True Cause of Apple’s Decline in China

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HK Apple Store Opened Exterior, source: Wikipedia

Apple slashed its revenue guidance for the quarter on Jan. 2. A day later its stock cratered 10 percent, ending the day at $142.19, its lowest price level since July 2017.

Compared to barely two months ago, when it topped out as the most valuable public company at $1.1 trillion, Apple has lost 30 percent of its valuation.

In his letter to investors, Apple CEO Tim Cook attributed its entire shortfall to headwinds in China due to economic slowdown: “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

Yet Canadian apparel company Canada Goose told a very different story when its first retail store opened in Beijing.

In an article entitled “Chinese line up for Canada Goose jackets despite anti-Canadian sentiment” by Reuters, reporters Martin Pollard and Ryan Woo wrote: “Large crowds have flocked to Canada Goose’s new outdoor wear store in downtown Beijing, its first in mainland China, since its opening on Friday, despite sub-freezing temperatures and a chill in bilateral ties.

“A long line of shoppers swaddled in thick winter coats were queuing outside the two-storey store on Monday afternoon, with waiting times for a quick peek at Canada Goose’s 9,000 yuan ($1,300) parkas requiring an hour or more.”

Seeing this curious contrast, Chinese commentator Ren-Zhong pointed out that Tim Cook did not own up to the true cause of Apple’s decline in China, specifically, its betrayal of its Chinese customers.

Last year, Apple transferred the iCloud data of its Chinese customers, along with the data encryption keys, from its original US location to Guizhou-Cloud Big Data, a Chinese state-owned enterprise.

This means the Chinese government now has access to Apple customers’ contacts, call logs, calendars, bookmarks, emails, memos, voice memos, photos, videos, application data, documents, SMS , MMS, music, iMessage, FaceTime recordings, ring tones, home screen and app placement, open and closed operations in settings, purchases in Apple services, and more across all devices.

In short, the information that Chinese customers have stored on their iPhones and how they are using their phones are now monitored by the Chinese Communist Party (CCP).

In this case, what is the difference between an iPhone and mobile phones marketed by China’s domestic brands such as Huawei, Xiaomi, OPPO, and vivo?

“I am afraid the only difference is the price,” concluded Ren-Zhong, ”for the price of an Apple mobile phone, you can buy two or three domestic mobile phones.”

He pointed out, “As you can imagine, when Apple’s mobile phone and domestic mobile phone are the same, they have become the tools for the CCP to monitor its people. How can its sales performance not decline? Unfortunately, Apple has let down the hopes of the well-off customers it had cultivated in China for many years.”

The CCP has already created its version of the Terminator Skynet, using hi-tech to monitor the Chinese people. The Chinese market does not need another product to help the government spy on the people. What is really needed, instead, is a mobile phone that is not monitored by the CCP. When Apple ceded that differentiation, it could no longer justify its higher price.

A Chinese saying goes, “a proper gentleman can desire money, but earns it properly.” Ren-Zhong points out that integrity is the most important component of any brand’s equity.

“If in order to make money, you kowtow to the CCP and become an accomplice to its persecution of the people, then you have ruined your own brand and you are bound to fail.”

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