While it defies U.S. govt, Apple abides by China orders -- and reaps big rewards...
While it defies U.S. government, Apple abides by China's
orders — and reaps big rewards
China iPhone sales
By David Pierson Feb
26, 2016 3:00AM
Apple Inc. has come out swinging in its pitched battle
with the government on its home turf.
But when it comes to its second-largest market, China,
the Cupertino, Calif., company has been far more accommodating.
Since the iPhone was officially introduced in China seven
years ago, Apple has overcome a national security backlash there and has
censored apps that wouldn't pass muster with Chinese authorities. It has moved
local user data onto servers operated by the state-owned China Telecom and
submits to security audits by Chinese authorities.
The approach contrasts with Apple's defiant stance
against the FBI, which is heaping pressure on the company to decrypt an iPhone
that belonged to San Bernardino shooter Syed Rizwan Farook.
I can't imagine the Chinese would tolerate end-to-end
encryption or a refusal to cooperate with their police, particularly in a
terrorism case.
- James Lewis, senior fellow, Center for Strategic and
International Studies
The years-long strategy in China is paying off at a
crucial time. While sales of Apple products have flatlined or declined in the
U.S., Europe and Japan, business in the company's greater China region
continues to soar — to a record $59 billion last year.
The Asian giant surpassed the U.S. last year as the No. 1
buyer of iPhones and could one day be the largest market for Apple Pay, the
mobile payment platform that was rolled out for Chinese consumers last week.
But there's no guarantee the good times will continue
rolling for Apple. Beijing is increasingly tightening the screws on foreign
technology companies, having introduced strict laws aimed at policing the
Internet and digital hardware.
The environment will get even tougher, Apple says, if the
FBI prevails in seeking a so-called backdoor to Farook's phone. That could set
a precedent for China's authoritarian leaders to demand the same in a country
where Apple has never publicly defied orders.
"What's driving this is Apple's desire to persuade
the global market, and particularly the China market, that the FBI can't just
stroll in and ask for data," said James Lewis, senior fellow at the Center
for Strategic and International Studies in Washington. "I can't imagine
the Chinese would tolerate end-to-end encryption or a refusal to cooperate with
their police, particularly in a terrorism case."
Apple's fight with the FBI
The last time Apple was in the crosshairs of Chinese
negative opinion was after the Edward Snowden National Security Agency leak in
late 2013.
Chinese state-run media began raising national security
questions about the iPhone's location-tracking feature. Communist party cadres
and other officials were also urged to ditch their Apple devices.
The controversy underscored how quickly nationalistic
sentiment in China can turn on a foreign brand.
Amid the furor, Apple announced it was shifting local
user data onto China-based servers.
The move was seen by some analysts as a concession to
calm fears that Apple's infrastructure was compromised by U.S. intelligence. It
came four years after Google pulled its search engine out of China in an
unprecedented stand against the Chinese government over censorship.
Apple, one of only a handful of U.S. tech giants that
have flourished in China, said the move was necessary to improve services for
its growing Chinese user base. It added that all data on the servers were
encrypted and inaccessible to China Telecom.
Even so, some security experts say the servers could be
vulnerable.
"Whatever data is on Chinese servers is susceptible
to confiscation or even cryptanalysis," a sort of code cracking, said
Jonathan Zdziarski, a leading expert in iPhone security.
The same could be said about access to data in servers in
the U.S., Zdziarski said, the only difference being you need a subpoena.
But it's not just the servers that pose a risk. Apple's
source codes could be stolen from one of its Chinese factories or during government
security audits.
"Most of the hardware tools that have hacked iPhones
in the past all came out of China, and that's probably for a reason,"
Zdziarski said. "It'd be foolish to think that Apple could form a safe and
healthy relationship with the Chinese government that didn't put the U.S. at
some level of higher risk."
In the end, moving users to China Telecom's servers was
followed by a rehabilitation of Apple's image in China that continues today.
On Monday, the state-run Economic Daily gave Apple Pay
its stamp of approval, saying it complied with national security standards —
echoing endorsements the iPhone 6 received more than a year earlier.
In January 2015, the government mouthpiece, the People's Daily,
tweeted a picture of Apple Chief Executive Tim Cook shaking hands with Lu Wei,
China's top cyberspace official.
"Apple has agreed to China's security checks, 1st
foreign firm to agree to rules of Cyberspace Admin of China," the tweet
said.
Apple said this was nothing special; it accedes to
security checks in all countries it operates in. And all companies that want to
do business with China are required to submit to such checks.
What's different, however, is how stringent the checks
could be in the near future.
Despite criticism from foreign governments, including the
White House, China is introducing security laws that are so vaguely worded some
fear it will require technology companies to provide source codes and backdoors
for market access. Regulators there have already demanded more foreign
companies store data locally like Apple did with China Telecom.
How the new rules fare could depend on the outcome of
Apple's case with the FBI, experts say.
"The problem is, depending on what happens with
Apple in the U.S., the window for foreign companies to maneuver over encryption
and other security requirements in China could shrink," said Samm Sacks,
an analyst for Eurasia Group.
She said the ambiguity of China's security laws are
designed to promote self-censorship.
Apple in the past has pulled apps from its China app
store that mentioned the Dalai Lama and ethnic Uighur activist Rebiya Kadeer —
both considered enemies of the state. And late last year, it disabled its news
app in China.
"Virtually every foreign tech company doing business
in China is going to have to make some concessions to the government, just as
the price of entry," said Charlie Custer, a writer and expert on tech in
China.
"I'd love to hold all global corporations to
Google's moral standard, but it's probably not realistic to expect that,
especially from a company like Apple whose most important market is probably
China."
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