Apple CEO Tim Cook agreed to Invest $275 billion in China in return for unlimited access to the Chinese market, a report citing interviews and documents reveals.
The report, published by The Information details how Cook’s team made several visits to China in 2016 to stave off impending restrictions against the company after Chinese officials shut down iTunes’ book and movie distribution in April 2016.
In addition, iCloud, the App Store, and Apple Pay were all under threat after Chinese officials determined Apple had been too negligent and “too arrogant” in its commitments to China.
Cook quick to respond
Cook, accompanied by several other high-profile executives, was quick to respond to the Chinese authority’s complaints and set out on a mission to strike a multi-billion dollar deal in investments.
On different occasions, Cook met with several representatives of China’s potent economic planning agency, the National Development and Reform Commission.
A key instrument utilized to broker the deal was a 1,250-word memorandum of understanding forged by Apple’s government affairs team championed by Cook. The initiative turned out to have “helped Apple rejuvenate its tattered ties with the Chinese government.”
A deal was negotiated that included a five-year agreement that would have expired earlier this year but had an automatic one-year extension option in case of mutual satisfaction.
Quid pro quo
Meanwhile, Apple promised, “to strictly abide by Chinese laws and regulations.” The corporation has since invested “many billions of dollars more” in Chinese software companies, “the most advanced manufacturing technologies,” retail stores, and sustainable energy projects. China, in turn, provided the “necessary support and assistance.”
At the same time, Apple pledged to collaborate with Chinese software businesses, cooperate on technology with Chinese institutes and directly sponsor Chinese tech enterprises.
Furthermore, the company said it would utilize more components from Chinese producers in its gadgets and engage more in business deals and “support the training of high-quality Chinese talents,” the report said.
Apple’s $1 billion injections into Didi Global, the popular Chinese ride-hailing service, in 2016 was to “mollify authorities,” and was intended to soothe Beijing’s scorn over Apple’s assumed negligence, the report said.
Sales taking off
The deal seemed to have paid off. Since then, Apple’s products, services, and revenues have sky-rocketed, and China has become Apple’s second-largest market after the U.S. for the first time in six years.
The company saw an annual sales growth of 83 percent in the fourth quarter of its fiscal year, posting a record $68 billion in revenue. China is now responsible for some 20 percent of Apple’s total sales.
Much of the company’s success is attributed to Cook’s personal moderation. So much so that analysts fear another ice age in the case that Cook steps down.
Apart from the deal, Apple also committed geographical mapping-fraud to please Chinese regulators who insisted that the uninhabited but heavily disputed Senkaku Islands, as Japan calls them — or the Diaoyu Islands, according to China — would have been displayed disproportionately larger on Apple Maps, even when zoomed out on pain of China pulling out of Apple Watch approval negotiations.
The outlet labeled the agreement as secret, but that hasn’t been entirely the case. Unlike earlier deals that Microsoft arrived at in 2002 and 2006 with the Chinese — that were celebrated with all due formalities — in this case, both parties simply decided to keep a low profile while negotiating terms and implementing their plans.