The Register® — Biting the hand that feeds IT

Feeds

Tim Cook eats necessary crow, apologizes to China

  • alert
  • print

State media: Apple 'greedy' and 'incomparably arrogant'

Free whitepaper – Hands on with Hyper-V 3.0 and virtual machine movement

Comment Apple CEO Tim Cook has released an open apology to his company's Chinese customers after coming under increasing pressure from that government's propaganda machine's attacks on Cupertino's customer-service practices.

In a letter published on Apple's Chinese website (Google Translate) – and which some of The Reg's Chinese-speaking readers might be better able to translate than Google – Cook expressed his "sincere apologies" (诚挚的歉意) to Apple's customers in the Middle Kingdom, a country for which he expressed his "immense respect" (无比的敬意).

From where we sit, however, it appears that Cook's gesture was not intended to ameliorate any consumer backlash, but rather to show appropriate deference to the industry-controlling Chinese government – the undisputed power in a country that is becoming ever more important to Apple's hopes for world domination.

The Chinese government's anti-Apple effort has been carefully orchestrated, but not entirely well-managed. On March 15 – World Consumer Rights Day – the state-run China Central Television (CCTV) aired a prime-time special that excoriated Apple for their warranty and customer-support policies.

One specific charge was that although Chinese law requires a new one-year warranty after a phone repair, Apple was replacing defective phones under warranty with new phones but using the back cover from the defective phone so as to skirt the warranty renewal.

"In contrast with China," CCTV said, "Apple consumers in other parts of the world including the United States, Australia, South Korea and the European Union are treated much better." There's nothing quite like playing to nativism to stir up a crowd, eh?

CCTV also cited one unnamed Beijing resident as saying, "I think there should be no difference between Chinese and foreign Apple users. Apple should guarantee the legal rights and interests of its Chinese fans."

The station also quoted Qiu Baochang, a top lawyer from the China Consumers Association (CCA) as saying, "Apple says Chinese consumers enjoy the highest standard of service. This is a false statement. It's a fact that the company gives brand-new replacements in other countries, but in China the warranty does not cover the outer casing. I think Apple is ducking the issue."

CCTV branded Apple as "greedy" and "incomparably arrogant," the Communist Party's People's Daily editorialized that "Perhaps the trouble comes from Westerners' traditional sense of superiority," and the CCA asked Apple to "sincerely apologize to Chinese consumers" and "thoroughly correct its problems," CCTV reported.

And on Monday Cook did just that, both offering his 诚挚的歉意 and broadening warranty support for Cupertinian smartphones from the iPhone 4 on.

That may have been a necessary move to placate the Chinese government and its state-controlled news outlets, but it doesn't appear to have been necessary to smooth ruffled consumer feathers. As reported by the Financial Times (free registration required), those consumers clogged the social interwewbs with caustic commentary about the government's attacks – especially after it was revealed that the CCTV recruited Chinese celebrities to promote their broadcast and attack Apple on their social-media accounts.

"Everybody is eating cooking oil recycled from gutters, no problem!" one online commenter responded. "Everybody is drinking poisonous milk powder, no problem! We drink water filled with dead floating pigs, no problem! But when you change the back cover of iPhones for foreigners but not for us then that is not OK, that is far more serious than any of these problems."

From the point of view of global corporate realpolitik, Cook had no choice. China is Apple's second-largest market behind the US, and his company's growth plans are increasingly reliant upon success there – success that the Chinese government may not relish if it comes at the expense of such home-grown players as Huawei and ZTE, or even companies such as HTC that are based on a nearby island that they still regard as theirs: Taiwan.

Cook has talked up China quite a bit during his conference calls with analysts and reporters that accompany Apple's quarterly financial reports. When reporting the company's Q1 2012 results, for example, Cook said that the "demand in China is staggering" and "off the charts." A year later – this January, to be exact – he was still bullish, saying that "it's clear there's a lot of potential there."

He also gave some China-specific figures during that call: during the first fiscal quarter of 2013, revenue from what Apple characterizes as "greater China" – mainland China, Hong Kong, and Taiwan – was $7.3bn, a 60 per cent bump year-on-year. Retail stores increased from six to 11, Apple's "premium resellers" doubled to 400, and iPhone point-of-sale spots soared from 7,000 to over 17,000.

At the time of that conference call, though, Cook was far from satisfied. "This isn't nearly what we need, and it's not the final by any means," he said. "We're not even close to that, but I feel that we're making great progress."

Sometimes progress, well, progresses in fits and starts, and Cook's Monday apology is, he must certainly hope, a small price to pay for getting in good with Chinese market managers. China continues to fine-tune its mix of private and state capitalism, and with a new PRC president and Communist Party General Secretary onboard in the person of Xi Jinping, Cook can ill-afford to ignore broadsides from such powerful Chinese entities as the CCTV and the People's Daily.

With new hands on the tiller of the Chinese ship of state, Cook is at both an advantage and a disadvantage – he faces new opportunities and new dangers. And not only is Apple's status as a hardware and services supplier at the mercy of China's vast bureaucracy, there is also – as Craig Stephen explained in a recent MarketWatch article – the not-at-all-insignificant matter of navigating contractual relationships with China Mobile, the world's largest wireless provider and not an iPhone carrier. Yet.

Cook may not be eating "cooking oil recycled from gutters" or "dead floating pigs," but he has made a calculated decision that a little crow on the menu is not all that tough to swallow. ®

Free whitepaper – Hands on with Hyper-V 3.0 and virtual machine movement

Anonymous Coward

Paragraphs. You need to use them.

