China Is More Than Happy to Be Nice to Apple

By Don Reisinger  |  Posted 2012-03-29

Apple's China Strategy: 10 Reasons Other IT Companies Should Pay Attention

Much has been made about Apple CEO Tim Cook€™s visit to China this week. Nearly everywhere he goes, Apple fans and reporters are wondering why he€™s there and what he€™s discussing. Meanwhile, Apple has only said that the chief executive has met with the government officials, declining to provide more details on his schedule and whether he€™ll be making an appearance in many other places.

However, Cook has been spotted at China Mobile offices and reportedly visited a company factory to ensure everything was going smoothly there. He also went to an Apple Store in Beijing to talk with employees. Although Cook is a chief executive of an American company, he€™s being followed like he€™s a country€™s leader visiting China and being given the red carpet treatment to see how things are going across the country.

But there€™s a reason for that. As Tim Cook himself has said, China is vastly important to Apple, and in some ways, Apple is vastly important to China; both parties have a mutual need for each other.

The questions then are: What is Apple€™s overall strategy in China, and why should other IT companies pay attention?

1. Mobile device usage is skyrocketing

The sheer number of mobile device connections in China might shock you: 1 billion. In other words, there are 1 billion devices connected to mobile networks around the country. Apple, meanwhile, is delivering the world€™s most sought-after smartphone. See why China is so important to Apple (and should be to other companies)?

2. The population is going after technology

There was a time in China when only those living in big cities like Beijing and Shanghai were using technology. But as the economy in the country grows and more people have disposable income, they€™re turning to tech goodies. Apple knows that, Apple wants to capitalize on that, and it wants to take advantage before others do.

3. Few companies are dominating industries

Following that, it€™s important to point out that, aside from the Web, few companies are dominating any industry in China. The mobile space is very much up for grabs, as is the computing market. Apple has the cash to invest in those areas and start appealing to customers. And if it€™s lucky, it might just be able to corner those markets before any other firms move in.

4. China Mobile. Period.

Following on the mobile theme, it€™s important to note that Apple currently works with two Chinese carriers€”China Telecom and China Unicom. And although both carriers are sizable by U.S. standards, they€™re dwarfed by China Mobile, which is 660 million subscribers strong. Apple has been trying to woo China Mobile for years, but so far, has failed. Is Tim Cook€™s visit designed to change its luck? Perhaps.

China Is More Than Happy to Be Nice to Apple


5. Factories

Apple has been in some hot water recently over claims that the factories producing its products have poor working conditions. To address the problem, Apple recently brought Fair Labor in to investigate the facilities. If those investigations go well, the company could be in good shape. But if they go poorly, it could dramatically impact Apple€™s relationship with China and how it€™ll work with the country going forward. Make no mistake: the stakes are high.

6. One lawsuit can change everything

Apple is currently waging a legal battle in China with a company called Proview. That firm, which is in dire financial straits, argues that Apple is violating its iPad trademark and should have the tablet banned from sale in the country. If Apple loses that case, it could go a long way in hurting the tablet maker€™s chances of succeeding in China. An awful lot is riding on that case, and Apple knows it.

7. It can capitalize on Google€™s issues

Google and Apple are waging war in nearly every country around the world. However, in China, Google hasn€™t been the most favored company, due to its battles with the government over search censorship and hacking. That€™s good news for Apple and every other company competing against the search giant. If Apple can continue to stay on the good side of the government, it could corner Google out of the market.

8. The government plays nice

Speaking of that government, it appears China is more than happy to be nice to Apple. And Apple might actually have some leverage. After all, it€™s driving China€™s consumer economy, and it€™s putting tens of thousands of people to work in its factories. Apple, meanwhile, has some leverage to possibly get what it wants€”either in legal cases or in dealings with other companies. It€™s a good position to be in, and it€™s vastly important to Apple€™s overall, global strategy. Other companies should consider following Apple€™s strategy and play nice with the Chinese government. It might just be good for business.

9. It could become Apple€™s biggest market

According to Tim Cook, China is currently Apple€™s second-largest market behind the U.S. In the coming years, if all goes well, that could change dramatically. China is poised to become Apple€™s (and probably most companies€™) biggest market and the single most important contributor to its financial health. If that doesn€™t show why it€™s so important to Apple€™s strategy, what does?

10. It gives Apple leverage globally

Finally, it€™s important to note the political position China finds itself in. The country is massive with an unending amount of political capital it can use on the United States and Europe. By getting close to the government, Apple can use some of that political capital to get better terms elsewhere around the world. It might sound rather Machiavellian, but Apple could use China as a pawn in a grand chess game that spans countries around the world. That€™s not to say Apple has actually done that, of course, but it€™s something all companies should consider going forward.

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