Apple Sinks $1B in China's DiDi Chuxing, a Ride-Sharing Rival to Uber

By Todd R. Weiss  |  Posted 2016-05-14 Print this article Print
Apple investment in China's DiDi Chuxing

Analysts say the investment is interesting, occurring just before Apple's CEO prepares to go to China to try to resolve recent difficulties.

Apple unveiled a $1 billion investment in China's DiDi Chuxing ride-sharing service, a competitor to Uber, just before Apple CEO Tim Cook heads to China for talks with leaders there.

The Apple investment is the largest received so far by DiDi as the company continues to create a data-driven ride-sharing platform in China, DiDi said in a May 12 announcement. Other investors include Tencent, China's largest Internet portal, and Chinese e-commerce company, Alibaba. DiDi is building a data-driven ridesharing platform that it hopes will be used by hundreds of millions of Chinese drivers and passengers.

Cook disclosed Apple's participation in the funding of DiDi in the company's announcement. "DiDi exemplifies the innovation taking place in the iOS developer community in China," said Cook in his statement. "We are extremely impressed by the business they've built and their excellent leadership team, and we look forward to supporting them as they grow."

Cheng Wei, founder and CEO of DiDi, said in a statement that Apple's endorsement "is an enormous encouragement and inspiration for our four-year-old company. DiDi will work hard with our drivers, riders and global partners to make available to every citizen flexible and reliable mobility choices, and help cities solve transportation, environmental and employment challenges."

Apple's $1 billion investment in DiDi is also interesting due to its timing, just before Cook is set to travel later this month for talks with Chinese leaders and after Apple experienced some stumbles in recent months. In late April, government regulators in China without warning shut down Apple's online iBooks Store and iTunes Movies service, which had opened six months before, leaving the company working with the Communist government to try to restart the services. The shuttering of the Apple services occurred despite permission that Apple previously received from the Chinese government when the services began there last year, according to an earlier eWEEK story. Apple is still working to return the services to users there.

Also in late April, Apple reported a quarterly decline in revenue for the first time since 2003. Apple's second-quarter revenue of $50.6 billion fell 13 percent from $58 billion a year earlier. Net income in that interval fell to $10.5 billion from $13.6 billion as sales of the company's flagship iPhone smartphones leveled off, ending Apple's 13-year record of uninterrupted sales growth. Apple's latest iPhone 6 models went on sale last September.

In its latest quarter, Apple reported sales of 51.2 million iPhones, down 18 percent from 61.2 million in the same quarter one year ago. The latest quarter's iPhone sales were down sharply—by 32 percent—from the 74.78 million sold in the first quarter of 2016. Revenue from iPhone sales dropped to $32.9 billion in the second quarter, down 18 percent from $40.3 billion one year ago.

For the company, China has long been seen as a place where it could increase revenue due to a large pool of customers and economic growth in recent years. Apple has been garnering more and more of its revenue from China the last several years, according to the company's revenue reports.

In January, Apple reported $18.37 billion in fiscal first-quarter revenue from China, which accounted for about 24.2 percent of the company's $75.87 billion in revenue for the quarter. In the fourth quarter of 2015, Apple reported $12.52 billion in revenue from China, out of a total of $51.5 billion.

China is Apple's second-largest global market behind the United States. The company began selling iPhones in China in October 2014, after gaining government device security approvals.

DiDi today completes more than 11 million rides a day on its platform, serving close to 300 million users across more than 400 Chinese cities with a diverse range of mobile technology-based transportation options, according to the company.

Analysts Weigh In on Apple's Investment in DiDi

Several IT analysts told eWEEK that Apple's investment in DiDi is intriguing for several reasons, including Cook's upcoming trip there.

"I've seen quite a few people draw a connection between the DiDi investment and the iBooks/iTunes issues, and it would probably be naive to think there wasn't one," Jan Dawson, chief analyst for Jackdaw Research, wrote in an email reply to eWEEK. The investment, however, isn't being made to try to influence China on that issue, he added.

"I see this as—among other things—a demonstration by Apple that it's really serious about the Chinese market and wants to continue to invest there," said Dawson. "Ahead of meetings with Chinese officials about the content bans, that's likely a useful message to be sending."

At the same time, Apple has previously made plenty of investments in China, including in retail stores, while many of its devices are built in factories there, said Dawson. "So I don't think this presages some new era of Apple making random investments in China to curry favor with the government."


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