Huawei out of the US, Apple out of China?
AEIdeas
In what the press is calling a “stunning setback” for the Chinese telecoms giant, Huawei, AT&T walked away from a deal to distribute the company’s handsets (phones) through its large nationwide distribution network. (Most mobile phones are sold in bundled packages by US carriers.)
The Huawei booth shows its public safety solution at an exhibition during the 86th INTERPOL General Assembly at Beijing National Convention Center in Beijing, China. REUTERS/Jason Lee
According to reports, the deal had been two years in the making, and the companies were set to announce the pact today (ads were already up on US billboards). While important details of the deal’s failure are still unknown, as first reported by The Wall Street Journal, security concerns about Huawei in general and the handset itself were behind AT&T’s sudden decision. The vague phrase “security concerns” noted in public reports almost certainly points to an intervention, behind the scenes, by a US government agency.
There is a lot more to be written as deeper analysis of this episode emerges, but at this point I have only one query: Why shouldn’t Tim Cook over at Apple be worried and apprehensive? The Chinese market has been described by Cook as a key element in Apple’s future growth. The company, after struggling for several years in the highly competitive Chinese handset market, has seen sales “soar”over the past quarter. But given the deteriorating state of US-China trade and investment relations, won’t it be tempting for Beijing to mirror the US and raise “security” concerns about Chinese citizens using a US company’s technology?
Just a thought.
Why should we care if China blocks Apple phones? They are all made in China. What benefit does Apple have for the American economy?
A question ignored by most is should Apple’s shareholders be concerned by Cook’s lack of due diligence and risk reporting on its 10K that China risk poses a threat to his entire company. Losing iPhone sales is one very real and likely risk, but a bigger risk, if far less likely, is geo-political risk such as an incident with North Korea or Taiwan that would surely prevent Apple from shipping products from the Mainland. Apple would not be able to ship a single iPhone if Chinese production went offline. While this risk is small it is by no means too small to report to shareholders. In fact, he would likely lose a law suit for failing to protect shareholders against foreseeable risks were it to come to pass. It is incompetence and arrogance that allows Apple to remain almost completely dependent upon China for its production base.