Xi’s iPhone Ban Plans May Backfire

An eye for an eye famously leaves everyone blind, but if I’m honest, I’ve never been one to turn the other cheek.

I’m sympathetic to the notion that when someone slights you, particularly when you don’t deserve it, you’re within your rights to respond in kind. It’s a cold world out there, and nice guys generally finish last.

However, if China decides to go ahead with what the financial media on Thursday described as an “unprecedented blockade” on iPhone usage by employees of government agencies and SOEs, the effort to hit back at the US for squeezing Huawei could easily backfire to the extent it underscores the urgency for Apple of moving more production out of the country and suggests to everyday Chinese that their government may be poised to further curtail access to Western products and culture.

The Wall Street Journal on Wednesday reported that China banned employees at central government agencies from using iPhones for work, and also from bringing them to work. Similar reports proliferated on Thursday, as competing outlets endeavored to get more information on the scope of the effort.

Apple is already keen to diversify away from China for a laundry list of obvious reasons, and India is an attractive locale for Tim Cook to expand local production. Xi decided not to attend the G-20 in India this week. Some suggested bilateral frictions were partly behind the decision.

Do note that a ban on the use of specific consumer devices or technology at government agencies and state-affiliated enterprises means something different in China than it does in nations where the line between the public and private sector is less blurry. In some sense, every enterprise in China is a state enterprise.

The Party won’t adopt that line of reasoning in any expanded iPhone ban, but the restrictions would likely apply to a large, diverse range of entities and operations, and reports suggested some organizations may forbid employees from owning an Apple device even outside of work. Last year, the Party instructed government entities to replace foreign PCs within two years.

As some analysts were quick to point out, Apple has implicitly suggested its operations are safe in China and that it maintains a cordial relationship with Xi’s regime — or as cordial as relationships can be between Western companies and the Party in the current geopolitical environment.

Far be it from me to question Cook’s managerial competence, but if he truly believed that Apple, the symbol of American corporate dominance, would come away unscathed in what’s shaping up to be a Cold War-style clash of ideologies for the history books, he was both mistaken and naive.

For Chinese consumers, the worry is that Xi might eventually move to curtail access to popular foreign brands completely. I want to be absolutely clear that this is pure speculation on my part, but given the world’s experience with authoritarian regimes operating command economies during ideological clashes with the West, it’s not totally far-fetched to suggest that China could ban iPhones and boot Apple from the country altogether as part of a broader push to exorcise what Xi plainly believes are insidious Western ideals.

Coming quickly full circle, I don’t blame Xi for responding. But rightly or wrongly, any effort to ostracize Apple will be viewed not just through the lens of tit for tat national security escalations, but also as an example of an authoritarian government closing its doors and otherwise pulling the curtain.


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11 thoughts on “Xi’s iPhone Ban Plans May Backfire

  1. I happen to be at the Apple store the other day to get a new laptop. If the gentleman I talked to was to be believed, apple products are very secure from a malfeasance. I do recall reading that when the Chinese people were becoming restless about the Covid lockdown some people were voicing concerns anonymously, to others that were within Bluetooth distance via Apple product. Apple may be a form of collateral damage.

    1. I’m surprised that Apple employees are still pushing that falsehood. It was somewhat true back when Apple computer usage was so low that hackers didn’t bother to attack them. Not anymore.

      Back to the topic: Do you all think that there is any connection between Huawei’s launch of their new smartphone and the crackdown on Apple phones?

      1. Exactly! Apple AirTag’s, which are effectively a stalkers dream device, are absolutely the opposite of security for those victims of them. In recent memory the iOS has been hacked so badly that at various times, nefarious actors were able to both turn on the camera and read the screen without the owners knowledge. Those bugs remained unpatched and undetected for months.

        The salesman in the store is probably not the best person to ask about Apple’s security.

        Huawei is actually a pretty competitive phone manufacturer, if you look at the landscape. At one point, Google was leveraging them to build the Nexus devices because they were able to make a product that could compete with Apple. I could see Xi banning iPhone as a means to drive demand for Huawei.

  2. Cook and Apple are addicted to iphones, unfortunately made in Xi-istan. No new products of note and the current ones made by chicoms, not my type of investment for a good future. But who doesn’t
    own some appl somewhere in some fund, etf, pension? For all this Cook vision he makes what a year???

  3. Tim Cook’s ability to stay in the good graces of both sides during the hottest days of the trade war is legitimately noteworthy. It’s hard enough to keep Trump friendly under any circumstances, but to be able to do that while remaining in Xi’s good graces? Impressive.

    I think it’s safe to assume Cook is aware of the risks Apple faces in China. He’ll lean into his diplomatic skills to buy as much time as humanly possible while quietly moving operations to new areas as rapidly as he can. Furthermore, it’s one thing for China to block sales of Apple products, it’d be quite another for them to interfere with manufacturing, which in a lot of ways represents the greatest threat to Apple. It would take a much more serious escalation in US – PRC conflict for China (or, I guess, the United States) to force a shutdown of the manufacturing business. That’s a lot of high quality jobs they would lose overnight.

    1. I’m not sure how much credit I would give Tim Cook for straddling the trade war. If anything, Apple looks like a pawn, not a player, here, and this sure seems like tit for tat. Yes, the Chinese consumers may be denied their iPhones, but this allows Xi to respond to the U.S. tech and export bans, while keeping the Apple manufacturing base, which also will keep Apple dependent and quiet, at least for the time being. And if this “unprecedented blockage” proves insufficiently impactful as far as China is concerned, why couldn’t Xi apply the very same principle to Tesla — which is in a similar position as Apple, with China being both a key manufacturing site and key consumer market?

      The likes of Cook and Musk may be getting high on their own supply here at home where capitalism reigns supreme and runs amok. Not sure negotiating and leverage, let alone economic impact and threats, hold much sway with Xi at this conjuncture.

    2. Panic in DC over the new Huawei phone. As John Liu suggested, more sanctions on SMIC are a given. But our GOP wants more. A lot more. Can Biden stand there and be labelled as being “soft on China” heading into the 2024 elections?

      Meanwhile, Apple can slowly move assembly of iPhones to India and Vietnam. But those countries have no fabs with the capacity to make the logic chips inside your iPhone. Zero. They are all made on an island 100 miles from China. (None in the US either.) Not to mention all of the other electronic components, many of which are made in the PRC.

      If Congress imposes dramatic sanctions on China, they can retaliate with “sanctions” of their own by impending chip production in Taiwan. No invasion necessary.

      Are Americans ready to go to war to ensure the supply of iWatches? Jim Cramer thinks so. Do you?

  4. It seems that China has far more to lose in a trade battle than the US does.
    In 2022, the US exported $153.8B to China (representing 7.5% of total global US exports). Whereas US imports from China were $536.8B (representing 16.5% of the total US imports).

    Furthermore, although the Chinese GDP is a
    $18T vs. the US GDP of $25T; the Chinese have 4 times the population- so per capita wealth isn’t even close.

    When, on the surface, something doesn’t make sense; if one digs further, it usually ends up being explained by “its all about the money”!

    Maybe Xi negotiating to slow/reverse the outflow of manufacturing from China….

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