Details Leak On Apple's Secret $275 Billion Deal With The Chinese Government

from the raising-marketshare,-eyebrows,-and-concerns dept

More troubling news has surfaced about Apple’s and China’s relationship. Apple relies on Chinese manufacturing to make its phones and the Chinese government relies on its massive amount of power to leverage deals that allow it to achieve its ends, many of which are oppressive.

An exclusive report by The Information (paywalled) details a $275 billion deal Apple struck with the Chinese government, apparently in hopes of exempting the company from new regulations that would have negatively affected its products and services. That deal was signed in 2016 and apparently includes an option for a sixth year, which would extend it through 2022.

Here’s what appears to have been the end result of this deal, which required Apple to invest heavily in China and work with the government to develop new technologies and cultivate Chinese tech talent. The South China Morning Post notes Apple is now back on top of the Chinese phone sales charts.

In October, Apple regained its title as the largest smartphone brand in China by shipments, its first time at the top of the list since December 2015, according to Counterpoint. Sales grew 46 per cent that month compared with the previous month, while the overall smartphone market grew just 2 per cent.

There’s something in it for China as well.

China has also become more important to Apple’s supply chain. The company has added more suppliers from mainland China to its list of vendors than anywhere else from 2017 to 2020, according the Apple’s supplier list for the period. Mainland Chinese companies make up nearly a third of newly-listed companies.

The Chinese government also asked for — and apparently received — some smaller, much stranger concessions from Apple, as Richard Lawler reports for The Verge.

That includes a request Apple reportedly received in 2014 or 2015 about a small group of uninhabited islands that China and Japan apparently have a dispute over in terms of who owns them. Going by either the Senkaku Islands or the Diaoyu Islands, depending on which side of the argument you’re taking, they inspired a request from China to members of the Maps team to make them appear larger, even when viewers are zoomed out on the map. According to The Information, not only did Apple eventually make the change, but even today, for viewers using its map from within China, the islands are still shown at a larger scale than the territories around them.

Weird flex by the Chinese government. But the government has plenty of weird flexes. More concerning is whatever concessions were made to allow the Chinese government to more directly control iPhone users in the country. Apple has already made several concessions, including erecting local data centers that can be easily accessed by the government. It has also removed content deemed unlawful or offensive by the Chinese government, some of which has been directly related to the government’s ongoing repression of its Muslim minority.

For Apple, this is a problem of both supply and demand. Apple obviously wants to be able to sell its products to the large Chinese market. But it’s pretty difficult to obtain much leverage when you’re also reliant on this market to manufacture the same devices you want to sell to this market.

Despite that lack of leverage, Apple has still secured some minor wins, as Samuel Axon points out at Ars Technica.

Encryption keys for iCloud user data for the region are controlled by Apple, despite the government’s efforts to encourage, pressure, or force foreign companies to hand over responsibility for that data to Chinese companies.

Still, the deal with the Chinese government suggests the country will continue to have the upper hand in negotiations. Apple may be investing in its future, but it’s pouring money into a regime that has continually expanded its power and escalated its oppressive activities against its own people. Apple’s money will fund these activities, even if only indirectly. Striking a secret deal worth hundreds of billions of dollars with an authoritarian government is never a good look.

Apple hasn’t said much about this report. The Chinese government, however, has reacted (via its state-owned press) and that reaction is bizarre, to say the least.

A commentary published on the WeChat blog Buyidao, operated by the state-run tabloid Global Times, defended the investments. The attack on Apple’s ties to China are “clearly driven by the ‘political correctness’ of Sinophobia”, according to the article.

“Forcing American companies to decouple from China is forcing them to decouple from opportunities and gains,” the article reads. “This is as good as McCarthyism for business.”

Huh. Well, that’s a take. The Chinese government has shown repeatedly it cannot and should not be trusted, that it’s an abuser of its considerable power. It’s possible to question deals struck with an oppressive regime without engaging in Sinophobia. This isn’t about the Chinese people or their way of life. It’s about a government that disappears unwanted residents into prisons, threatens government critics with death sentences, and reacts with hostile indignation any time its narrative and claims are questioned. Pulling out of China isn’t McCarthyism. It’s simply a refusal to cater to the whims of a government that is its own population’s primary antagonist.

There’s nothing inherently wrong with striking deals with foreign governments to ensure steady supply chain operations or expand customer bases. But striking a deal of this size with a government that expects its foreign partners to assist it in the oppression of its constituents is cause for concern.

