BEIJING: Will Apple be the last US tech giant left in China?

BEIJING: There was a time when the US tech
giants were all in China – even Facebook. Today, Apple’s huge presence in the
country looks increasingly conspicuous.

Last week
Microsoft, which still operates in China, announced it was to shut down its social network, LinkedIn, there.

The
company said having to comply with the Chinese state had become increasingly
challenging – so it pulled the plug.

Apple has
its own censorship problems in the country.

The BBC reported last
week that two popular religious apps had been removed from Apple’s App Store.

It later emerged that Amazon-owned Audible and the Yahoo Finance
app had also been taken down.

Apple
Censorship, a group that monitors the App Store, says it has seen an increase
in apps that have been removed this month.

So what
is going on?

The great tech crackdown

It is
notoriously hard to gauge what’s happening behind closed doors in Beijing.

Still,
what is becoming increasingly clear is that Apple and Microsoft are embroiled
in a domestic battle between the authorities and the Chinese tech industry.

China has
its own big tech titans – Tencent, Alibaba and Huawei – that are enormous
global companies. But the Chinese government has grown worried about the power
they wield.

• In April, Alibaba accepted a record $2.8bn
  (£2bn) fine after
  an investigation found that it had abused its dominant market position
• In August, the Chinese
  government unveiled a five-year plan outlining tighter regulation of the tech economy
• It’s also been cracking down on Bitcoin

American
companies haven’t been spared from the “great tech crackdown”.

“The
crackdown suggests that both Apple and Microsoft are very aware that their
position is more tenuous than it’s been in recent years. They know they need to
walk carefully,” says James Griffiths, author of The Great Firewall of
China.

The straw
that broke the camel’s back for Microsoft appears to be a law due to come into
force on 1 November – the Personal Information Protection Law (PIPL) – which
would have required the company to comply with more regulation.

Microsoft
alludes to it in a statement explaining its decision to pull LinkedIn:
“We’re facing a significantly more challenging operating environment and
greater compliance requirements in China.”

Graham
Webster, editor-in-chief of the DigiChina Project at Stanford University, said:
“I think they decided it just wasn’t worth it.”

Mr
Webster links the decision to say goodbye to LinkedIn to forthcoming
enforcement of the PIPL.

The devil’s bargain

Apple,
however, has a different set of priorities in China to Microsoft.

It is
deeply entangled in the country, far more so than any other US tech company.

In the
last quarter, Apple made nearly $15bn in revenue in China and Taiwan – an
extraordinary figure.

Its
global supply chain also depends on Chinese manufacturing. And to be in China,
Apple knows it has to play by the country’s rules – even if that means
censorship.

You might
ask: why doesn’t Apple just sell hardware in China, and forget about the App
Store?

The
problem is, Apple believes the App Store and the iPhone are inseparable. It
doesn’t want to set a precedent of side-loading apps, where people can download
apps on an iPhone away from the App Store.

For one
thing, it would make considerably less money.

So if
Apple is going to sell products in China, keeping the App Store operational in
that country is deemed essential.

“Apple
has been removing apps and essentially censoring the App Store in one way or
another for years,” Mr Webster says.

But Mr
Griffiths argues that censorship has slowly grown stricter during Apple’s time
in the country.

“​Apple
has set itself a devil’s bargain here,” he says.

“Once
you start to agree to remove apps, it doesn’t really stop.”

Secret strategies

Other
companies saw the writing on the wall earlier than Microsoft.

Google
removed its search engine from China in 2010, after what it said was a Chinese
hacking attack. The company said it was no longer happy to censor searches.

Rebecca
Fannin, author of Silicon Dragons, believes Microsoft’s pulling of LinkedIn now
makes Apple a “big target”.

But she
thinks Apple is going to fight to stay in China.

“You
know Apple is really one of the market leaders in China… I don’t see Apple
pulling out of China over any of these issues any time soon,” she says.

What we
don’t know are the conversations that are going on behind closed doors between
Apple and the Chinese authorities.

Perhaps
Apple does push back, and maybe many apps are still up and live on the App
Store in China because Apple stood up for them. We don’t know.

Apple
rarely comments on these stories, and points journalists to its human rights policy, which states it will follow the
laws of the countries it operates in – even if it disagrees with them.

And in
China, they’ve been doing just that.

When the
authorities really want an app taken down, it gets removed.

Apple’s
presence in the country now feels almost like a hangover from another era. Big
Tech simply doesn’t have much of a presence in China any more.

The
question now is how much regulation, how much compliance – and how much
censorship – is too much?