Apple’s China PR problem

Not that many years ago, I had written a rather harsh post on Apple’s iPhone launch in China. I remember the surprise I had when I got a comment on the post debating some numbers I had written, with the IP address of the comment suggesting it’s coming from the Apple campus in Cupertino (I can’t seem to find the comment today). Back then I had joked to my b-school room-mate, “there goes my chance of working at Apple!”

Fast forward a few years, and Apple has pleasantly surprised me with how much it has grown its business in China. In many ways, this was a perfect storm – the rise of the iPhone (and iPad later) globally coincided with China’s boom in luxury spending. iPhones and iPads became the perfect luxury item in consumer electronics, and a whole wave of Chinese consumers eagerly grabbed every unit they could get their hands on.

Apple posted $6.8 billion in revenue from the Greater China region in the previous quarter (their fiscal Q1 2013, which was reported in January). That is a massive amount, and I honestly struggle to think of any other international company that generates more revenue from Chinese consumers (the only companies I could think of that could challenge that number were global car brands – I tried searching for the revenue of VW’s China JV, but only found a quote for 2004 revenue of 38 billion RMB – roughly $5 billion by the old FX rate).

The sheer size of Apple’s China business (and the big growth potential) means that it must take any local PR crisis very, very seriously. (Read Bill Bishop’s piece in the NYTimes for a recap and his opinion.) So while it may be surprising to many that Tim Cook signed and issued an apology letter (in Chinese) to local consumers, I would actually argue that Apple’s response is barely adequate, and they should continue to be in full crisis management mode. It’s unfortunate that Apple has to deal with rather shady counter-parties such as various branches of China’s state media, but as long as Apple stays true to its ethics (and steer clear of Foreign Corrupt Practices Act violation), it should do everything in its power to control and mitigate the PR damage being done.

There are a few other pointless, but rather interesting (in vacuum) thoughts on this topic:

  • One could certainly ponder what Steve Jobs would have done if he was still at the helm. Tim Cook has always had the image of the pragmatic and efficient CEO, so it rather fits his persona to issue the apology. Would Jobs have done the same? Would people bash him for kowtowing to the Chinese government?
  • Comparisons to Google’s China exit are certainly going to be brought up, but such comparisons are doomed to be pointless. The straw-man counter argument is that Google never had that big of a business in China, so the upside versus the costs (to its public brand, its core values etc.) are drastically different – would Google have given up China that easily if it were making $10 billion a year in China?

(I apologize for the lack of substance in this post – I felt compelled to comment on the trending topic, but really there’s little to say)


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