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Comments on “Details Leak On Apple's Secret $275 Billion Deal With The Chinese Government”

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Scary Devil Monastery (profile) says:

Re: Re:

"China, Apple…both want total control."

Pretty accurate as it stands. Apple’s customer facing template was formulated by Steve jobs – an archetypical BOFH who successfully designed idiot-proof high-tech devices for a user base he considered morons whose money he would take and in return offer them a phone even the worst technological illiterate couldn’t fsck up.

And China is still running strong with the old imperial template of Qin Shi Huang from 2500 years past. Considering the "people" raw material who’d occasionally produce academic elites capable of helping to run the country but otherwise a resource to be used and utilized in the most pragmatic and high-handed a fashion possible.

Truly a match made in heaven.

Scary Devil Monastery (profile) says:

Re: Re:

"…but 50 billion dollars a year to an oppressive regime from what amounts to a shakedown… gotta love Apple’s priorities."


To understand why every corporation keeps kowtowing the full nine times to Beijing you first need to understand the scale involved.

China is 1,4 billion people. Meaning every one in six people on the globe is Chinese. As a consumer market that’s twice as large as the US and the EU put together. And they’re a new and growing market, at that, with their consumer-happy middle class growing explosively.

This means that every corporation would rather lose their US market than their Chinese one, no question…unless the shareholders are all committed to losing money.

If you were wondering why western governments and institutions keep falling all over themselves to align with China every time the Pooh Bear in Beijing feels thin-skinned?

This is why.

PartTimeZombie (profile) says:


Apple have a choice.
They can choose to do business in China, and play by China’s rules, or they can choose not to.
They have chosen to take the option that makes them the most money which is basic capitalism.
The really concerning thing is not that China is a totalitarian state, but that Western capitalism enables them.

Scary Devil Monastery (profile) says:

Some correction there, Tim.

"…some of which has been directly related to the government’s ongoing repression of its Muslim minority."

Point of note here; Muslims have been part of China since forever and up until very recently the Hui (muslim minority represented both in Xinjiang and all over the rest of China), for instance, had no problems at all – though they are now getting caught up in the PRC’s anti-uyghur PR spillover. Generally speaking as long as you are very clearly chinese first and <insert religion here> second you’re in the clear with the PRC.

No, the reason the Uyghurs and Tibetans are specifically targeted is because they keep insisting that they aren’t chinese. And for 2500 years it has been the norm that if you try to say you aren’t beholden to the Son of Heaven within what China counts as a border then he’ll be bringing the crackdown.

This gets even more tricky when you consider that the Uyghur liberation movement has been officially allied with ISIS/Daesch and before them, Al-Quaeda. Meaning western hands, with Abu Ghraib and Gitmo in their own closet, are often tied.

All of which doesn’t matter concerning the bloody ethnic cleansing program going on in Xinjiang being fscking horrible…but it does pay to be exact.

China isn’t islamophobic. They’re just severely allergic to any and every indication that a people within their borders might consider themselves turks rather than chinese. Always have been.

Scary Devil Monastery (profile) says:

Re: Famous quote

Ah, Good old Lenin, eh?

But true enough, the more integrated the global markets become the more the specters of old guard communists appear like fscking prophets.

That said…the chinese "communist" party is anything but. If anything I’d describe China as a hybrid of feudalism and oligarchic bureaucracy. Same as it’s been for millennia, with minor hiccups briefly bucking that trend.

I’d also claim current China’s marketplace is way, way more free-market capitalism than the contemporary US one – which has lost any semblance of actual competition driving performance and efficiency.

And that, essentially, is the problem. If China was communist then their markets would look like those of the old USSR and the country’s potential consumer base not affluent enough to be attractive. Since it’s not western companies instead bend over backwards in order to kiss the Pooh Bear’s ring so they can stay in that market.

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Scary Devil Monastery (profile) says:

Re: Re: Re:

"A government who twists its own diapers at the mention of Winnie the Pooh or Peppa the Pig has no place to claim that it "controls dysfunction"."

The problem is that if you can make thin-skinned authoritarianism work then the guy on the top will want to consider that a "success" – despite the fact that, as can be seen in Chinese history, it sets up a recurring pendulum of ages where the decay sets in as soon as prosperity has been achieved and the country has to metaphorically rise from the ashes every century or so.

Current China is in the ascendant phase. A century or two from now it will once again be in a "century of humiliation", another Sui, Yuan or Qing dynasty, etc. And rise again, learning nothing.

Sure, the west doesn’t have successful examples either, but at least those cycles are no longer predicated on the idea that the emperor or politburo possesses divine and untouchable rule.

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