Global corporation
275 billion for China: This secret deal secured Apple the largest market in the world
iPhone buyers in a Chinese Apple store
© Budrul Chukrut // Picture Alliance
No market is growing as fast as China – and at the same time it is so difficult for foreign corporations to conquer. Apple succeeded anyway. Now it became known for the first time how exactly.
1.4 billion inhabitants, a middle class larger than the German population – and still a lot of upside potential: China is a dream market for many Western corporations. And at the same time it is harder than almost anywhere else in the world to get your foot in the door. Compared to other tech companies, Apple remained noticeably unlimited. And was apparently ready to make far-reaching concessions to the giant in the Far East.
That comes from a detailed report by “The Information”. According to the investigative magazine, which specializes in investigative reports, the US company and China had already reached an agreement in a previously secret agreement in 2016. In addition to investments worth $ 275 billion, the company also promised numerous specific measures to support the emerging Chinese tech industry, according to the report, which is based on discussions with insiders and insights into pierced documents. Apple did not want to comment on the report when asked.
Pressure compensation
The core of the deal is an effort to protect Apple from the numerous restrictions foreign corporations have to fear in China. The pressure was high: Shortly before the signing by government agencies, Apple’s book and film sales in China were stopped. Chinese officials have also given the company to understand that it is not sufficiently involved in the local economy. Apple promised numerous measures, probably to prevent further repression.
The spectrum is wide: it ranges from the promise to install more Chinese components in your own devices, through deals with Chinese software companies, through close cooperation with the manufacturers in the development of new production lines, to support for Chinese universities. The government’s goal was to strengthen the technology sector and develop local talent. It’s no secret that Apple invested in China. The group repeatedly publicly announced programs, takeovers and collaborations and also publicly listed the investments. However, it was not previously known that there was a specific agreement behind this.
Beneficial relationship
In fact, Apple is likely to have enjoyed numerous benefits from the deal. One example is the encryption of iCloud accounts. Although the Chinese government normally requires that the data be kept in China, Apple was able to keep the digital keys for its cloud service in the US. The group also enjoys a special position when it comes to apps: While Google, for example, does not offer its Android platform for apps, the Play Store, in China, Apple was able to make its app store largely unmolested. However, concessions were made to China, unpleasant apps deleted or content blocked that the Chinese government did not like.
How important the deal was and is for Apple shows that CEO Tim Cook personally took care of it. He therefore traveled several times to China himself to hold talks and negotiate details of the 1250-word deal. The Apple boss is well connected in China; during his time as COO of the company, he built up the company’s supply chain, which relies heavily on the country.
Growth market
Apple is extremely successful in China itself – although, with the exception of Samsung, almost all major competitors in the smartphone market are based there. Apple’s devices are considered a status symbol in China and sell accordingly well. Apple is currently benefiting from the difficult situation of the former domestic market leader Huawei. The success had only recently reached its peak: Compared to the previous year, Apple was able to almost double its sales in China in the third quarter with 83 percent growth, reported “Reuters”. The growth in China was almost three times as high as Apple’s compared to the previous year, which was already extremely strong overall growth of 29 percent. The group now makes almost a fifth of its sales in China.
Apparently, both sides are satisfied with the way the deal has developed so far: the five-year period initially agreed for the agreement expired for the first time in May. According to “The Information”, however, the contract stipulates that it will automatically be extended by one year. As long as one of the parties does not end it.
Sources: The information, Reuters