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Why Apple CEO Tim Cook Apologized to China
Why Apple CEO Tim Cook Apologized to China
By Jennifer LeClaire / NewsFactor Network Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
APRIL
01
2013

It's not the first time Apple CEO Tim Cook has had to apologize, but it's the first time he's had to write an apology to Chinese consumers. Cook is sorry for the misunderstandings around its customer service warranty programs in the Far East and has vowed to make changes to the policies for its iPhone 4 and iPhone 4S.

Apple has been in the hot seat for weeks. The state-controlled media have unleashed a barrage of criticism against Apple's warranties, accusing the iPhone maker of treating China unfavorably compared with other nations. Apple at first denied there was any difference in its China warranty policies and those in other regions.

"We are aware that a lack of communications...led to the perception that Apple is arrogant and doesn't care or attach enough importance to consumer feedback," Cook said in a Wall Street Journal translation of the letter. The original letter is written in Chinese and published on Apple's China Web site. "We express our sincere apologies for any concerns or misunderstandings this gave consumers."

Apple Backpedals

Apple is promising to offer Chinese consumers more clarity of its warranty and repair policy on its China Web site, as well as to improve training for Apple store associates there. Apple has also pledged to offer new replacement devices for users under its one-year warranty. Apple previously only replaced non-working parts. Cook took the opportunity to note that 90 percent of consumers were satisfied with the original return policy.

Why, then, was Cook so quick to apologize? A couple of reasons. First, Apple's sales to China in 2012 rose to $23.8 billion, from $10 billion in 2011. That's more than double the sales in just a year and 15 percent of Apple's revenue base. Some market research firms also position China as the largest smartphone market. Samsung and Apple are in heated competition there, just like in other nations.

But there's also the media pressure. China's People's Daily published a front-page story alleging Apple is discriminating against Chinese consumers. And the General Administration of Quality Supervision, Inspection and Quarantine, which sets standards for products in China, told Apple to change its service practices and follow Chinese laws and regulations, according to Forbes.

"It was responding to complaints from consumers who said Apple provides only one-year warranties on the mainboards of its MacBook Air computers sold in China. Chinese rules require manufacturers to provide a two-year warranty on a computer's major components," the China Daily reported.

Double-Edged Sword

Rob Enderle, principal analyst at the Enderle Group, told us Apple and China haven't gotten along well for many years, primarily because of the intellectual property theft in China.

"Long before you could actually get an iPhone in China you could buy all kinds of iPhones in China, but none of them were made by Apple," Enderle said. "They even duplicated an Apple Store in China, which was eventually shut down. Apple has been far more restrictive with its products in China. It's a cross between one of the most proprietary firms and a country that has perhaps the worst record of major countries in terms of intellectual property protection."

That said, Enderle noted, China is one of Apple's growth markets. Because Apple was so slow to enter the market, there was substantial upside and the numbers out of China have been one of the positive reports under Cook's leadership.

"Because there is so much copying going on, there is a lot of brand loyalty for original products," Enderle said. "They are higher quality and carry more status. So even though there may be more Apple clones being sold on the side in China than Apple products, the fact that Chinese folks will actually seek out the Apple products makes it a very lucrative market for Apple regardless of the illegal activity."

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