Why is Apple differentiating between India, China?

The Asian Age, September 20, 2017

By Pradeep S. Mehta

A few months back, Apple was showing its utmost commitment to China’s “black letter law”

The latest flavour in the mobile industry is iPhone X. Its manufacturer, Apple, is leaving no stones unturned in ensuring the global success of its flashy new smartphone. It is safe to assume that Apple will devote equal attention to the world’s largest telecom markets: China and India. However, the company seems to be differentiating between two peas in a pod, when it comes to regulatory and policy compliance in these two countries. This is evident from the tech giant’s “yes minister” attitude in China as opposed to their “elitist” complex in India.

A few months back, Apple was showing its utmost commitment to China’s “black letter law”. Thus, going to the extent of planning its first data centre in Guizhou province in southwest China, to adhere to the newly-framed data privacy and protection laws of the country. However, in India, Apple has been asking for a host of concessions from the government to manufacture in the country. Surprisingly, at the same time, it got into a skirmish with Telecom Regulatory Authority of India (Trai), over the Do Not Disturb (DND) app. Despite the app being intended for consumer welfare, it is not being made available on Apple’s iOS app store. Such partisan attitude to the domestic legal and regulatory regimes of the two countries, which are offering similar market opportunities, is surprising.

Few experts consider China’s business environment as the “Wild West” for foreign companies. The latest cyber security laws of the country requires foreign digital technology companies to store its citizen’s personal and passive data, within its shores. The move was based considering the rising economic value of user data, and the worldwide trend on digital data security and sovereignty.

China is Apple’s second largest market for selling its iconic iPhone, contributing over 20 per cent to the company’s global turnover. Therefore, the company was careful so as not to offend the Communist government. Subsequently, it pledged an investment of $1 billion to operate its iCloud services “for China from China”, in a partnership with a local data management company. The move was made so as not to face the same fate as other tech companies like Google and Facebook who are barred from operating in China due to non-compliance with the country’s cyber laws.

On the other hand, Apple had the nerve to upset the Trai chief by blocking the DND app on its app store, citing violation of its “privacy policy”. Such an arrogant attitude is not worthy coming from a company which itself collects user data, and readily allows other online data-driven platforms like Facebook, Zomato, etc, to do the same through their apps available on its app store.

The blatant disregard for Trai’s DND app signifies the indifferent attitude of the company towards the Government of India, including the telecom regulator. Such indifference may be stemming from the fact that though Apple is one of the preferred premium brands in the country, its overall market share is currently only three per cent. The “sticker shock” of its product prices is one of the major reasons for its low sales in India. Also, the company’s “Make in India” move did not work out as well as hoped.

In its bargaining with the department of industrial policy and promotion, the company had requested for waiving the minimum domestic sourcing requirement, concessions on import duties, apart from various other concessions. Furthermore, its plan of making and selling refurbished products in the country is also against the Government of India’s policy.

Such demands may be considered as “asking for too much too soon”, specially considering what Apple is offering in return. Media reports suggest that Apple does not intend to manufacture smartphones in India for exporting it to its global markets. Apple’s local vendor Wistron’s India’s annual production capacity is at a mere 75,000 units, whereas annual domestic sales of mobiles in India was over 100 million in 2016. Though the company has expressed its intention to expand its production capacity, there is no credible reason at this stage to provide special treatment to Apple, as it would be unfair on other mobile makers who are already manufacturing in India.

India is one of the world’s largest telecom hardware markets and it’s growing. The potential it holds for Apple, if priced better, should be more than an incentive for the company to start large-scale operations here. The cascading global quarterly sales figures of iPhone in 2016, bearing an overall eight per cent decrease from 2015, is forcing Apple to look at India’s large untapped market. Their upcoming research and development (R&D) centre in Bengaluru is not enough to woo the government, which is striving to make India an end to end manufacturing hub.

It is time for Apple to fall in line with other mobile manufacturers in India by adopting the policy of “when in Rome, do as Romans do”. Allowing the DND app on their app store could be a good start in the larger interest of consumers. If the company can follow the diktats of the Chinese based on the country’s domestic needs and priorities, there is no reason for them to not do the same in India keeping in mind our ambitions. This specially when both countries hold comparable potential in consumption, production and global value chain contribution for Apple.

Sidharth Narayan of CUTS contributed to this article
Pradeep S. Mehta is secretary general of CUTS International.

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