Tim Cook eats necessary crow, apologizes to China

Comment Apple CEO Tim Cook has released an open apology to his company's Chinese customers after coming under increasing pressure from that government's propaganda machine's attacks on Cupertino's customer-service practices.

In a letter published on Apple's Chinese website (Google Translate) – and which some of The Reg's Chinese-speaking readers might be better able to translate than Google – Cook expressed his "sincere apologies" (诚挚的歉意) to Apple's customers in the Middle Kingdom, a country for which he expressed his "immense respect" (无比的敬意).

From where we sit, however, it appears that Cook's gesture was not intended to ameliorate any consumer backlash, but rather to show appropriate deference to the industry-controlling Chinese government – the undisputed power in a country that is becoming ever more important to Apple's hopes for world domination.

The Chinese government's anti-Apple effort has been carefully orchestrated, but not entirely well-managed. On March 15 – World Consumer Rights Day – the state-run China Central Television (CCTV) aired a prime-time special that excoriated Apple for their warranty and customer-support policies.

One specific charge was that although Chinese law requires a new one-year warranty after a phone repair, Apple was replacing defective phones under warranty with new phones but using the back cover from the defective phone so as to skirt the warranty renewal.

"In contrast with China," CCTV said, "Apple consumers in other parts of the world including the United States, Australia, South Korea and the European Union are treated much better." There's nothing quite like playing to nativism to stir up a crowd, eh?

CCTV also cited one unnamed Beijing resident as saying, "I think there should be no difference between Chinese and foreign Apple users. Apple should guarantee the legal rights and interests of its Chinese fans."

The station also quoted Qiu Baochang, a top lawyer from the China Consumers Association (CCA) as saying, "Apple says Chinese consumers enjoy the highest standard of service. This is a false statement. It's a fact that the company gives brand-new replacements in other countries, but in China the warranty does not cover the outer casing. I think Apple is ducking the issue."

CCTV branded Apple as "greedy" and "incomparably arrogant," the Communist Party's People's Daily editorialized that "Perhaps the trouble comes from Westerners' traditional sense of superiority," and the CCA asked Apple to "sincerely apologize to Chinese consumers" and "thoroughly correct its problems," CCTV reported.

And on Monday Cook did just that, both offering his 诚挚的歉意 and broadening warranty support for Cupertinian smartphones from the iPhone 4 on.

That may have been a necessary move to placate the Chinese government and its state-controlled news outlets, but it doesn't appear to have been necessary to smooth ruffled consumer feathers. As reported by the Financial Times (free registration required), those consumers clogged the social interwewbs with caustic commentary about the government's attacks – especially after it was revealed that the CCTV recruited Chinese celebrities to promote their broadcast and attack Apple on their social-media accounts.

"Everybody is eating cooking oil recycled from gutters, no problem!" one online commenter responded. "Everybody is drinking poisonous milk powder, no problem! We drink water filled with dead floating pigs, no problem! But when you change the back cover of iPhones for foreigners but not for us then that is not OK, that is far more serious than any of these problems."

From the point of view of global corporate realpolitik, Cook had no choice. China is Apple's second-largest market behind the US, and his company's growth plans are increasingly reliant upon success there – success that the Chinese government may not relish if it comes at the expense of such home-grown players as Huawei and ZTE, or even companies such as HTC that are based on a nearby island that they still regard as theirs: Taiwan.

Cook has talked up China quite a bit during his conference calls with analysts and reporters that accompany Apple's quarterly financial reports. When reporting the company's Q1 2012 results, for example, Cook said that the "demand in China is staggering" and "off the charts." A year later – this January, to be exact – he was still bullish, saying that "it's clear there's a lot of potential there."

He also gave some China-specific figures during that call: during the first fiscal quarter of 2013, revenue from what Apple characterizes as "greater China" – mainland China, Hong Kong, and Taiwan – was $7.3bn, a 60 per cent bump year-on-year. Retail stores increased from six to 11, Apple's "premium resellers" doubled to 400, and iPhone point-of-sale spots soared from 7,000 to over 17,000.

At the time of that conference call, though, Cook was far from satisfied. "This isn't nearly what we need, and it's not the final by any means," he said. "We're not even close to that, but I feel that we're making great progress."

Sometimes progress, well, progresses in fits and starts, and Cook's Monday apology is, he must certainly hope, a small price to pay for getting in good with Chinese market managers. China continues to fine-tune its mix of private and state capitalism, and with a new PRC president and Communist Party General Secretary onboard in the person of Xi Jinping, Cook can ill-afford to ignore broadsides from such powerful Chinese entities as the CCTV and the People's Daily.

With new hands on the tiller of the Chinese ship of state, Cook is at both an advantage and a disadvantage – he faces new opportunities and new dangers. And not only is Apple's status as a hardware and services supplier at the mercy of China's vast bureaucracy, there is also – as Craig Stephen explained in a recent MarketWatch article – the not-at-all-insignificant matter of navigating contractual relationships with China Mobile, the world's largest wireless provider and not an iPhone carrier. Yet.

Cook may not be eating "cooking oil recycled from gutters" or "dead floating pigs," but he has made a calculated decision that a little crow on the menu is not all that tough to swallow. ®