Apple Inc. will probably find itself shut out of China, Ian Bremmer – founder and president of the Eurasia Group told CNBC on Monday. Bremmer – a leading expert on global political risk to corporations – said “It’s very possible.”
Will Apple survive in China?
Speaking to CNBC’s “Squawk Box,” Bremmer said “I’d be very surprised in five years’ time if we see Apple having the kind of access to the Chinese consumer that they presently enjoy.” He foresees a scenario, where Apple may have the same kind of issues that Facebook presently has in China. The social media giant is banned in China.
Citing the closure of Apple’s iTunes Movies and iBooks Store earlier this month, he said the people misunderstood the nature of the Chinese tech involvement. These services were released just about half a year back. Apple apparently thought it had approval from the Chinese government, reported the New York Times last week. Regulators tightened their control though.
Apple’s overall privacy strategy could further trip up the firm in China, said Bremmer. Apple’s strategy of creating an ecosystem that nobody have access is “antithetical” to everywhere the Chinese want to go, the expert said. And, when people start figuring that out, there will be questions like, “are you or are you not evaluating iPhone with access to the biggest consumer market in the world?”
In such a case, either Apple Inc. will have to change their stance, which Bremmer believes is a difficult ask, or they will have to struggle to gain access to the Chinese market.
Another leading authority on tech firms, Piper Jaffray analyst Gene Munster, played down Bremmer’s concerns. Munster told the Squawk Box that the Chinese government has been pushing back on using the iPhone for the last couple of years, but the China growth has still been 15% to 100% for Apple Inc. .
Munster in response to Bremmer said, “I think they [China] are always going to make it difficult. But I think Apple is going to have a booming business in China.”
A warnings to other US firms
Apple’s unpleasant experience in China, can be seen as a warning to other US tech giants. The US firms need to understand that China would never get encouraged by their innocent gestures and potential benefits of partnerships. It can be said that China does not want the foreign firms to dominate its information sector and pose potential threat to the CCP’s monopoly of power, says a report from Fortune.
As Chinese market is too big to ignore, the American firm are in a dilemma. If they do not ask for a favor from the Chinese authorities, then their rivals will. And, considering the massive Chinese market, this will not be a good business move. Western firms, including American giants in all sectors, driven by such considerations have adopted two principal strategies so far.
First is to demonstrate their commercial value in Beijing while the latter is to establish rapport with the Chinese authorities to build good relations. Because of the arbitrary nature of the Chinese regime, any strategy that relies on the Chinese authorities’ goodwill is dicey. Western firm should come together, suggests Fortune.
While dealing with the Western firms, the Chinese authorities play the classic game of “divide and conquer.” China is wooing some and bullying others. But unfortunately, the western firms would not unite, thus, making them vulnerable to Beijing’s capriciousness.
It does not matter how big a Western firm is, it’s just not a match for China. However, the country also cannot afford to stay away from a group of western firms whose services, technologies, and products it sorely needs.