SMARTPHONES: Apple Defies Washington, Plays with Beijing

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Bottom line: Apple would probably hand over iPhone user information to Beijing if faced with a situation like its current standoff with Washington, but would keep the matter low profile and possibly try to find other ways to placate Beijing.

Washington standoff spotlights Apple’s cooperation with Beijing

As the high-profile standoff between Apple (Nasdaq: AAPL) and Washington continues over access to information on a terrorist’s iPhone, a new report is raising the interesting question of what the US tech giant might do if faced with a similar situation in China. Actually, the “what if” scenario isn’t raised too much in the Los Angeles Times report, which instead focuses more on the cozier relationship that Apple has with Beijing in terms of allowing access to sensitive information related to its products.

But this still looks like a good opportunity to explore the “what if” angle, since Apple might find far fewer friends in China if it decided to defy a Beijing order to hand over information stored on the Chinese iPhone of a known terrorist. By comparison, the US technology giant has found at least some supporters for its refusal to help the FBI access information stored on the iPhone of Syed Rizwan Farook, the man behind the worst terrorist attack in the US since September 11.

Apple has far more reason to move more cautiously in China than it has in the high-profile US case. China has boomed to become the company’s second largest market in the last few years, with local sales now accounting for more than a fifth of Apple’s total.

The architect of that boom has been Apple CEO Tim Cook, who has personally traveled to China at least twice a year over the last few years to lead a huge campaign to improve his company’s image in the country. After that huge investment of time and resources, Apple might be far less eager for a similar high-profile confrontation with Beijing that could easily result in a total loss of all that effort.

At the same, Beijing is even more sensitive about national security than Washington, especially when it comes to terrorism. While the US worries mostly about terrorism from abroad, China has more immediate worries from homegrown terrorists from its far western Xinjiang region, who have carried out numerous attacks in recent years. That threat played a big factor in China’s introduction last year of a controversial new national security law, which foreign companies complained was overly intrusive and vague.

Against that backdrop, let’s look at the latest report that shows just how far Apple has gone to play along with China’s national security fears. Apple’s first and biggest move on that front was its controversial decision 2 years ago to move data for its China users to China-based servers from offshore ones. (English article; previous post) Last year Apple made another big concession by allowing government security audits for products it sells in China. (previous post)

Better Access

Both moves were designed to give Beijing access to information on iPhone users in China if and when Chinese investigators wanted to access such information. But China’s legal processes are far less transparent than the US, and many worried that Beijing was simply laying the foundation for demanding any information it wanted from Apple. Such information could involve suspected terrorists, but also potentially political dissidents or really anyone the Beijing government considered a threat.

So far we haven’t heard anything about Beijing making requests of Apple similar to the ones being made by Washington. But that’s probably because Apple is unlikely to publicize such requests, and neither is Beijing. Internet company Yahoo (Nasdaq: YHOO) yielded to one such request more than a decade ago involving a dissident’s e-mail account, and came under fire in the west even as it said its decision was required by Chinese law.

So, where does all of this leave Apple, and what’s the likelihood that it would comply with similar requests by Beijing? Frankly speaking, I have little doubt that Apple would at the very least be far more low-profile in any such confrontation with Beijing and would certainly keep it out of the headlines. Tim Cook is probably hoping he never needs to make that decision either. But I suspect that if and when the time comes, which seems inevitable, Apple would probably quietly hand over the information, or at least find some other way to placate Beijing.

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