Cyber-Security Wars Pause With iPhone 6 Nod
So much has been written already about the sudden approval of the iPhone 6 in China, after several weeks of unexplained delays, that I thought I would focus on the broader implications of this surprise move in the ongoing war of words between the US and China over cyber security.
I praised iPhone maker Apple (Nasdaq: AAPL) in August for emerging as a voice of reason in this war of words after it decided to use China-based servers for to store some of its local user data (previous post), and it seems like more praise is in order this time as well. Only this time the praise should go to Beijing, for finally taking a break from the cyber security war of words by realizing that companies like Apple are far more interested in doing business than engaging in cloak-and-dagger spying games.
Before we go any further, we probably need to review everything that’s happened in this twisted tale, which began last month with Apple’s unexplained removal of China from the iPhone 6’s global launch list. That story ended last week with announcement of a new launch date for the iPhone 6 in China. Apple had previously planned to include China in the Asia launch on September 26, but then ran into unexplained delays. After finally resolving the issues behind the delay, the company announced this week it will launch the iPhone 6 in China on October 17. (company announcement)
Apple said online orders for the new iPhones will be accepted starting one week before the launch, and models will be available from all 3 of the nation’s telcos. One report says the phones will carry a starting price of 5,288 yuan ($860), which is several times higher than prices in the US. (Chinese article) But we’ll have to wait and see if the China telcos offer lower subsidized prices for customers who sign multi-year contracts.
I’m sure we’ll see a flood of pricing plans come out after the current Chinese Golden Week holiday ends on October 8 and people return to work. But in the meantime, let’s review what happened behind the scenes to cause the latest iPhone delay, and what the final resolution means for cyber-security concerns in the future. Much of the fuss surrounds telecoms products like smartphones and networking gear that are often shipped across international borders, leading to suspicions about governments colluding with their domestic companies.
By now it’s completely clear that the iPhone 6 delays were caused by China’s telecoms regulator, which must grant a license for every cellphone model before it can be sold in the country. We still don’t have a complete explanation for the regulatory delays, but it appears the main issue was Apple’s use of computers outside China to store some data for iPhone users. (English article) The regulator was also worried about the potential for hackers to steal data on Chinese iPhone users from Apple computers.
According to the reports, Apple addressed the regulator’s concerns by promising not to use iPhone user data for spying purposes, and also by showing that its systems were secure. A Chinese lock-out of the iPhone would have sharply raised tensions between the US and China over cyber security, and might have been seen as retribution for Washington’s earlier decision to forbid US telcos from buying networking equipment from Chinese manufacturing giants Huawei and ZTE (HKEx: 763; Shenzhen: 0000063).
At the end of the day, Beijing probably decided it wasn’t worth opening such a major new front in the cyber security war of words by dragging the much larger smartphone sector into the equation. But I also like to think that Beijing leaders finally realized that Apple is a company that cares most about profits, and is happy to leave political spying games to governments and hackers. Hopefully this move signals that smartphones won’t get dragged into the cyber war of words between China and the west, and that governments will finally be able to see that companies are most interested in doing business and have little or no interest in cyber warfare.
Bottom line: China’s approval of the iPhone 6 indicates Beijing wants to prevent the current cyber spying war of words with the US from spreading into the lucrative smartphone space.
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