Apple Signed $275 Billion Deal With China To Ease Regulatory Pressure

You could call it an investment. Or you could call it a very expensive bribe. Or a bit of both. JL

Sarah Jackson reports in Insider:

Apple struck a deal with the Chinese government in 2016 amid a regulatory crackdown that would have threatened services like the App Store, Apple Pay, and iCloud. The five-year agreement is estimated to be worth more than $275 billion and was intended to placate Chinese government officials. The deal included commitments from Apple to help China build "the most advanced manufacturing technologies," train workers, tap Chinese suppliers for more parts for Apple devices, strike deals with Chinese software companies, work with Chinese universities, and invest "many billions of dollars more" than Apple was already pouring into China

Apple CEO Tim Cook struck a deal with the Chinese government in 2016 amid a regulatory crackdown that hobbled the company's business there, according to a new report from The Information.

The five-year agreement is estimated to be worth more than $275 billion and was intended to placate Chinese government officials, who believed Apple wasn't doing enough for the country's economy, according to internal documents viewed by The Information.

Throughout 2016, Cook lobbied government officials over actions that would have threatened services like the App Store, Apple Pay, and iCloud, The Information reports. He made the deal during the first of several visits to China that year that were spurred by regulators' actions which had tanked iPhone sales.

Apple's government affairs team in China created a memo of understanding with the country's National Development and Reform Commission to sweeten relations with Chinese leaders, and company leaders made it a priority to meet with top Chinese officials after the 2016 crackdown hit iTunes books and movies, a person familiar with the deal told The Information.

The deal included commitments from Apple to help Chinese manufacturers build "the most advanced manufacturing technologies" and train workers. It also included vows to tap Chinese suppliers for more parts for Apple devices, strike deals with Chinese software companies, work with Chinese universities on technology, and invest "many billions of dollars more" than Apple was already pouring into China, according to The Information. Some investments were to go toward Chinese technology companies; other outlined beneficiaries included new retail stores, renewable energy projects, and research and development centers.

In line with China's 13th Five-Year Plan, Apple further committed to "grow together with Chinese enterprises to achieve mutual benefits and a win-win situation," help develop China's IT industries, and promote science, technology, education, and environmental protection, according to The Information. In exchange, China agreed to offer "necessary support and assistance."

Outside of the deal, Apple made other concessions with the Chinese government to keep business running. By early 2015, China's State Bureau of Surveying and Mapping had directed Apple Maps to make the Diaoyu Islands, or Senkaku Islands, which China and Japan both claim to own, look big even when zoomed out; regulators said they'd refuse to approve the Apple Watch if Apple didn't comply, according to internal documents viewed by The Information. The company ultimately accommodated the demand.

Apple appears to have held up much of its end of the deal. The company announced a deal with China's largest wind turbine maker, Xinjiang Goldwind Science and Technology, in 2016, made plans to move iCloud operations to China in 2017, launched a $300 million investment fund for clean energy in China in 2018, opened 11 more retail stores in mainland China, and brought Chinese manufacturer Luxshare Precision Industry into iPhone 13 production.

 

Apple's business has been booming in China as of late; it posted a record $68 billion in revenue from Greater China in the 12 months ended in September, and the country is now responsible for roughly one-fifth of Apple's total sales, The Information reports.