Tim Cook’s Secret $275 Billion Deal With China
Hartley Charlton (Hacker News):
In an extensive paywalled report based on interviews and purported internal Apple documents, The Information revealed that Tim Cook personally forged a five-year agreement with the Chinese government during a series of in-person visits to the country in 2016. The need to push for a closer alliance with the Chinese government reportedly came from a number of Apple executives who were concerned about bad publicity in China and the company’s poor relationship with Chinese officials, who believed that Apple was not contributing enough to the local economy.
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The agreement included a pledge from Apple to help Chinese manufacturers develop “the most advanced manufacturing technologies,” “support the training of high-quality Chinese talents,” use more components from Chinese suppliers, sign deals with Chinese software firms, collaborate with research in Chinese universities, and directly invest in Chinese tech companies, as well as assistance with around a dozen Chinese government causes. If there were no objections from either side, the deal would be automatically be extended for an additional year until May 2022, according to the agreement.
Apple vowed to invest “many billions of dollars more” than its current expenditure in China, including on new retail stores, research and development facilities, and renewable energy projects. Other internal documents reportedly showed that Apple’s pledge amounted to more than $275 billion in spending over a period of five years.
To date, Apple has mostly honored its part of the agreement, and the article details exceptional cases when Apple has benefited from the strong relationship in successfully circumventing limitations that would normally be imposed on foreign companies.
For example, 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. On the other hand, a commitment by Apple to adhere to Chinese government regulations and policies was part of the deal, and Apple has often complied with requests to delist apps and content that run counter to the state’s priorities and goals.
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Apple has performed better in China than most comparable American tech companies, and the report makes the case that this is in large part thanks to Cook’s lobbying, dealmaking, and relationship building.
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The Information notes that China represents 19 percent of Apple’s total sales, up four points from just a year earlier. It also cites data by Counterpoint Research that states Apple has recently become China’s largest smartphone brand.
First, it confirms what analysts speculated in 2016 when Apple announced its uncharacteristic investment in ride hailing company Didi Chuxing — that it was basically a way to appease government officials in China. Cook wrote a glowing endorsement of Didi Chuxing CEO Jean Liu for Time’s “100 Most Influential People” feature in 2017.
Second, while this agreement may be officially non-binding, it is hard to imagine Apple could run afoul of its spirit given its dependency on suppliers and manufacturing in China.
I feel compelled to share this nugget:
Sometime in 2014 or early 2015, China’s State Bureau of Surveying and Mapping told members of the Apple Maps team to make the Diaoyu Islands, the objects of a long-running territorial dispute between China and Japan, appear large even when users zoomed out from them. Chinese regulators also threatened to withhold approval of the first Apple Watch, scheduled for release in 2015, if Apple didn’t comply with the unusual request, according to internal documents.
Some members of the team back at Apple’s headquarters in Cupertino, Calif., initially balked at the demand. But the Maps app had become a priority for Apple, so eventually the company complied. The Diaoyu Islands, when viewed in Apple Maps in mainland China, continue to appear on a larger scale than surrounding territories.
I would venture to say that all members of Apple’s Maps team balked at this request. It’s absurd and offensive. Asking professional cartographers to misrepresent the size of islands for propaganda purposes — even if only to users in mainland China — is like asking writers to misspell words or misstate facts, or asking mathematicians to generate incorrect results.
This does seem to go beyond the more common government requests about how to label a territory when the map is viewed from within that country.
A demand for iOS’s source code, though, that would be over the line. I don’t see how Apple could comply with it. The Chinese get that. It is a two-way relationship.
And in terms of ways that Apple has benefitted from this diplomacy, look no further than Huawei. Trade sanctions imposed by the Trump administration have effectively driven Huawei out of the high-end smartphone business. The way trade wars typically work is tit-for-tat. After the tit of the U.S. imposing harsh sanctions on Huawei — the premiere Chinese phone maker — the obvious tat would have been for China to crack down on Apple — the premiere U.S. phone maker. That never happened.
Note that The Information writer Wayne Ma never uses Senkaku Islands, the Japanese name for islands, only the Chinese Diaoyu name. I’ve already posted about Apple Maps removing the Sea of Japan name, both in English and Japanese.
Even on my Mac, running in English from the United States, Apple Maps does not label the Sea of Japan, even though it labels the nearby East China Sea and many much smaller bodies of water. Google Maps calls it “Sea of Japan (East Sea).”
Previously:
- Yahoo Finance App Removed From Chinese App Store
- The Risks of Client-Side Scanning
- Scanning iCloud Photos for Child Sexual Abuse
- Didi Chuxing Removed From Chinese App Store
- A Hard Bargain for Apple in China
- Apple Changes Crimea Map When Viewed From Russia
- HKmap Live Removed From the App Store
- Taiwan Flag Removed from iOS Emoji Keyboard in Hong Kong
- macOS 10.14.4 Restricts Taiwan Flag Emoji in China
- iCloud in China and on Google’s Cloud
- Chinese Firm to Operate China iCloud Accounts
3 Comments RSS · Twitter
Any body with some knowledge of Chinese supply chain should have know this for a long time. It again requires some sort of mainstream media push to gain traction. Kinda sad. But at least it is a wake up call.
Given Apple's functional organization, it's not that surprising Tim Cook was involved since he's the only person at the intersection of Legal + Operations + Finance.
https://hbr.org/2020/11/how-apple-is-organized-for-innovation
2016 + 5 = 2021.
Convenient the way this comes out when the "5 year deal" negotiated in 2016 comes to an end. I suppose another deal will need to be made, and this is a means to put pressure on Apple.
Unlike many of the authors of the linked articles, I find Tim Cook's behavior despicable, if not treasonous. He's happy to live here in the West, where he can be himself, whereas people in China are persecuted, and is happy to undermine the economic well being of the West by transferring technologies to China, which if nothing else is an economic rival, and will soon be, if it is not already, a military rival.
Capitalists will sell you anything, including the rope you will use to hang them, as the old Chinese Communist saying goes. How right they are.