According to a new report by The Information, Tim Cook signed a $275 billion deal with China's government promising them that Apple will help in developing China's economy and technological capabilities. The report is based on Apple's internal documents and interviews. It claims that the five-year deal was reportedly signed when Tim Cook went for an in-person visit to the country in 2016.
Why was the deal signed?
The first question that pops up in our heads is why the Cupertino giant signed such a deal with such a significant amount. According to the report, the deal signed between Apple and the Chinese government was to prevent regulatory action by the government which would have significant negative effects on Apple's operations and business in China. The report from The Information says:
They included a pledge to help Chinese manufacturers develop "the most advanced manufacturing technologies" and "support the training of high-quality Chinese talents."
In addition, Apple promised to use more components from Chinese suppliers in its devices, sign deals with Chinese software firms, collaborate on technology with Chinese universities and directly invest in Chinese tech companies... Apple promised to invest "many billions of dollars more" than what the company was already spending annually in China. Some of that money would go toward building new retail stores, research and development centers and renewable energy projects, the agreement said.
The documents show that Tim Cook "personally lobbied officials" in China. The report says that Tim Cook set out to use a "memorandum of understanding" between Apple and the Chinese government agency to formally agree to a number of permissions in return for regulatory exemptions. For example, iCloud encryption keys in China are handled by Apple despite the country's government efforts to hand over responsibility to China's government. On the other hand, Apple complied with the Chinese government by delisting apps and content that run counter to the state's priorities and goals.
After a lot of negotiations and counter-proposals, a multibillion-dollar agreement was signed between China and Apple. The agreement included a pledge from Apple to help Chinese manufacturers develop "the most advanced manufacturing technologies," "support the training of high-quality Chinese talents," use components supplied by Chinese manufacturers, invest in Chinese companies, as well as "around a dozen Chinese government causes."
In May 2016 only, Apple announced that it will invest $1 billion in the Chinese ride-hailing startup Didi Chuxing. Even though this was before the agreement was signed, it was an attempt from Apple's side to mollify authorities to reach an agreement. Since the deal was agreed upon, Apple has put in a lot of money to advance the manufacturing process, and improve the overall technology of the country. A report recently claimed Apple became the number 1 smartphone seller in China.
The report also says that if there isn't any objection from the either side, the agreement has an option to extend the deal for one year, i.e., until May 2022. The report also says that Apple has "vowed" to invest "many billions of dollars more" in the country. Some internal documents have also suggested that the deal cost Apple more than the reported $275 billion.