After Huawei Exec's Arrest, Chinese Government, Companies Retaliate Against Apple

China is not subtle about indicating its displeasure - or its intent to retaliate proportionately.

The larger, longer term question may be what this does to the global supply chain for tech components. JL


Bethany Allen-Ebrahimian reports in Yahoo News:

A Chinese court ruled that Apple infringed on patents by Qualcomm, and moved to block sales of some models of the company’s smartphone. Apple has already seen a dramatic decline this year in its share of the Chinese market. (And) a growing number of companies across China have announced new policies requiring the exclusive use of Huawei products, and in some cases penalizing employees who purchase iPhones, in a growing movement to support the Chinese tech giant after the arrest of one of its top executives.

A growing number of companies across China have announced new policies requiring the exclusive use of Huawei products, and in some cases penalizing employees who purchase iPhones, in what appears to be a growing domestic movement to support the Chinese tech giant after the arrest of one of its top executives in Canada.

Canadian authorities detained Meng Wanzhou, chief financial officer for Huawei and daughter of the company’s founder, Ren Zhengfei, as she changed planes during a layover in Vancouver on Dec. 1. Meng faces extradition to the United States on allegations that she participated in Huawei’s efforts to skirt U.S. sanctions on Iran.

Meng’s arrest has sparked outrage across China, where Huawei is seen as a national champion and a source of national pride. China has summoned the U.S. and Canadian ambassadors over the arrest, and threatened Canada with “serious consequences” if it does not immediately release her.

Now several Chinese companies across the country have implemented internal policies to support Huawei, according to internal company memos obtained by Yahoo News.

In a Dec. 8 memo sent to employees, Jiangxi Ruike Refrigeration Technology, based in the southeastern province of Jiangxi, stated that for the next month, any employee who exchanged their iPhone for a Huawei handset would receive a company subsidy of 2,000 RMB, or about $290. “The news of Huawei CFO Ms. Meng Wanzhou’s arrest by Canadian authorities has shocked the Chinese people,” the memo stated. “We advocate that everyone support Huawei with practical actions.”

Chengdu RYD Information Technology, a research and development company that provides services for municipalities and the aerospace industry, announced to employees in a memo issued last week a new policy requiring that the company buy Huawei products exclusively and only use Huawei software. The company also promised a 15 percent subsidy for any employee who purchased Huawei products for personal use.

In a Dec. 6 memo distributed to employees, Shaanxi Li’An Development Group stated that all data centers must purchase only Huawei equipment for upgrades, all employees must use Huawei software and would receive a 20 percent subsidy for using Huawei products.

One company in Shenzhen, where Huawei is based, has even said that it will punish employees for buying iPhones. Menpad, which makes LCD displays and is one of Huawei’s many suppliers, wrote in a statement on its website that “if employees buy any iPhone for themselves, the company will impose a 100 percent penalty on the basis of the phone’s market price.” The company announced a total of seven different measures to support Huawei and oppose American companies, including that employees no longer buy American-made cars.

The companies did not immediately respond to a request for comment.

The Chinese backlash against iPhones comes amid a larger dispute with Apple. A Chinese court recently ruled that Apple infringed on patents by Qualcomm, and moved to block sales of some models of the company’s smartphone. Apple said it is appealing the ruling.

Apple has already seen a dramatic decline this year in its share of the Chinese market for smartphones, falling further behind several domestic producers. Huawei holds the top spot in China.

Apple did not immediately respond to a request for comment on the backlash sparked by Meng’s arrest.

The arrest of a senior Chinese executive comes at a sensitive moment in U.S.-China relations. For several months, President Trump has engaged China in a trade war, levying tariffs on billions of dollars of Chinese imports in an attempt to force China to address its trade surplus with the United States. The Huawei executive’s arrest unfolded during a dinner meeting as Trump and Chinese President Xi Jinping discussed a temporary halt to the trade war.

Huawei has long been suspected of shady dealings with Iran. Reuters reported as early as 2013 that the tech giant had sought to do business in Iran through a company called Skycom. In Meng’s Dec. 7 bail hearing, Canadian prosecutors alleged that Meng had misrepresented Huawei’s dealings in financial transactions with banks to prevent them from detecting sanctions violations.

But the sensitive timing has led some in China to believe that the United States has essentially made Meng into a high-profile hostage to strengthen its hand in trade negotiations. “Only by correcting its mistake, immediately ending its violation of a Chinese citizen’s lawful and legitimate rights and giving the Chinese people a due explanation, can Canada avoid paying a heavy price,” declared a Dec. 9 editorial in Communist Party-controlled newspaper, People’s Daily. Some Chinese took to social media to express support for a boycott of Apple — something of a national pastime in China when the United States does something to provoke nationalist anger there.

While grassroots Chinese nationalism is often organic, the Chinese Communist Party has shown a growing penchant for channeling such sentiment into economic leverage against other countries. After South Korea installed a U.S-made missile defense system despite intense Chinese government opposition, massive Chinese boycotts hit Korean-made cars, and dozens of China-based branches of Korean supermarket Lotte were forced to close. Even popular K-pop bands were targeted.

After Chinese pro-democracy activist Liu Xiaobo was awarded the Nobel Peace Prize in 2010, Chinese imports of Norwegian salmon dropped dramatically, though no official policy was publicly announced. Chinese imports of one of Norway’s most important products didn’t pick up again until after the countries normalized diplomatic relations in 2016.