17
1

As someone who lives in China, it has been interesting to see this play itself out "from the inside". As this article rightly points out, the Chinese government has been going after Western companies using their government owned TV programs for a while now. It is Western company bashing at its finest, disguised as a reputable TV program. While some of the complaints lodged at these companies have merit, many do not. But your average Chinese citizen does not have access to the entire story, nor do many care. Many in China could not afford an iPhone even if they wanted one. But money and image have become king in China and many people, particularly in the larger cities, would sell their parents and their left arm if they stand to gain monetarily. You're a nobody if you are not carrying the latest gadgets or weaing designer clothes. The Chinese govenment has played a large role in this because they are beginning to understand a few things. First, China does not have the education system, the culture, nor the know-how (yet anyway) to produce employees who can innovate, design, and create like those in the West. Yes, it's a stereotype, but there is truth to this. The Chinese govenment is trying to model the education system in China like that in the West, but there is a lot of resistence and this will take much longer than people realize. One only needs to consider the number of children from affluent Chinese families who are now educated in the West (from an early age) to realize this. Furthermore, I believe that the sudden increase in hacking into Western companies is a direct result of the Chinese government's realization that it will be difficult to compete with Western companies for some time unless they either acquire the technology by buying up Western companies, or steal it. They have met much resistance on the former from Western governments, thus the increase in the latter. The government also realizes that, as the gap between the middle class and rich widens, people are going to start demanding more, and the days of China's manufacturing dominance are numbered. So the government must stimulate the economy in other areas - consumerism, being one such area. But if they increase sales of goods in China, it's best that the goods are produced by Chinese companies, not Western companies - and so the CCTV program gives them the vehicle to paint Western companies as "selfish", "China haters", "arrogant", "unethical", etc. Perhaps there is some truth to this, but surely there is a benefit to turning citizen's frustrations away from their own government and focusing it instead onto Western companies or governments - the Chinese government officials are masters at this. Many Chinese people see right through this attempt, however, as this article mentions. Speculation began to swirl when Peter Ho, a Taiwanese-American actor and Samsung spokesman, posted some disparging remarks about Apple on his Weibo (Twitter) account.....but inadvertently included the instructions given to him, telling him what to write. Of course, he claimed that his account had been hacked and removed all comments, but the damage had been done. People realized that the government was paying celebrities (or those with large numbers of Weibo followers) to post comments on their behalf, and compensating them quite nicely. China is the land of make-believe. The Chinese government has done a fairly good job of presenting a facade of a powerful country in which the government is taking care of things, but meanwhile the counrty is very dysfunctional and many things do not work the way they should. Corruption is rampant, from the highest levels of government all the way down to the village peasant, and, considering that it's been a part of their culture for hundreds of years, rooting it out is going to be extremely difficult, if not impossible. So, you've got government money being funneled into primarily state owned companies (very little of this money goes to fund small, familly owned companies), where people at the top skim their cut, and so on all the way down from there, where perhaps 1/2 of the funds are used for their intended purpose. In order to make due on half the required funding, companies simply cut corners (just thow the chemicals into the nearest river since there isn't money to dispose of them properly; use cheaper materials when building, even though these buildings will age rapidly and become a safety hazard; take land from the poor instead of compensating them (as is supposed to be done) since people in the countryside have few rights anyway; and the list goes on). Meanwhile the people who have immense wealth can use money to get just about anything. Your child wants to go to the top university in China? No problem. Just pay off the president and administrators. You want access to loans for a construction project.? No problem. Just pay off the bank president. You can begin to see how it becomes nearly impossible to run an efficient economy when so many people have their hands in the till. And you can also see that, not unlike the West to some degree, if you have money (and therefore likely a position of influence), life is grand. If you are an average Chinese citizen, however, life is more difficult. Will this change in the future? I hope so. I find Chinese people to be some of the warmest and most hospitable people in the world. And I think the West will benefit from a strong China. But I am not as optimistic as many about this being the "century of China". Their economy will surely grow simply because of the population of China, but whether it will be a real threat to the West in research, design, and innovation, that remains to be seen. I'm not so hopeful - at least not in the near future and perhaps not for several generations. They have a long list of problems that must first be worked out, and, while the government says that this is their first priority, one wonders if this is true, when the people in charge benefit directly from the status quo. There is a much greater incentive for them to do nothing, while their wealth grows in the current climate. That is until the Chinese people finally get tired and fed up - then all bets are off.

17
5

Re: Slow News Day Or April Fools?

II, for one, welcome relevant news coming from China. Not only because I live here, also I see a change in Chinese mentality. People want to address issues closer to home and, through social media, are finally able to let their voices be heard. 'Slow news day' means no news to report. Just cause you think it doesn't concern you, doesn't mean it is not news.

8
2

It's just anti-FUD

Eating cooking oil recycled from gutters, drinking poisonous milk powder, water filled with dead floating pigs. I think we ca also add childrens toys painted with toxic paint to that list.

This is standard political tactics, whip up the masses about trivial issues while ignoring the important ones, it's a variation on Parkinson's law of triviality.

Well, it's still early here so I'm going to have a couple of emulsified high fat offal tubes for breakfast.

6
1

Excellent summary (but yeah you could've used paragraphs).

As someone who has previously lived in China, I can also confirm the sense of 'hand in the till' you get is relentless. Literally all educated/upper class people's mentality is 'get enough money by whatever illicit means necessary then bail (Usually to Aus/Canada/UK/Europe). It's a bit hard to big up their economy when so many people are desperate to leave. Has all the characteristics of a Mafia bust out.

4
0