China Sows Fresh Confusion About Apple With Security Remarks

The Chinese government’s position on Apple Inc. only grew more muddled Wednesday, with Beijing both pushing back on reports about iPhone restrictions but also raising concerns about security problems with the device.

(Bloomberg) — The Chinese government’s position on Apple Inc. only grew more muddled Wednesday, with Beijing both pushing back on reports about iPhone restrictions but also raising concerns about security problems with the device. 

“China has not issued laws and regulations to ban the purchase of Apple or foreign brands’ phones,” Foreign Ministry spokeswoman Mao Ning told a regular press briefing in Beijing on Wednesday. It marked the government’s first comments on reports that authorities are reining in employees’ use of Apple products.

Mao also said that the government attaches “great importance” to security and that all companies operating in China need to abide by its laws and regulations. “We noticed that there have been many media reports about security incidents concerning Apple phones,” Mao said.

The remarks left US investors unsure about Apple’s status in China — which is both the company’s production base and its biggest international market — just as a new iPhone is launching. The shares slipped as much as 1.3% in New York on Wednesday before recovering some of the losses.


Mao’s comments about security incidents were slightly different in the official English translation of the news briefing. That translation, delivered simultaneously onsite by the ministry, omitted the reference to media “reports.” Foreign affairs ministry briefings are typically rigorously controlled and spokespeople’s responses are usually scripted ahead of time with consistent translations.

The press conference came just hours after Apple unveiled the latest model of its marquee device, the iPhone 15. The company introduced four new models, keeping pace with the past few generations: the iPhone 15, 15 Plus, 15 Pro and 15 Pro Max. Preorders of the device begin on Friday.

A spokesperson for Apple didn’t immediately respond to a request for comment.

Bloomberg News reported this month that China plans to expand a ban on the use of iPhones to a plethora of state-backed companies and agencies, a sign of growing challenges for Apple in the country. Several agencies have begun instructing staff not to bring their iPhones to work.

Read More: China Seeks to Broaden iPhone Ban to State Firms, Agencies

Apple also has faced a number of security issues in recent months. An iPhone belonging to a staffer at a Washington-based civil society organization was hacked remotely with spyware created by Israel’s NSO group. Apple confirmed the attack and issued a patch last week to address the issue. 

Russia’s Federal Security Service, known as the FSB, accused an unidentified US intelligence agency in June of hacking several thousand iPhones. The attacks were linked to SIM cards registered with Russia-based diplomats, including some from China, it said.

Apple didn’t comment at the time on whether any Russian phones were breached, but a spokesperson said the company didn’t help any government in the alleged attack, as the FSB implied. 

If Beijing goes ahead with an iPhone ban, the unprecedented blockade will be the culmination of a yearslong effort to root out foreign technology use in sensitive environments, coinciding with Beijing’s effort to reduce its reliance on American software and circuitry. Just over a week ago, Huawei Technologies Co. quietly unveiled a smartphone with a chip a few years behind the cutting edge, which Chinese state media hailed as a triumph over US sanctions intended to curb the country’s rise.

Beijing has established laws to severely restrict the flow of information beyond China’s borders, and tighten its grip on the enormous amounts of data that will be key to controlling the world’s No. 2 economy. While Apple has for years kept data on Chinese users completely in-country through a partnership with a state-backed data center operator, other foreign firms have struggled with new regulations that they fear could hamper their ability to operate.

Read More: Chinese Officials Meet Foreign Firms to Ease Data Law Fears

Those rules give President Xi Jinping’s administration the power to shut down or fine companies that leak or mishandle sensitive information. This year, Beijing also enforced an anti-spying law that foreign multinationals fear could grant authorities unprecedented powers to crack down on their operations.

In Apple’s case, a ban threatens to erode Apple’s position in a market that yields about a fifth of its revenue, and from where it makes the majority of the world’s iPhones through sprawling factories that employ millions of Chinese. Several analysts have argued Huawei’s new phone will take market share from Apple, along with domestic competitors.

What Bloomberg Intelligence Says

China’s extended ban on the use of iPhones in government agencies is a wild card that could dampen our iPhone sales recovery scenario next year. The ruling prohibits the use of foreign-made equipment in sensitive departments, though we don’t believe Apple derives notable revenue from selling to this end market. However, the impact of this directive on the behavior of Chinese consumers is unclear. Though sales in China accelerated in fiscal 3Q, a rise in nationalist sentiment might hurt Apple’s prospects.

– Anurag Rana and Andrew Girard, analysts

Click here for the research.

For now, it’s unclear how many companies or agencies could eventually adopt restrictions on personal devices, and there’s been no formal or written injunction as yet, Bloomberg News reported. State firms or organizations will likely vary in how strictly they enforce such bans, with some forbidding Apple devices from the workplace while others could bar employees from using them entirely.

–With assistance from Lulu Shen and Sarah Zheng.

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