Apple’s China Policy: Reckless Entanglement or Stratagem Unfolding?  

Apple in the Cloud in China

TLDR/Key points: 

  1. Longterm (corporate) survival requires adaptability and the ability to seize opportunity
  2. Change is constant in any system not at rest, and change creates opportunity
  3. China is undergoing change
  4. Adaptability is about survival and maintaining fitness; seizing opportunity is using fitness to change things to one’s favor
  5. Consistent adherence to core values and policies are essential internal guidance through that change

Survival is complex. Were it not so, then extinction would be a rare event. Instead, more species have gone extinct than are alive today. The long-haulers, those that have survived across multiple mass extinctions, have possessed two traits: adaptability and the capacity to seize opportunity for competitive advantage. Human enterprises, whose progress we can measure at human time scale, live and die by the same principles. 

Recently, the New York Times featured a piece called Censorship, Surveillance and Profits: A Hard Bargain for Apple in China.

While critical of Apple’s policies in China, a state under one-party rule led by an authoritarian president who, by many accounts, has amassed more centralized authority and power than even Chairman Mao, the piece lacked essential context. 

Apple-critical pieces in the mainstream press often follow one of two patterns: they either negatively evaluate Apple’s policies or products, supplemented with commentary from Apple’s competitors or critics; or they are thinly veiled advocacy pieces designed to get Apple to take a specific action, focussed almost exclusively on Apple irrespective of other industry involvement. This NYT piece seems to fall into the latter category. Either way, like many of both types of criticisms, it was long on complaint and short on solutions. To be clear, big tech, Apple included, have much upon which they can improve; but critical analysis requires context, which in turn defines both expectations and performance indicators.  

Apple has made substantial concessions to the Chinese government, but so too have other companies, world councils and nation states, from low and middle income countries to the United States of America to the United Nations and the World Health Organization on just about everything. To this day, for example, neither the United Nations nor the United States have had any effect on China’s expansion of its territorial waters in the South Pacific. Indeed, not only have Chinese fighter jets consistently challenged both US military aircraft and naval vessels over nominally international waters, they have begun to encroach their military shadow towards Taiwan, and the forecast is stormy. Trade relations have been no less troubled. 

So, let us take a pause, and set our assessment of Apple’s China concessions into that geopolitical context. No nation, in isolation, can successfully compel China to do anything China does not wish to do, let alone anything that it views as contrary to its interests. That being the case, what recourse has any company, irrespective of market cap, in the absence of international geopolitical backing?

Then there is the current legislative and regulatory context, in which not only Apple but big tech in general are under active investigation for everything from unfair competition to where they make their products to cooperation with law enforcement – a toxic brew brimming with skepticism and hostility at home and abroad – which has positioned Apple awkwardly with the very governments that could provide Apple with the protections they require in conducting business in China. 

This is essential context in which to assess Apple’s decisions in China. In the world of global tech giants, Apple is akin to an apex predator atop the food chain. Think of Apple as a leopard, an apex predator in its own right, but occupying a defined niche, having to negotiate its survival on an open savannah amidst multiple prides of lion, who rule like nation-states. Now, a leopard is an awesome and beautiful beast, but it’s no match for even a single lion, let alone a pride and less still multiple prides all claiming their respective turf. The lions dictate the terms of engagement; don’t take our stuff, don’t come near our cubs, don’t hunt our game, and don’t whiz on our termite mounds, capiche?

Oh, and be prepared to hand over your kills, concede the hunting ground whenever we want it, accept that we can whiz wherever the hell we want, and if we see your cubs, we get to take them out because…lions rule. To any fair-minded human who believes in individual liberty and equality, this seems unfair and intolerable. Here’s the problem; lions and leopards are not people, and on the savannah (or jungle, take your pick) in the absence of active human husbandry, might makes right. Sovereign states and corporations, likewise, are not ‘people’, but entities that seek to survive and exert dominion; and in that arena, in the absence of enforceable regulation, might makes right. It’s just a different kind of savannah. And when corporations enter the territory of a sovereign power, they have to play by their rules, retreat or die. It’s not complicated. 

Whenever anyone opines that companies can simply opt not to compete in a market, specifically China’s, they assert that a global company can ignore the world’s largest market, whilst their competitors, many of them Chinese, engage. Chinese enterprises will not only compete in China, they will, to paraphrase Churchill, compete ‘on the beaches, on the landing grounds, in the fields and in the streets, in the hills and shall never surrender any market on the planet’. In short, they will out-compete and become fitter than their China-abstaining competition, and might ultimately drive them out of business or acquire (eat) them.

Does this obviate Apple from any responsibility as to how they negotiate that savannah? No, however for any company to maintain social credibility and market viability, it must balance two values, like opposite ends of a tightrope walker’s balancing pole; and these are the metrics by which it should be judged. The first are its core operating principles; the second, its stated practices and policies, in this case compliance with local law – typically the price of admission to a domestic market. Amongst Apple’s core principles are a commitment to civil liberties and privacy; the former subject to national law, and varying from nation to nation, the latter is the consensual sharing of personal information.

It is in this context that we can talk about adaptability and seizing opportunity; and as we will discuss in part 2, these serve different functions.

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