China doesn’t want to ‘close its doors’ to Apple, but…

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Responding to Trump’s tariffs—and to Apple’s $1 trillion market cap—China demands a bigger share of Apple’s profits.

 

Published Tuesday in the state-owned People’s Daily:

China is by far the most important overseas market for the US-based Apple, leaving it exposed if Chinese people make it a target of anger and nationalist sentiment. China doesn’t want to close its doors to Apple despite the trade conflict, but if the US company wants to earn good money in China, its needs to share its development dividends with the Chinese people.

In an increasingly interconnected world, Apple is a particularly good example of global manufacturing. China now serves as a key production and processing base for Apple. Many Chinese companies have been included in Apple’s production chain to provide parts and components or assembly work. This has allowed Apple to benefit from China’s ample supply of cheap labor.

In the case of the iPhone, some statistics show Chinese processors only get 1.8 percent of the total profits created by the device.

Apple’s contribution to job creation in China is notable, but the company enjoys most of the profits created from its Chinese business. It is impractical and unreasonable to kick the company out of China, but if Apple wants to continue raking in enormous profits from the Chinese markets amid trade tensions, the company needs to do more to share the economic cake with local Chinese people.

My take: As the trade war heated up, Apple was China’s trump card. Now they’ve played it—or threatened to—and it rings a little hollow. The fact is, China can’t afford to lose Apple, and Apple can’t afford to lose China. “I’m not buying it,” said Jim Cramer this morning. “They would target some other companies first.”