Apple Pledges Two New R&D Centers in China --2nd Update
18 March 2017 - 4:18AM
Dow Jones News
By Tripp Mickle
Apple Inc. is launching a new round in its charm offensive in
China, announcing two additional research-and-development centers
ahead of planned speeches by Chief Executive Tim Cook at a major
Chinese government conference.
The new centers, to be set up in Shanghai and Suzhou, bring
Apple's total commitment to R&D facilities in China to more
than 3.5 billion yuan, or about $500 million, Apple said Friday in
an announcement it issued only in Chinese. It last year committed
to opening a similar center in Shenzhen, and currently operates one
in Beijing.
Mr. Cook is expected to mention those commitments in a speech on
innovation and corporate social responsibility at the China
Development Forum, an event for discussion between China's senior
leadership and global business executives that begins Saturday. Mr.
Cook has traveled numerous times to China, but it will be his first
time speaking at the forum, which is hosted by an arm of the State
Council, China's cabinet, and takes place at the Diaoyutai State
Guesthouse in Beijing. The guest list also includes International
Business Machine Corp. CEO Ginni Rometty and Johnson & Johnson
CEO Alex Gorsky.
The Apple CEO is also scheduled to make remarks at the event on
Monday introducing Xu Lin, who as China's Cyberspace Administration
commissioner is the nation's top internet censor. That planned
appearance, scheduled to occur behind closed doors, underscores the
tension between Apple's championing of values at home such as
individual privacy and media accuracy and its need to work with a
Chinese government that tightly limits speech and other individual
freedoms.
Apple didn't immediately respond to requests for comment
Friday.
Apple is grappling with rising pressure from homegrown rivals
and a string of other setbacks in China, its most important market
outside the U.S. Its sales in Greater China fell 17% in its latest
fiscal year to $48.49 billion, as Huawei Technologies Co. and other
Chinese companies gained share against its iPhone -- although Apple
said sales stabilized in the most recent quarter in mainland China,
which excludes Taiwan and Hong Kong.
Apple last year was forced to halt its online music and book
services in China because they violated local media rules. The
company also faced criticism from local consumer groups last year
over complaints that iPhones were spontaneously shutting down even
as half the devices' battery life remained. Apple said a limited
number of phones were affected and offered free replacement
batteries for those devices.
China is a critical manufacturing hub for Apple -- a fact that
triggered criticism during the election campaign last year from
then-candidate Donald Trump, who said it should make more products
in the U.S. The vast majority of its products sold world-wide are
made in China by contract manufacturers such as Foxconn Technology
Group, and Apple says it has created and supported 4.8 million jobs
in China.
Longer-term, though, Apple's business is out of step with the
Chinese government's goal to reduce its dependence on expensive
foreign technology, and facilitate the development of homegrown
competitors like Huawei, Xiaomi Inc. and Oppo.
"Apple is annoying to China because it's selling phones and
sending money back to the United States," said Roger Kay, an
analyst at Endpoint Technologies Associates Inc. "It's competing
with Xiaomi and Huawei, and that's an irritant."
Opening R&D centers in China, beyond any operational
benefits, has long been a way for foreign companies to show
commitment to the government's overarching goals. To preserve
operational stability in China, Apple and other companies "have to
keep on investing and giving back," Mr. Kay said. Last year, Apple
also invested $1 billion in ride-sharing service Didi Chuxing
Technology Co., which later bought control of the Chinese business
of U.S. rival Uber Technologies Inc.
Apple said the new R&D centers will work with Asian
companies to develop advanced technology and services. It plans to
hire graduates from Chinese universities such as Peking University,
Tsinghua University and Shanghai Jiaotong University.
Under Mr. Cook, Apple has emphasized protection of
customer-privacy -- publicly battling a Federal Bureau of
Investigation effort to force it to help unlock an iPhone used by
San Bernardino terrorists. Mr. Cook also has raised concern about
the rise of "fake news," calling last month in an interview with
British newspaper the "Independent" for technology companies to
"create some tools that help diminish" its rise.
In China, the world's largest smartphone market, Apple has made
concessions. It removed the New York Times from its App Store
earlier this year. That followed an agreement in 2015 to submit
products for Chinese security checks and an earlier decision to
move Chinese customers' data from overseas servers onto a domestic
system operated by state-run China Telecom.
Apple said it removed the New York Times app because it violated
local regulations. It has said that Chinese consumers' data is
encrypted.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
March 17, 2017 13:03 ET (17:03 GMT)
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