Diplomacy in China Has Allowed Apple to Skirt or Delay Legal Obligations ft.com

Patrick McGee and Ryan McMorrow, Financial Times:

Yet when it comes to selling its devices to Chinese consumers, business has boomed. Operating profits in greater China — which includes Hong Kong, Macau, Taiwan and mainland China — have shot up 104 per cent over 24 months to $31.2bn in the financial year to September, eclipsing the $15.2bn earned by Tencent and the $13.5bn from Alibaba in their most recent 12-month period, according to S&P Global Market Intelligence.

The record profits underscore the bargain Apple has struck with Beijing, allowing the iPhone maker to sail through President Xi Jinping’s crackdown on homegrown tech groups while reaping the rewards from US sanctions, which are helping to damage its only real competitor in the country — national champion Huawei.

This article builds modestly upon Wayne Ma’s reporting last year for the Information about Tim Cook’s efforts to ingratiate himself and Apple among officials in China. But the deal struck by Cook was due to expire last year, according to Ma, and the company has begun to diversify its manufacturing dependency. I bet Apple wishes that diversification could happen much faster, as it just announced supply would be reduced of iPhone 14 Pro and Pro Max models because of COVID-19 restrictions at its main factory for those phones.

As I wrote when I linked to Ma’s story last year, it is notable that this diplomatic trade-off has required Apple to comply with an increasingly authoritarian regime. In some ways, these compromises have permitted Apple’s customers a greater level of security and privacy than is offered in products from other companies. At the same time, it has also made Apple complicit in implementing those laws. But if it did not compromise, it is likely Apple would be required to be wholly compliant with just about any law since it is so dependent on the country for manufacturing.