Apple Appeasing Communist Chinese Regulators as CEO Tim Cook Hits Trump

Apple's declining sales in China have moved the company to make a greater effort to appease cyber regulators in Beijing

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• August 1, 2017 2:00 pm


Tech giant Apple has taken more steps to appease the Chinese government amid falling sales in the communist country even as Tim Cook, the company's chief executive, has launched a steady stream of attacks on President Donald Trump's administration in the United States.

Apple has experienced declining sales in China, with its latest figures showing the country is "Apple's biggest problem right now." China currently generates 25 percent of the company's sales and is expected to eventually become the company's biggest market. However, Apple is now experiencing weaker sales and loss of the market share to local competitors who provide less expensive products.

Apple's iPhone sales fell in the country for the first time on an annual basis last year. The company is being beaten by local smartphone manufacturers such as Oppo, Huawei, and Vivo, which represent half of smartphone sales in China. Apple, on the other hand, experienced declining sales in 2016, according to sales figures released earlier this year. Throughout 2016, Apple moved 44.9 million units—a 23 percent decline in sales from 2015—while capturing less than 10 percent of the market share.

Apple reported declining revenues again during the second quarter of 2017 and sold fewer iPhones than the market had anticipated. Neil Shah, research director of devices at Counterpoint Research, told CNBC that Apple has "hit a ceiling in terms of the total premium market it can capture."

The declining sales led to Apple to create a new position for managing director of Greater China. Isabel Ge Mahe, vice president of wireless technologies, was appointed to the Shanghai-based position.

Apple is taking more steps to appease Chinese regulators amid their declining sales.

Apple announced in July that it would be opening its first data center in the country in response to a "strict new law in China that requires companies to store users," the New York Times reported. The center, planned for the southwest province of Guizhou, will be built and run in partnership with Cloud Big Data, a government-owned company co-founded by the government of Guizhou.

"Apple already stores some of the data of China's residents in local servers, but the new agreement goes one step further with a Chinese partner responsible for running its data center, managing the sales of its services in the country, and handling legal requests for data from the government," the Times reported.

Apple claims the data center would keep "strong data privacy and security protections in place" and added that it would allow the company to "improve the speed and reliability" of their products and services while "complying with newly passed regulations."

Apple recently announced in late July that they would be removing Virtual Private Network (VPN) services from its China app store, caving to Chinese regulators who aim to restrict access to overseas sites.

The move drew criticism from providers, who accused the company of bowing to pressure from cyber regulators in Beijing.

"The app store purge is hugely impactful because VPNs represent the only way that a China-based individual can bypass state censorship controls to access the internet without restrictions," TechCrunch wrote.

"Apple may believe it is best for business to co-operate with requests from Beijing, but this app store purge just created one of the biggest setbacks for the free internet in China's history," they added.

As Apple has caved to regulators in the communist country—even as competitor Google shut down its Chinese search engine in 2010 after it refused to comply with censorships demands—CEO Tim Cook has been a vocal opponent of the Trump administration on a number of fronts in the United States.

Earlier this year, Cook spoke at the China Development Forum and called on China to allow foreign businesses to operate in the country while taking an indirect jab at Trump's "America First" agenda by defending globalization as being "in general great for the world," Business Insider reported.

Cook has been a vocal opponent of Trump's travel ban and has attacked Trump's decision making. Cook said the president ‘decided wrong' on withdrawing from the Paris Accord and has come out in opposition to the military's transgender ban, among other issues.

Cook pushed the company toward foreign manufacturing in 2004 and was "responsible for building Apple's supply chain" while serving as its operations manager. The company has faced scrutiny in the past over labor conditions in the Chinese factories. In response, the company announced yearly audits of the factories.

Since moving manufacturing over to China, Apple has created twice as many jobs in the country than it has in the United States.

Apple claimed that it had "created or supported" 4.8 million jobs in China during a March 2017 announcement that it would be investing $500 million in the country by setting up two additional research and development centers. By contrast, the company has created 2 million jobs in the U.S.

Apple did not return a request for comment on its China operations by press time.

Published under: Apple, China, Internet, Jobs