China’s Government iPhone Ban is Testing Apple’s Powers of Diplomacy

(Photo Credit: Alexander Andrews/Unsplash)
(Photo Credit: Alexander Andrews/Unsplash)

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Apple, one of the few foreign companies that has managed to succeed in China, may no longer be in Beijing’s good graces.

To protect national security and boost reliance on homegrown tech, China ordered central government officials to not use iPhones and other foreign devices for work — or even bring them into the office, The Wall Street Journal reported Wednesday.

Really Got a Good Thing Going

Never easy, doing business in China has grown even more difficult for foreign companies since Beijing’s crackdown on oversight and security since the US-China trade war began in 2018. Apple’s diligent compliance — adhering to digital freedom laws and removing apps that Beijing considers illegal — has paid off. China accounts for about 20% of Apple’s revenue, but even more importantly, it’s where nearly all the company’s devices are made. The world’s largest iPhone factory is in China’s Zhengzhou province, and employs more than 300,000 workers.

While Apple’s share price dropped 3.6% in the wake of the news, dragging down the entire tech index, it’s still too soon to know how the bans will affect the company’s future in China’s consumer market. For now, it’s just one more sign that foreign businesses must tread even more carefully in the Middle Kingdom:

  • A recent survey from the EU Chamber of Commerce found that two-thirds of 570 respondent companies said doing business in China has become more challenging since Beijing began expanding anti-espionage laws. Even Apple has moved to bolster its supply chains in India. However, with 1.4 billion citizens and a consumer market worth $6 trillion, China is tough to ignore.
  • Chinese military personnel and employees of some state-owned companies are no longer allowed to drive Teslas, but that hasn’t stopped Elon Musk’s car company from thriving. In the second quarter, Tesla’s Chinese revenue jumped by more than half to $5.7 billion. Somehow it’s hard to imagine Tim Cook following Elon’s playbook, but who knows?

The Ban Hammer: China’s move mirrors actions taken by the US in recent months. The Biden administration banned the sale of products from phone makers Huawei and ZTE, as well as surveillance companies Hikvision, Dahua, and Hytera, all in the name of protecting data and national security. Plus, more than half the states and the federal government banned its staff and some contracted employees from using the Chinese video sharing app TikTok. Starting next year, Montana will be the first state to ban the app on all devices in the state lines. So, you’ll need to post those Yellowstone closeups of you and the grizzly on TikTok while you’re safely in Wyoming.