Apple Services Shut Down in China in Startling About-Face

http://www.nytimes.com/2016/04/22/technology/apple-no-longer-immune-to-chinas-scrutiny-of-us-tech-firms.html

by jboydyhacker • 10 years ago

108 87 10 years ago

3pt141592• 10 years ago

China has to play fairly carefully with Apple. On the one hand it's an American company that puts microphones and cameras into the cafes, offices, and bedrooms of many of their citizenry; but on the other hand, with decreasing competitiveness due to rising wages there isn't anything specifically _stopping_ Apple or other American tech companies from moving manufacturing out of China. Foxconn alone employs about 4.3 million people, and while it would be very difficult to move operations to Tiawan, Singapore, Japan, or even the United States; it would also provide a number of benefits since any new hosting country would very incentivized to make the move happen.

jbob2000• 10 years ago

Manufacturing is slowly moving to be "on demand". That is, a consumer purchases something, then it is built and shipped to them. It doesn't make sense any more for a company to predict market volume and then produce goods to match the prediction, especially since technology turns over so fast.

With that in mind, I could see Apple having simple components being produced in a number of different countries, then shipped out to wherever their products are in demand. Then the components are assembled by robots locally and the final product is picked up or shipped down the street to the consumer. I remember reading that this is where the auto industry is heading. They want to produce interchangeable car parts which get assembled at the dealership when a person purchases the car.

So to your point, China is already done. Instead of huge factories producing consumer ready goods, Apple just needs a handful of smaller factories making much simpler intermediary components. It's much easier to setup and move these smaller factories around, rather than these huge factory cities managing a massive production line.

eulji• 10 years ago

I predict that technology is not going to move that fast as it used to (moore's law etc). Instead we will go back to the age of "durable" / "longer lasting goods". A good software will make a difference between scoring a sale or not. Same with services.

Besides most of the companies are trying to move the manufacturing to Vietnam, Indonesia, India, Africa etc or automatizing as much as possible.

nsgi• 10 years ago

How does that fit with the advent of same-day delivery? Presumably the goods can't be assembled that quickly.

makecheck2• 10 years ago

And Apple has one of the best chances to make real change here because they can afford to spend a hell of a lot of money without their short-term business being hurt.

They could, for instance, speculatively set up entire facilities in new areas, hire staff, and experiment with parallel development of the same products to measure how well the new bring-up is going.

codeisawesome2• 10 years ago

Why will they do it? Corporate entities like Apple exist to make profits. Change is not on the agenda. It's not healthy to be that hopeful when you're setting yourself up for disappointment.

Steko3• 10 years ago

I think you've got it backwards, it's Apple that needs China's market and China basicallly has them over a barrel on these secondary products.

What China has to be careful of is eventually the US/EU decide to get tough on Chinese protectionism and impose significant barriers to goods manufactured in China. And that would also be bad for Apple again since they make their stuff in China.

DannyBee• 10 years ago

"it's Apple that needs China's market".

I always hear this, but given the experience of most american companies in china, it seems little stretched.

3nki• 10 years ago

If China keeps giving western tech companies a hard time they might stop making their stuff in China. That would hurt the Chinese economy far more than they gain by local companies taking a little business from Apple and such.

tn13• 10 years ago

I think you are ignoring the precedent effect. If China indeed does something nasty with Apple it is not Apple that is going to leave China but almost every vendor out there might start doing risk analysis. India's pro-market government is already trying to woo American manufacturers (but don't seem to succeeding yet).

Not to mention the governments of USA/EU etc. might do the same to Chinese companies.

draw_down2• 10 years ago

I dunno. Cook recently said in an interview their manufacturing is in China not due to cost but because the supply chain is simply stronger there, and they can do things there that they can't elsewhere. Of course they could make a bold move like make a big outlay to get their supply chain operating in another country/region, that strikes me as something they could do. But it would be a really big deal.

MBCook• 10 years ago

I imagine that would be an incredibly huge investment to try to get even a small percentage of the supply chain in another country.

dilemma• 10 years ago

Of course they could make a bold move like make a big outlay to get their supply chain operating in another country/region, that strikes me as something they could do. But it would be a really big deal.

The supply chain is made up of thousands of companies who in turn rely on thousands of others. You can't recreate this top down, it has to be through organic growth.

pessimizer• 10 years ago

there isn't anything specifically _stopping_ Apple or other American tech companies from moving manufacturing out of China.

