Apple’s iPhone success over the years in China is hardly an accident. The Information reveals a previously unreported agreement 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 was reached at a time when local smartphone makers were forcing iPhone sales in China to fall.
The Information cites 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 to regulatory actions that would negatively impact Apple.
Throughout that pivotal year, Cook, who was the architect of Apple’s supply chain in China, personally lobbied officials over threats that would have hobbled the company’s devices and services, including Apple Pay, iCloud and the App Store, the documents show.
At Cook’s direction, Apple’s government affairs team worked with China’s economic planning agency to improve relations.
The 1,250-word agreement was originally conceived by Apple’s government affairs team in China as a way to improve relations with Beijing and win an audience with senior leaders, according to a person familiar with the agreement. Face-to-face meetings with top Chinese officials became a priority for Apple brass after regulators shut down iTunes books and movies in April 2016, the person said.
While the strategic agreement may have been made without disclosing, the actions taken to uphold it were largely public, starting with Apple’s $1 billion investment in ride-sharing service Didi Chuxing that year.
Within days of announcing the investment, representatives from Apple and the Chinese government signed the deal:
Five days later in Beijing, Cook, along with Chief Operating Officer Jeff Williams and government affairs head Lisa Jackson, met publicly with senior government officials at the country’s secretive leadership compound, Zhongnanhai. Neither side disclosed details of the visit, but they were there in part to sign the economic deal, which committed Apple to aiding roughly a dozen causes favored by China. They included a pledge to help Chinese manufacturers develop “the most advanced manufacturing technologies” and “support the training of high-quality Chinese talents.”
Additionally, Apple committed to “use more components from Chinese suppliers in its devices, sign deals with Chinese software firms, collaborate on technology with Chinese universities and directly invest in Chinese tech companies,” according to the report.
Also interesting is that the five-year agreement was set to automatically renew for an additional year in May 2021 if both parties agreed. Should this mean Apple’s footing in China over the next few years should be a concern for the company and investors?
Early this year, iPhones sales in the country returned to pre-pandemic levels, although Apple now faces the same global chip shortage and supply constraints facing other companies.
Subscribers to The Information can read the full report here.
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