Apple Promises China R&D Facility This Year

During Tim Cook's ninth visit to China, he confirmed that Apple will open an R&D facility there this year. He called China a market with still tremendous potential.

Tim Cook, Apple

Apple has committed to building a research and development facility in China, a number of sources have reported.

Apple CEO Tim Cook (pictured), during his ninth visit to China, met with senior government officials this week and promised to increase investment in the country.

An Apple spokesperson said that the R&D facility will open this year and focus on developing new products and "strengthening relationships with local partners and universities," according to The Wall Street Journal.

While China had been a fast-growing market for Apple, during the company's most recent fiscal quarter, sales in China were down 33 percent.

Cook, in an interview with the The Washington Post published Aug. 13, framed the figures differently, saying the company reports every 90 days because the law demands it, but that view doesn't allow for a big picture.

"… I think China is an unbelievable market—not only from a demand point of view and the revenue potential there, but also as a great source of talent. We have over a million and a half developers there," Cook told The Post.

He added, "There are, sort of, speed bumps now with the economy. In a year-ago quarter, we were up 112 percent. So I think you have to back up and put it in perspective. If you look at it over a two-year basis, we were up over 50 percent in the quarter."

Apple could also benefit from endearing itself a bit more to the Chinese government, which earlier this year shut down Apple's iBooks Store and iTunes Movies service, despite Apple reportedly having the required permissions.

A month later, the Beijing Municipal High People's Court ruled against Apple in a trademark dispute, granting authority of the use of the word "iPhone" to a Beijing company that makes leather wallets and smartphone cases.

In May, in a move thought also to be about currying needed favor with the Chinese government, Apple announced a $1 billion investment in China's Didi Chuxing, a ride-sharing competitor to Uber.

"There's clearly an element of currying favor with the Chinese government and Chinese people here," said Jan Dawson, chief analyst of Jackdaw Research. "But China is also a huge market for Apple and a huge skilled labor force, too, so it's a logical place to make an investment like this."

Ezra Gottheil, principal analyst with Technology Business Research, said buttressing Apple's relationship with China is certainly a goal of the R&D center. But it also makes good business sense for Apple. "This year, Apple announced app development centers in southern Italy and in Bengaluru, India. These are different from what is proposed for China, focused on helping independent developers," Gottheil told eWEEK. "Apple is doing two things: diversifying its talent base and making it easier for outside developers to work with Apple."

He continued, "This last part is most important in light of opening up Siri to third-party products, where two important Chinese apps topped the list: the ride sharing app Didi Chuxing and the messaging app WeChat. … Opening up Siri is necessary for iOS to remain competitive, as Microsoft, Google and Amazon invest in natural language. Natural language development requires expertise in languages, so locating in large countries with different languages makes sense."

Gottheil, in email to eWEEK, also noted that one of the first things Cook did, when he arrived at Apple as its senior vice president for operations, was to turn to China for much of Apple's manufacturing. While Cook is respectful of Steve Job's legacy and the traditions he established, wrote Gottheil, Cook "is more comfortable working across border."

During his visit Aug. 15, Cook stopped by the Beijing studio of designer Guo Pei.

"Nihao, Beijing! It's great to be back. Started my trip today by visiting with the incomparable Guo Pei—such exquisite care and craftsmanship in her work," Cook wrote on Sina Weibo, a Twitter equivalent, according to a report in the China Daily. "Thrilled to see how her team is using iPad Pro," Cook added, "as Guo Pei designs her new collection."