After Tesla, China is banning iPhones for government officials
- China wants to expand a ban on using iPhones in sensitive departments to government-backed agencies and state companies.
- The move, a blow to Apple, comes after military and government personnel were barred from using Tesla vehicles.
- If the ban is extended, as seems possible, it could harden the trade war between the US and China.
Tesla vehicles have been barred around specific locations or occasions in China since last year, out of concern that the vehicles’ impressive array of sensors and cameras—and the sheer fact that Tesla is a foreign company—could threaten national security.
Now, the Chinese government is looking to do the same with iPhones. Reports have surfaced that Chinese authorities are actively restricting use of the Apple flagship product in sensitive departments, government-backed agencies and state companies.
The restrictions around Teslas are not a concern unique to Xi’s government. Even as Chinese automakers gear up for a big push into the West, anxieties about how those vehicles could phone their robust trove of data home are already mounting on American soil. In fact, national unease about the surveillance powers of new modes of transportation is hardly novel.
But for China — Apple’s most significant market — to ban the use of iPhones among officials may be a major blow to the US tech giant. According to The Wall Street Journal (WSJ), the Chinese government has banned officials at central government agencies from bringing foreign-branded phones, including the iPhone, into offices, or using them for government work. Citing unnamed sources, the article says China seeks to “cut the country’s reliance on foreign technology,” beef up cybersecurity, and keep sensitive data from leaking to foreign governments.
The move by China is not surprising and is, in fact, considered a tit-for-tat following the US’ “rip and replace” bans of Huawei and ZTE hardware and ever-expanding attempts to ban TikTok at the local, state, and federal level. The US even recently broadened restrictions on the export of high-performance artificial intelligence chips by Nvidia and Advanced Micro Devices (AMD).
Especially in the last two years, tensions between the US and China have intensified. Washington actively worked with allies to block the Chinese access to vital equipment to keep its chip industry competitive. Beijing did not meekly accept the sanctions though, proceeding to restrict shipments from prominent US firms, including plane maker Boeing and chip company Micron Technology.
Beijing also ordered central government agencies and state-backed corporations in 2022 to replace foreign-branded personal computers with domestic alternatives within two years, marking one of the most aggressive efforts to eradicate key overseas technology from within its most sensitive organs.
The latest ban by China is a big blow to Apple’s iPhones
There is no denying that for over a decade, China has been seeking to reduce reliance on foreign technologies, asking state-affiliated firms such as banks to switch to local software and promoting domestic semiconductor chip manufacturing. The latest move though is a first that broadly targets foreign-made smartphones.
The move could be a significant blow to Apple, considering China is still one of its biggest markets, accounting for around 19% of its overall revenue. Moreover, China still plays a crucial role in Apple’s supply chain, even as the company transfers manufacturing to countries like India and Vietnam. Apple CEO Tim Cook visited the country just four months ago, praising it for its rapid innovation and long ties with the US giant.
For context on China’s large part of the iPhone maker’s bottom line, it’s worth noting that Apple has changed its iOS software to appease the country, such as limiting AirDrop’s time window to 10 minutes, and in a more geopolitically sinister move, removing the Taiwanese flag emoji.
The WSJ also reported that managers have notified staff of the ban via chat groups or meetings. Separately, a source who regularly deals with Chinese central government agencies told CNN that Chinese officials had already been following an unwritten rule of shunning iPhones since before the pandemic despite the apparent absence of a formal policy.
According to sources, central government officials now use smartphones made by major domestic companies, especially Huawei. Bloomberg also reported that Beijing intends to extend that restriction far more broadly to many state-owned enterprises and other government-controlled organizations.
“If Beijing goes ahead, the unprecedented blockade will culminate a yearslong effort to root out foreign technology used in sensitive environments, coinciding with Beijing’s effort to reduce its reliance on American software and circuitry. It threatens to erode Apple’s position in a market that yields roughly a fifth of its revenue, and from where it makes the majority of the world’s iPhones through sprawling factories that employ millions of Chinese,” Bloomberg’s report reads.
Is China changing its stance on Apple?
Considering Apple’s relationship with Beijing and its importance to the economy, it “has historically been viewed as relatively safe in China from government restrictions,” KeyBanc Capital Markets analyst Brandon Nispel said in a report Wednesday. “Is the government changing its stance?”
Maybe. But despite rising resentment of American efforts to contain China’s rise in technology prowess, Apple still enjoys widespread popularity in China. In fact, iPhones are among the nation’s bestsellers, and are common in both the government and private sectors. China was also a highlight of Apple’s results last quarter, helping offset a sluggish period.
What happens if Beijing turns the screw further on the iPhone in retalliation for Washington’s increasing hostility to Chinese technology?
If nothing else, it will make the trade war between the two nations even colder and more bitter even than it has been recently.
Are we entering the hardball stage of the US-China tech war?
29 February 2024
29 February 2024