But it's about as credible as the Saudi's dumping all of their US treasuries. Apple enjoys a very high margin at a very high price point. Any move would be margin-killing, not price-raising. They're not manufacturing in China to be charitable.

mtgx• 10 years ago

Unfortunately, the Chinese government has only gotten bolder since the U.S. government has publicly become an enemy of encryption itself. The damage would be far greater if the U.S. actually passed a law mandating backdoors, but even just talking about it and making a "scandal" out of it, has probably encouraged Chinese government to be more aggressive about it in its own country.

Remember when the U.S. government at least pretended to care about things like privacy and human rights internationally. Now it seems to be more like "Wait, China did it? Why can't we do it then?!". Case in point, in a recent encryption hearing, law enforcement argued that if Apple showed its source code to the Chinese government (it didn't), then it should also show it to the US gov!

icebraining• 10 years ago

Remember when the U.S. government at least pretended to care about things like privacy and human rights internationally.

No. When was that?

educar2• 10 years ago

You make it sound like Apple can easily move out of China. Think again. Apple's profits are largely due to the cheap labor market (just like many other companies)

masklinn• 10 years ago

Their point is that chinese costs are rising fast. OTOH they're probably underestimating the difficulty of moving outside China, not because of the supply chain.

toomuchtodo• 10 years ago

Apple's profits are largely due to the cheap labor market (just like many other companies)

Foxconn is replacing millions of workers in China with robotics. Couldn't Apple acquire these same robotics, perform their own manufacturing in the US (remember, substantial tax breaks in the US for equipment purchases!), and then lease out any spare capacity.

Seems its all coming back to US shores. As a US citizen, I don't mind.

zepto• 10 years ago

This is simply false. The difference in labor cost makes only a small difference to Apple's profits.

The benefit to Apple of being in China is the responsiveness of the supply chain.

mahranch2• 10 years ago

You make it sound like Apple can easily move out of China.

And you make it sound like cheap labor only exists in China.

blackguardx• 10 years ago

Foxconn is Taiwanese and has many factories around the world already.

jdietrich• 10 years ago

Nobody else has anywhere near the capacity. Foxconn are the third largest tech company in the world, not a tinpot little outsourcing shop. Apple already use other EMS companies for reasons of cost and capacity, but they are all Chinese companies or rely on predominantly Chinese labour. Foxconn's nearest foreign competitor (Flextronics) is just a fifth of the size of Foxconn and sources most of its labour from China.

China has tremendous technical expertise and vast amounts of relatively cheap labour, which is a formidable combination. Singapore, Japan and Chinese Taipei have the expertise, but they don't have enough cheap labour. Thailand and Indonesia have plenty of cheap labour, but they don't have the expertise. China also has superb logistics, which reduces cost and improves lead times.

For the foreseeable future, China is simply unavoidable. Within just a few years, their position as the dominant manufacturing nation will be secondary to their position as the dominant consumer market.

3pt141592• 10 years ago

China's cheap labor is not everything it used to be. Nearly 7x more expensive over the past two decades and expertise is everywhere. Sure it would be painful, but it isn't like China doesn't stand to also lose here as well.

xigency3• 10 years ago

It shouldn't be too surprising with China's history of censorship that they would ban iTunes from selling books and movies to their citizens. What's surprising is that they apparently allowed it for several months.

tekklloneer• 10 years ago

It would be very likely that Apple was following by "the rules".

xigency3• 10 years ago

How could they? The communist party would have to literally read every book and watch every movie for approval, so to really go by the rules, the only content they could offer is media in favor of the cultural revolution. I doubt Apple even tried to play it like that, so why be surprised when it's shut down?

Naritai• 10 years ago

There's an easy answer to this: The government provided the list of books and movies that were allowed to be sold. And Apple realized they couldn't make money selling only this list, so they dropped out.

bnolsen• 10 years ago

and this is a reason why china with the current government can never truly be a world leader in anything: Your entire enterprise can be distroyed at the whim of a few unrestrained individuals. Sort of like apple's app store, but at a much bigger level.

_nedR3• 10 years ago

Being from india, i have come to the opposite conclusion.

Chinese protectionism (aided by the language barrier) has served chinese entrepreneurs quite well.

They have their own google. Their own fb. Their own twitter. Basically all services that India doesnt have. The list goes on. These services may or may not be inferior to the original but from an economic standpoint, its good since the money and data flows within the economy instead of going abroad.

India has its own taxi service but they are getting severe competition from uber (with rumours floating of a possible buyout by uber). We have flipkart but they are getting pummelled by amazon (which just walked in late to the indian ecommerce market after flipkart laid all the groundwork) and was recently down-valued by investors.

