cultivate Chinese tech talent. The South China Morning Post notes Apple is now back on top of the Chinese phone sales charts.
In October, Apple regained its title as the largest smartphone brand in China by shipments, its first time at the top of the list since December 2015, according to Counterpoint. Sales grew 46 per cent that month compared with the previous month, while the overall smartphone market grew just 2 per cent.
There’s something in it for China as well.
China has also become more important to Apple’s supply chain. The company has added more suppliers from mainland China to its list of vendors than anywhere else from 2017 to 2020, according the Apple’s supplier list for the period. Mainland Chinese companies make up nearly a third of newly-listed companies.
The Chinese government also asked for — and apparently received — some smaller, much stranger concessions from Apple, as Richard Lawler reports for The Verge.
That includes a request Apple reportedly received in 2014 or 2015 about a small group of uninhabited islands that China and Japan apparently have a dispute over in terms of who owns them. Going by either the Senkaku Islands or the Diaoyu Islands, depending on which side of the argument you’re taking, they inspired a request from China to members of the Maps team to make them appear larger, even when viewers are zoomed out on the map. According to The Information, not only did Apple eventually make the change, but even today, for viewers using its map from within China, the islands are still shown at a larger scale than the territories around them.
Weird flex by the Chinese government. But the government has plenty of weird flexes. More concerning is whatever concessions were made to allow the Chinese government to more directly control iPhone users in the country. Apple has already made several concessions, including erecting local data centers that can be easily accessed by the government. It has also removed content deemed unlawful or offensive by the Chinese government, some of which has been directly related to the government’s ongoing repression of its Muslim minority.
For Apple, this is a problem of both supply and demand. Apple obviously wants to be able to sell its products to the large Chinese market. But it’s pretty difficult to obtain much leverage when you’re also reliant on this market to manufacture the same devices you want to sell to this market.
Despite that lack of leverage, Apple has still secured some minor wins, as Samuel Axon points out at Ars Technica.
Encryption keys for iCloud user data for the region are controlled by Apple, despite the government’s efforts to encourage, pressure, or force foreign companies to hand over responsibility for that data to Chinese companies.
Still, the deal with the Chinese government suggests the country will continue to have the upper hand in negotiations. Apple may be investing in its future, but it’s pouring money into a regime that has continually expanded its power and escalated its oppressive activities against its own people. Apple’s money will fund these activities, even if only indirectly. Striking a secret deal worth hundreds of billions of dollars with an authoritarian government is never a good look.
Apple hasn’t said much about this report. The Chinese government, however, has reacted (via its state-owned press) and that reaction is bizarre, to say the least.
A commentary published on the WeChat blog Buyidao, operated by the state-run tabloid Global Times, defended the investments. The attack on Apple’s ties to China are “clearly driven by the ‘political correctness’ of Sinophobia”, according to the article.
“Forcing American companies to decouple from China is forcing them to decouple from opportunities and gains,” the article reads. “This is as good as McCarthyism for business.”
Huh. Well, that’s a take. The Chinese government has shown repeatedly it cannot and should not be trusted, that it’s an abuser of its considerable power. It’s possible to question deals struck with an oppressive regime without engaging in Sinophobia. This isn’t about the Chinese people or their way of life. It’s about a government that disappears unwanted residents into prisons, threatens government critics with death sentences, and reacts with hostile indignation any time its narrative and claims are questioned. Pulling out of China isn’t McCarthyism. It’s simply a refusal to cater to the whims of a government that is its own population’s primary antagonist.
There’s nothing inherently wrong with striking deals with foreign governments to ensure steady supply chain operations or expand customer bases. But striking a deal of this size with a government that expects its foreign partners to assist it in the oppression of its constituents is cause for concern.