Symbolic iPhone ruling attests to real China risk

Published Fri, Jun 17 20164:26 PM EDT

Breakingviews

Robert Cyran

A Chinese regulator has decided to ban the sale of some iPhone models in Beijing. Their design was supposedly too close to a domestic firm's model. The ruling is likely to prove largely symbolic, but it's a reminder of the real risks that Apple , Uber and other tech companies are taking in China. The potential significance to the $524 billion Apple cannot be overstated. About 25 percent of Apple's $50.6 billion of total revenue in its most recent quarter came from Greater China. The Beijing ruling, however, should have minimal impact, at worst. Apple's appeal may be successful, but if the decision holds the company will have to stop selling its aging iPhone 6 and 6 Plus models in the capital. But it can keep selling its newer models there, and all of its phones in other cities. More from Breakingviews : Pro-Brexit bankers risk repeating past errors What Apple can't change is that it's not a Chinese company. It is, arguably, the most successful U.S. business in the Middle Kingdom. But the government gives domestic players the edge, especially when it comes to technology, because it wants to boost economic development and ensure national security. It encourages state enterprises and other companies to use domestic alternatives when possible and places strict limits on the likes of Alphabet and Facebook. Apple's gadgets are less obviously threats to the government's control than, say, social-networking services. But it can still be a dicey relationship. Chief Executive Tim Cook had to apologize for the company's arrogance after a state-orchestrated campaign made vague allegations about Apple's unfair treatment of customers in 2013. Last month's $1 billion investment in China-based car-hailing app Didi Chuxing may have been intended to curry favor, too. However, the latest ruling that design-conscious Apple copied a Chinese phone signals that the Cupertino giant can't assume its path will be clear. Companies like Oracle, IBM, and EMC know from experience that the deck is stacked against them in China. Facebook, Google and others still seem hopeful the country will open to the world – and their products. Meanwhile Uber is investing heavily to compete with local rival Didi. It makes sense because China is a huge market. U.S. tech investors, though, need to remember that the imposing metal-studded lacquered gates can swing closed as well as open. For more independent commentary and analysisfrom Reuters Breakingviews, visit breakingviews.com

Sales staff welcome the customers to buy iPhone 6 and iPhone 6 Plus at an Apple store in Beijing, October 17, 2014. A Beijing regulator ordered Apple to stop selling some smartphones in the city because their design was too close to a Chinese firm’s model.

Jason Lee | Reuters