NEW ENERGY: Apple Polishes China Image With Solar Farms

By newsdoug on April 22, 2015

Bottom line: Apple’s new solar power initiative in China is a highly symbolic move to curry favor with local officials, and should win the company positive public relations points at very little cost.

I have to commend Apple (Nasdaq: AAPL) for finally realizing it needs to improve its image in China, with word that the global tech giant is investing in 2 new solar farms to be built in interior Sichuan province. The move is actually quite masterful, as Apple is at once killing many birds with a single stone as it works to curry favor with Beijing.

The 2 new projects will contribute to China’s recent drive to produce more clean, renewable energy, which has been one of Beijing’s top priorities these last couple of years. The new farms are also being built in China’s interior, which has been a priority area for investment by Beijing leaders eager to reduce the wealth gap between interior regions and wealthier coastal areas. Last but not least, these new investments should be quite inexpensive for a company like Apple, and carry relatively small risks.

A friend recently joked to me that Apple has no corporate social responsibility (CSR) program, referring to the latest business buzz word these last few years as companies seek to portray themselves as responsible corporate citizens. Apple’s poor CSR reputation comes partly from its secretive nature, and was a primary factor behind a major Chinese media assault 2 years ago that saw it criticized for its extreme arrogance.

I’ve said all along that one of Apple’s biggest problems is the perception that it only wants to sell its products to Chinese consumers, but does little to assist China’s economic development. This latest move looks squarely aimed at responding to that complaint, with Apple saying it will back the 2 new solar plants in a partnership with new energy specialist SunPower (NYSE: SPWR) and 4 local Chinese partners.

Significantly, China’s official Xinhua news agency is leading the coverage on this new initiative, showing a tacit form of government praise that marks a positive shift from the earlier acrimony. According to the reports, the 2 new solar farms will add 80 megawatts of power to China’s national grid, enough to supply electricity to 61,000 homes. (English article) The project marks the first of its kind for Apple outside the US, which will also undoubtedly please Chinese officials who like to get this kind of special attention.

The 2 farms are both in underdeveloped areas of Sichuan province that are home to large Tibetan minorities that sometimes feel they are second-class citizens to China’s ethnic Han majority. Such communities often are remote and have limited access to power, so the move should earn Apple lots of goodwill from Beijing for that reason.

I write quite a bit about the solar energy sector, and can say with relative certainty that these new plants will be relatively inexpensive to build, probably costing less than $100 million. That’s a tiny figure for a company like Apple, which reported $75 billion in revenue and $18 billion in profits in its latest quarter, drawing on the popularity of its computers and smartphones that also enjoy a strong following in China.

This particular headline is one of the few for Apple in terms of China investment, an area it should really work harder to improve to polish its image among the government officials who control the nation’s media machine. Apple actually uses contract manufacturers like Foxconn (HKEx: 2038) to make most of its products, and most of those do so in China-based factories. But a steady stream of negative reports about poor working conditions at those factories has hardly helped Apple’s image.

Apple has also said it plans to significantly boost the number of its trendy signature stores in China, but to date still only has 21. The company made another CSR move last year when it announced a China-based recycling program for its iPhones. (previous post) But that program has reportedly met with lukewarm reception, since prices being offered for used iPhones are far less than owners can get by reselling them on the open market.

From a public relations perspective, the smartest move that Apple could take would be opening an R&D center in China, since such centers are highly prestigious and represent a commitment to locally-based product development. But rampant intellectual property theft and other issues have made such centers problematic for foreign companies lately. Given those constraints, I would have to close by saying Apple’s latest move may not look too exciting from a financial perspective, but appears quite smart and well-conceived in its broader campaign to boost its image among China’s powerful bureaucrats.