Cupertino to Beijing... A route that Apple CEO Tim Cook knows well. Apple is known for its secrecy, but one alleged big secret: The Information reported that Cook signed an estimated $275B deal with Chinese officials in 2016, in which Apple promised to invest in China’s economy and tech industry. Cook is said to have sealed the deal during China visits he made after regulators there cracked down on its China biz, including shutting down iTunes books/movies. As iPhone sales plunged, Cook jumped into action:
- The reported five-year agreement included Apple’s promise to invest in Chinese companies (see: Apple’s $1B investment in Didi), supply deals, infrastructure, and worker training.
- The supposed goal: Establish strong ties with China to protect and grow Apple’s business in the key market, where nearly all its products are assembled.
iPhone diplomacy... As China tightens censorship and data-privacy laws, more US tech companies like LinkedIn and Yahoo have pulled out. Facebook and Twitter have been blocked since 2009, and Google left in 2010 after refusing to censor its search results. US-China tensions are escalating: The US just announced a diplomatic boycott of the Beijing Winter Olympics over China’s human-rights abuses. Meanwhile:
- Apple is #thriving in China: Thanks to Cook’s reported diplomacy efforts, it’s one of the few US tech companies succeeding in the world’s most populous country.
- No. 1: Apple recently became the largest smartphone brand in China, which now makes up 19% of Apple’s total sales — up from 15% a year ago.
China diplomacy is a double-edged sword… likely why Apple would try to keep such a deal under wraps. Apple’s China strategy has helped it become the world’s most valuable company. It has been exempt from many limitations imposed on foreign companies (for example: It gets to control encryption keys for Chinese iCloud users). But Apple has also complied with China’s requests to delist thousands of apps that run counter to the state’s policies, including religious apps. As US-China tensions grow, Apple could get more flak for its biz-boosting concessions.