Apple pledged to invest over $275 billion in China while facing declining iPhone sales

Apple’s iPhone success over the years in China is hardly an accident. The information reveals a previously unreported deal negotiated by Apple CEO Tim Cook and Chinese government officials that saw the company invest over $ 275 billion in the country over five years. The deal came at a time when local smartphone makers were forcing iPhone sales in China to fall.

The information quotes interviews and internal Apple documents in reporting that the pledge started in 2016, when Tim Cook regularly visited China to lobby the government for exemptions from regulatory actions that would have a negative impact on Apple.

Throughout the crucial year, Cook, who was the architect behind Apple’s supply chain in China, personally lobbied officials over threats that would have hampered the company’s devices and services, including Apple Pay, iCloud and the App Store, the documents show.

Following Cook’s instructions, Apple’s government team worked with China’s economic planning agency to improve relations.

The 1,250-word deal was originally conceived by Apple’s government team in China as a way to improve relations with Beijing and win an audience of senior executives, according to a person familiar with the deal. Face-to-face meetings with top Chinese officials became a priority for Apple’s brass after regulators shut down iTunes books and movies in April 2016, the person said.

Although the strategic agreement may have been reached without disclosure, the measures taken to maintain it were largely public, beginning with Apple’s $ 1 billion investment in carpooling service Didi Chuxing that year.

Within a few days of the announcement of the investment, representatives of Apple and the Chinese government signed the agreement:

Five days later in Beijing, Cook, along with Chief Operating Officer Jeff Williams and Prime Minister Lisa Jackson, met publicly with senior officials in the country’s secretive management complex, Zhongnanhai. Neither party disclosed details of the visit, but they were there in part to sign the economic deal, which obliged Apple to help around a dozen cases that China favored. They included a pledge to help Chinese producers develop “the most advanced production technologies” and “support the training of high-quality Chinese talents.”

In addition, Apple undertook to “use more components from Chinese vendors in its devices, enter into agreements with Chinese software companies, collaborate on technology with Chinese universities, and invest directly in Chinese technology companies,” according to the report.

Interestingly, too, the five-year agreement was set to automatically renew for an additional year in May 2021 if both parties agreed. Should this mean that Apple’s foothold in China over the next few years should be a concern for the company and investors?

Earlier this year, sales of iPhones in the country returned to pre-pandemic levels, though Apple now faces the same global chip shortages and supply constraints that other companies face.

Subscribers to The information can read the full report here.

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