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China’s disillusionment with ‘Apple’ dream

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Apple Inc., the world’s most popular smartphone producer and second-largest IT company, was accused of discriminatory after-sale policies in China on the country’s annual 3.15 TV show on consumer rights. And based on a reliable and evidence-based report by the program,  viewers were assured that the accusation against Apple Inc. was well-founded.

In case you are interested, please refer to Perfunctory manner of Apple angers fans in China, another article by Sino-US.com.

The TV show, broadcast by the state-run CCTV for 23 consecutive years on March 15, the World Consumer Rights Day, has earned its name for bringing numerous scandals to light and knocking down big brands with hidden unethical business practices.  For the past several years, Chinese people have witnessed the program bring down several domestic business magnates on their knees with its in-depth investigations and irrefutable evidence.

Although Apple’s double standards in offering its after-sale services is no news for the business community, many common Chinese are still surprised by the big company’s bold malpractices.

Soon after the exposure, tens of thousands of netizens posted their comments on Sina Weibo, China’s Twitter-like microblogging service. Although some die-hard Apple fans sympathized with their beloved brand for being shamed, more people were wondering how Apple Inc. would react to such a crisis.

And the outcome might have surprised them.

Several hours after the criticism on the TV show, Apple China (苹果中国) issued a statement, which claimed Apple Inc has been trying to provide the best products and services and they sincerely care about every user’s concerns. “It’s all rhetoric and no substance,” a lot of Weibo users commented, annoyed with Apple’s perfunctory answer.

Its indifferent response finally made Apple’s notorious arrogance known to all people in this country which has the largest pool of Apple fans (also called ‘Guo Fen’ 果粉).

Apple’s pride and prejudice

Actually, Chinese fans’ disenchantment with ‘Apple dream’ was inevitable from the very beginning.

The Apple under Steve Jobs had worked wonders, created miracles and made itself a legend. But the post-Jobs era is more explicitly featured not by its innovation or abilities to change the world but indifference and prejudice.

iPhone 5—not a darling of the fans

On December 14, 2012, iPhone 5, the flagship product of Apple Inc., finally came to mainland China. Two telecom-operator partners of Apple Inc., China Telecom and China Unicom, initiated ‘big sales’ at the zero hour of the day.

Despite all the efforts made by the two carriers in a long-drawn marketing campaign lasting several months, the sales of iPhone 5 failed to impress, and the market response was even frostier. The unexpected low ebb could partly be blamed on that day’s big snow, but more probably, the Chinese fans’long-standing enthusiasm for Apple had started to fade away.  
 
Based on a third-party survey, the total production cost of an iPhone 5 is only 1,039 yuan, but its lowest price in China is as high as 5,288 yuan, which means Apple Inc.’s gross profit for the product reaches 409%. More sadly, the fixed price in China is higher than that in the US by 23%.

China—Apple’s dumping market?

According to a review article by ennweekly.com, a financial news portal, Apple Inc. has never treated its Chinese consumers or partners with due respect; “it is always arrogant and regards China only as a dumping market.”

In the third quarter of 2012, the China market contributed the total revenue of $7.9 billion to Apple Inc., accounting for 22.6% of its overall earnings and making China its second biggest market after the United States, but Apple still would not acknowledge the large fan base for its new model release. China was not listed even in the list of 22 countries for iPhone 5’s second-round sales.

Meanwhile, the eight suppliers of Apple Inc. in China only earned a total profit of $154 million for the first half of 2012, when Apple Inc. itself grabbed $20.4 billion during the same period.

And, although China Telecom and China Unicom occupy half of China’s telecom market, their total profit could only amount to one-fourth of China Mobile, the largest mobile carrier in China, which had chosen not to cooperate with Apple Inc. from the beginning. The ‘brave decision’ originally worried its shareholders but now turns out to be wise. Apparently, clever Apple has maximized its own margins while minimizing that of its Chinese partners.

A planned shift

On December 6, 2012, Tim Cook, the new CEO of Apple Inc., declared that they would re-establish the production line of Mac line of products in the United States in 2013 to bring manufacturing jobs back home. The change of plan means all Chinese workers now working for Mac line would lose their jobs.

On the one hand, Apple makes huge profits in China and on the other hand, it decides to bring investments home for tax exemption. The practice would put China at a great loss.

Facing the reality

Since the policy of reform and opening-up, China began to trade market for technology and investments, and for quite a long while, the strategy worked well and greatly promoted China’s economic growth. In 2010, China finally surpassed the US to become the biggest manufacturer in the world.

At the same time, it seems the side effects of the opening-up policy are beginning to appear these years. After China has opened its huge market, western counties are hindering their big companies from exporting technologies to China, and the Chinese companies wishing to enter western markets are facing many barriers.

Apple Inc. is not the first and definitely would not be the last foreign company to apply double standards in China. The Chinese people’s disillusionment with the Apple dream was clearly inevitable.

We should stick to our opening-up policy but more importantly, we need to learn how to safeguard our interests.
 


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