Ukraine crisis, and Apple’s unsustainable dependence on China

By | March 2, 2022


The Ukraine crisis has cast a new spotlight on an issue I’ve been raising for several years now: Apple’s unsustainable dependence on China.

With Russia, Apple can afford to take a stand against the country, and it is doing so. It has suspended sales in the country; stopped all exports to Russia; blocked access to state media apps from outside the country; disabled live info in Apple Maps; is donating to humanitarian work; and is effectively tripling employee donations

Writing for Macworld, Jason Snell echoed a conversation I had with a friend yesterday.

While the company certainly makes money in Russia, it can afford to walk away… permanently, if it needs to. Apple can’t do that with China, should that country decide to act in a similar fashion as Russia.

As I’ve written many times before, Apple is hugely dependent on China for both a very sizable chunk of its sales – like most of last year’s iPhone sales growth, for example – and, even more critically, for production.

Ukraine crisis could embolden China

One nightmare scenario could easily lead to another. China could be emboldened by what it is seeing in Ukraine, and decide that it is finally time to seize control of Taiwan.

Putin just demonstrated that the West cannot take any kind of military action to defend the Ukraine; the threat of all-out nuclear war is just too terrifying. All our military forces can do is sit back and watch, and hope the economic sanctions will ultimately prove effective.

The same would be true of Taiwan. Yes, the US is theoretically committed to help Taiwan defend itself against invasion, but there is what some have called “strategic ambiguity” in the wording of the act. Since exactly the same risk of escalation to nuclear war would exist with China as it does with Russia, the prospect of the US doing very little in practice had always seemed likely.

And right now, China has pretty solid evidence from the Ukraine invasion that Western military intervention would be unlikely were it to do the same in Taiwan.

Much of the world would again impose financial sanctions on China, though the global economic impact would be high. But could Apple afford to take a principled stand there? It would not only be sacrificing a massive proportion of its sales within the country itself, but it would also be utterly unable to meet product demand for the rest of the world if it ceased Chinese manufacturing.

This would be the ultimate threat to Apple’s reputation

I’ve talked before about the hit Apple already takes to its image as a principled company as a result of actions it has been forced to take in China over the years.

Back in 2017, the Chinese government asked Apple to remove the New York Times app from the Chinese App Store; Apple complied.

Later the same year, China insisted that Apple remove more than 400 VPN apps from the App Store; Apple did so.

Again in 2017, the Chinese Ministry of Public Security asked Apple to remove Skype; the Cupertino company again did as requested.

Yesterday, it removed access to the Quartz news app; and today we’ve learned that it has, with a second U-turn, banned a Hong Kong protest app.

Even more controversially, China introduced a new law in 2017 which required foreign companies to use Chinese companies to store user data. That meant Apple had to partner with a local company for the storage of iCloud data. Apple insists that data is encrypted and only it holds the keys, but there is understandable skepticism about this. And even if it’s true that Apple will require a court order before permitting Chinese law enforcement to access user data, that’s a mere formality in China.

For a company that claims to do the right thing, none of these things are a great look.

But if the rest of the world were to take sanctions against China, while Apple continued its manufacturing operations in the country, that would be a truly terrible look.

Yes, the company has for many years been gradually diversifying its production, in India, VietnamIndonesia, and elsewhere. But the key word here is “gradually.”

I said back in 2019 that Apple needs to greatly accelerate these efforts. Since then, it has accelerated them to a significant degree – but is still not even remotely close to the point where it could be independent of China.

Apple has taken its biggest steps in India, but as of a year ago, its ambitions for the then-flagship iPhone 12 were said to be in the 7% to 10% range. That was a rather modest goal to start with, and things since then haven’t exactly gone according to plan, with a series of setbacks.

The stark reality

So, in truth, if China invaded Taiwan tomorrow, Apple would be faced with a stark choice: sacrifice its principles and continue manufacturing there, or shutdown what is by far its biggest global manufacturing center and see its sales dry up to a trickle as it failed to meet demand.

Taking a principled stand against Russia is easy. Doing the same against China would be devastating.

Apple probably thought it had years to free itself from its dependence on China. Current events demonstrate that it may have left things too late.

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