China is also successfully exporting to india- chinese smartphones are doing very well, much better than Apple.

educar2• 10 years ago

Totally agree with this. India is not an exception here though. In europe, we have the problem that all the main software is owned in US companies and much of the data resides there. Given US companies desire to mine user data at will, this is very much frowned upon. But sadly, there is no competition (whatever there was has already been killed).

The US companies (slack being perfect example) have the typical approach of: 1. Take capital and give out free stuff 2. Be everywhere 3. Now either show ads and mine user data and build user profiles. Alternately, they shutdown. All this churn causes a tremendous amount of loss in the local economy.

WWKong• 10 years ago

The issue is that Trade agreements don't allow such a move. You either partake in global trade or not. Can't have it both way. For example India will export beef, clothes etc. but block Uber and Amazon. Doesn't work that way.

sievebrain4• 10 years ago

Served Chinese entrepreneurs but that isn't the same thing as served the Chinese people.

For instance, at the time when Google was kicked out of China essentially leaving their market a Baidu monopoly, Baidu lacked many useful features of Google especially if you wanted to search for non-Chinese websites (e.g. if you were a scientist wanting to do international research). The PRC didn't care. Having a pliable and controlled 'captain of industry' in the form of the Baidu founder was a more important goal to them, than the convenience of their own people.

Repeat that story a million times and you have an economy that looks superficially strong but makes its people miserable .... oh wait no it doesn't, because the censorship and language barriers ensure most people have no idea what they're missing out on.

bjshepard• 10 years ago

A key sentence from the BBC article on the topic: " The strict rules are also seen as a way to foster the success of indigenous net Chinese firms such as Huawei, Alibaba and Tencent."

lukasb• 10 years ago

as if Tencent needs the help!

coldcode• 10 years ago

Apparently there was a movie that China didn't approve available on iTunes that might have triggered the stoppage.

williwu• 10 years ago

It's the Ten Years movie

codecamper• 10 years ago

I think as the technical part of the population, we have the opportunity now to greatly change the structure of the world.

Government can be largely replaced by software. (just thinking long term here)

Democracy can be more pure. Corruption can be controlled. Economies can be stabilized and better planned. Environmental resources can be better managed.

We've got a lot more work to do past sharing images & allowing chats (though look at the massive affect of just those things)

pi-err• 10 years ago

Printing press changed the scale, idea and goal of government. Very slowly though because it changed _societies_, not actual rulers.

It may be that it takes 1-2 centuries to software-ize our govs.

And are we so sure it would be more efficient? GitHub as a constitution would be a blessing and a curse.

inimino• 10 years ago

Which functions of government can be replaced by software specifically? Making laws? Interpreting them? Diplomacy??

I think as the technical part of the population we tend to be overoptimistic about technical solutions, which then get steamrolled by the real world's existing power structures.

sievebrain4• 10 years ago

One obvious one is the gathering of feedback and debate about decisions. Governments barely encourage that today, except when they have dumb petition sites and the like, but there's no real reason why they couldn't.

sachinag• 10 years ago

There's a huge difference between iCloud not working and the content sale restrictions that this is. This is irritating but not key for Apple - but if iCloud and activation for iPhones and iPads stopped working, that would really be a big deal.

China doesn't want to be a dumping ground for western media, and they're rightfully concerned about not being able to build a content export industry.

bickfordb• 10 years ago

I'm curious how China is able to do this and belong to the WTO?

xbmcuser• 10 years ago

Will they put the same restrictions on Ios apps. No one has been able to make Apple open its hardware to non appstore apps. Would be interesting if in the future they ask for that as well.

Spooky232• 10 years ago

This almost certainly a consequence of pissing off the USG.

It's a pretty rare event to create a situation where the interests of the PRC are directly aligned with the US government's interests.

rospaya• 10 years ago

Are you referring to the FBI decrypting situation? If so, I very much doubt that decrypting phones is even remotely important as billions in taxes.

vadym909• 10 years ago

I can't imagine ibooks and imovies was making in money in China given how easy it is to get content without paying. Apple's probably OK with just the hardware profits from iphones. Developing countries aren't great markets for IP/copyrighted products.

studentrob• 10 years ago

Last week, Apple’s iBooks Store and iTunes Movies were shut down in China, just six months after they were started there... then a regulator, the State Administration of Press, Publication, Radio, Film and Television, asserted its authority and demanded the closings

Unsurprising. China has a habit of allowing foreign services to operate for a bit. Then they come out with their own version.

Apple Services Shut Down in China in Startling About-Face

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