More on Apple’s Political Dance With China

Nick Heer, writing at Pixel Envy:

Ma reports that Apple acquiesced to many government demands, like building research and development centres in the country — including one with the university where Cook was later named chairman of the advisory board — assigning an executive specifically to business in China, and even changing the scale of disputed territories in Apple Maps.

However, it also seems that this deal has helped Apple avoid more stringent regulation in other areas, in ways that are beneficial to users’ rights. Even though Chinese users’ iCloud data is stored on servers located within the country and operated by a local partner — as required by law — it has been allowed to retain control over its encryption keys. The government has allowed it to retain control over its source code, too. But Ma has previously reported that many of Apple’s exemptions are being revoked, and now writes that key businesses, including the App Store, are in a sort of legal limbo.

The whole situation is a fascinating study in diplomacy. As Heer observes, it’s wrong to look at it as a one-sided relationship — that China makes demands, and Apple acquiesces. Apple certainly gets a lot from China — they assemble the vast majority of their products there, and it’s their second biggest consumer market for selling those products. But China gets a lot from Apple. Apple is arguably the most prestigious corporation in the world, and inarguably one of the most prestigious. China benefits from that relationship on the world stage. As Ben Thompson wrote yesterday in a subscribers-only Stratechery update:

Apple remains the most visible and most impressive example of China’s manufacturing prowess. That is extremely valuable both in terms of China’s image and also its capabilities: Apple doesn’t just benefit from China’s capabilities, it also enhances them, in a virtuous cycle.

Apple bent quite a bit, to say the least, to keep iCloud available in China while complying with the recently-passed law requiring all cloud-based services for Chinese users to be hosted in data centers owned by Chinese companies, physically located in mainland China. But Apple still controls the encryption keys to the data on those servers.

The issue of source code is an even better example of Apple not acquiescing to every “request” from the CCP. Back in 2016, Reuters reported:

Apple Inc. has been asked by Chinese authorities within the last two years to hand over its source code but refused, the company’s top lawyer told lawmakers on Tuesday in response to U.S. law enforcement criticism of its stance on technology security. [...] “I want to be very clear on this,” Apple general counsel Bruce Sewell told Tuesday’s hearing under oath. “We have not provided source code to the Chinese government.”

Source code, I firmly believe, would be a dealbreaker for Apple. It’s humiliating that Apple Maps shows the disputed Diaoyu Islands larger than they actually are to users in China, but, well, sometimes you need to eat dirt. Same thing for removing the Taiwanese flag from the emoji keyboard for users in Hong Kong. That is a serious shit sandwich and everyone at Apple, from Tim Cook down to the programmer who had to special-case the emoji keyboard to remove it for Hong Kongers, knows it. A demand for iOS’s source code, though, that would be over the line. I don’t see how Apple could comply with it. The Chinese get that. It is a two-way relationship.

And in terms of ways that Apple has benefitted from this diplomacy, look no further than Huawei. Trade sanctions imposed by the Trump administration have effectively driven Huawei out of the high-end smartphone business. The way trade wars typically work is tit-for-tat. After the tit of the U.S. imposing harsh sanctions on Huawei — the premiere Chinese phone maker — the obvious tat would have been for China to crack down on Apple — the premiere U.S. phone maker. That never happened. (I took that from Ben Thompson’s column yesterday, too.)

Thursday, 9 December 2021