Uh-oh. Just when Apple (AAPL) was on the verge of becoming the name to beat in China’s fast-growing smartphone market, the state’s television network poured water on those smoldering coals. Now the world’s most recognizable consumer technology name faces a huge hurdle in the lucrative market … or does it?
What if the Chinese government’s media arm cried “foul” and nobody actually cared? As it turns out, this is apt to be the shape of things. AAPL stocks owners need not worry about the red flag (no pun intended) China began to wave late last week.
Apple Products Pose a Security Threat?
On Friday, state-run TV network China Central Television (CCTV) declared the iPhone’s location-tracking feature posed a national security concern. Specifically, it was allegedly troubling to some Chinese officials that the iPhone records its owner’s travels — in order to populate the “frequent locations” index – and could be used nefariously were someone to gain access to the wrong/right person’s smartphone logs.
It’s a stretch, though it’s not entirely inconceivable that knowing the approximate whereabouts of the nation’s movers and shakers at certain times of the day could prove valuable. Perhaps if the iPhone’s owner worked for a key agency and was known to be visiting a particularly sensitive location, it’s possible someone could connect the proverbial dots. In a nation that’s wildly crowded, however, knowing an individual’s vicinity at a particular point in time isn’t exactly earth-shattering data.
Whatever the case, in a country known for censorship in a world where the mere perception of impropriety — even a silly one like this — isn’t easy to forget, this kind of scandal could really crimp Apple at a critical time, right? Well, if it were a different TV network, maybe. When it’s the CCTV making the claim, however, even the Chinese are now rolling their eyes.
AAPL Stock Owners Have Nothing to Worry About
If this all seems a little familiar, there’s good reason — CCTV has worked diligently in the recent past to shame Western companies doing business in China. For instance, in October the network blasted Starbucks (SBUX) for what China Central Television described as price gouging. The beef was, a latte that cost $3.26 in Chicago cost $4.40 in China.
While twenty years ago such a report might have inspired a new wave of nationalism, in late-2013 it simply sparked a backlash against CCTV itself. Instead of inciting boycotts of the world’s most popular coffee chain, Chinese citizens were asking why the TV network was focusing on coffee prices and ignoring much bigger problems like pollution, corruption, and high housing costs. On Weibo (China’s version of Twitter), nearly 30,000 comments like “CCTV, can we talk about China’s housing and gas prices and other basic living costs before we discuss expensive coffee?” appeared shortly after the story aired.
Apple has been in China’s hot-seat before as well. In March of last year, the American maker of iPhones was specifically targeted as part of the annual Consumer Rights Day (yes, it’s a real thing) festivities led by China Central Television. Using undercover operatives and secret cameras to record conversations, CCTV was able to validate claims that Apple didn’t offer the legally-required length of warranty it was supposed to provide to Chinese customers, nor did it perform adequate warranty service. In conjunction with the report, several Chinese celebrities appeared to chime in on Weibo around the same time, bashing Apple.
Problem: The whole shebang appears to have been one big stunt designed to villainize Apple. When thousands and thousands of Chinese citizens recognized the timing of the Weibo posts — and who posted them — were part of a well-orchestrated and biased media attack, not only did Apple not suffer a marred reputation, the company actually garnered an army of Chinese sympathizers.
The point is, CCTV has effectively lost its credibility, and it’s unlikely anyone is taking the latest warning from the television network seriously. Indeed, odds are good nobody was really surprised the iPhone keeps a log of where their owners are at any given time. How else is a “frequent locations” app supposed to work? (The feature can be disabled, by the way.)
The governmental-control ploys that may have worked in China in the 1980s depended on consumers not being able to communicate with one another, and not being able to point out obvious government-generated message gaffes. The ploys also hinged on less-than-savvy Chinese citizens who never even asked if it was possible the state-run media might have an agenda other than seeking the truth. In an era of the unstoppable and somewhat-unregulated flow of information, though, China Central Television can’t afford to be anything less than honest and accurate … since someone else always knows the truth.
As for Apple, no, none of this is apt to impact the value of AAPL stock. The company survived its early-2013 drubbing, and Starbucks overcame the attempted shaming effort from November as well. Last week’s outcry will be little more than an amusing memory a week from now.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.