A few years ago, Apple Inc. (AAPL) sued rival Samsung Electronic (SSNLF) because the icons on its Android smartphones had rounded corners and because Samsung has ripped off Apple’s “elegant and distinctive product and packaging design,” (as if not all smartphones were rectangular with rounded edges in pretty packages).
Today, Chinese regulators asked Apple to stop selling the iPhone 6 and the iPhone 6 Plus in that country because its design appears to infringe on a design patent owned and currently used by a company called Shenzhen Baili, for its 100C smartphone.
To be fair, the iPhone 6 and the 100C do look quite a bit alike, but not because Apple ripped off the look and feel of the relatively unknown company’s form factor. They look alike because smartphones have to be rectangular in nature, and there are only so many ways to design such a shape.
Oh, well, there’s that and the fact that the Chinese government loves to torture Apple.
It’s Official – China (Secretly) Hates Apple
If there’s been any impact on Apple stock, it’s been minimal. Shares are down 2% Friday, which may be more the result of some pre-weekend trading cleanup than the regulatory headwind. In fact, Apple immediately (and successfully) filed to keep the iPhone 6 and the iPhone 6 Plus on Chinese phone-seller’s shelves until Apple at least has a chance to plead its case.
Yet, the mere effort from Beijing’s intellectual property regulator should concern owners of AAPL stock. The country’s clearly doing whatever it can to stymie Apple’s growth in that county, while Apple desperately needs China to realize its ambitions.
Case(s) in point: It was only in April the Chinese government shut down Apple’s fledgling iBooks and iTunes Movies business there, with no clear explanation. Last month, the country’s courts allowed a handbag maker to continue using the name “iPhone,” despite Apple’s legal efforts! And let’s not forget that in 2013 a swath of Chinese celebrities vocally and voraciously bashed Apple as part of what some still believe was a government-sponsored effort to keep the company from penetrating the sizable market.
The irony? It was only last month that Apple attempted to extend an olive branch of sorts, investing $1 billion in China-based ride-hailing service Didi Chuxing, despite the fact that U.S.-based Uber is trying to gain its own foothold in China.
Talk about being sucker punched.
Reality Check for AAPL
Were it just the celebrity attack or just the surprise shut-down of iTunes Movies and iBooks or just the decision to let a handbag maker use the powerful name or, now, just the effort to keep Apple on the losing end of a ridiculous patent battle, it might be dismissed as bad luck. Putting all of these stumbling blocks together though, it becomes clear there’s a systemic plan — perhaps subconsciously — to undermine Apple’s aim to become a powerhouse in China.
It certainly wouldn’t be a first for Beijing. Its love/hate relationship with Alphabet Inc (GOOG, GOOGL) subsidiary Google is relatively well documented, ultimately leading up to Google’s 2010 exit of the country’s search engine marketplace. China’s censorship mandates just became more headache than they were worth for Google.
In a similar vein, in 2014, Microsoft Corporation (MSFT) finally pulled its Nokia smartphone manufacturing sites out of China and into Vietnam. Microsoft cited costs and logistics as the reason, but the move has a political flavor to it as well.
Bottom Line for Apple Stock
Whether Apple is just another casualty in China’s assault on U.S. companies, or if Apple is considered public enemy No. 1 in China, isn’t exactly clear; it may be a little of both.
To owners of Apple stock though, where Apple is on that spectrum is of little consequence. China’s government is making it exhausting to do business in that country, while doing most everything it can to avoid being the proverbial “bad guy.”
With China pretty much showing all of its cards now — with the last card being a petty, yet potent patent standoff — it’s plenty clear China isn’t going to be the easy target CEO Tim Cook thought it would be back in 2013 when he predicted the country would become Apple’s biggest market.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.