China warns over reports of iPhone-related ‘security incidents’

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China warned it has “noticed reports” of iPhone-related “security incidents” and told smartphone makers to comply with the law in its first official comments following news that government bodies are cracking down on the use of the US company’s devices.

Beijing said that while foreign phones, including Apple’s, were not banned from China, all producers should “strictly adhere” to data protection and information security laws.

“The Chinese government places a high priority on information and network security and treats both domestic and foreign companies equally,” the foreign ministry said.

The remarks follow growing investor concerns that Chinese ministries, government departments and state-owned enterprises are quietly banning or discouraging more employees from using Apple devices.

Reports of the measures knocked $200bn off the company’s stock last week ahead of the launch of its iPhone 15 on Tuesday and also coincided with the launch of a new 5G handset from domestic competitor, Huawei.

The new iPhone Pro and Pro Max models use 3-nanometre chips from Taiwanese producer TSMC, which are more advanced than the “made in China” 7-nanometre chips used by Huawei’s new Mate 60 Pro, which has been hailed in China as an important step forward for its domestic semiconductor industry.

The foreign ministry said China was committed to protecting the rights of foreign investors and creating a “market-oriented business environment”.

“China has not enacted any laws, regulations, or policy documents prohibiting the purchase and use of foreign brand phones, including Apple,” it said.

“However, in recent times, we have indeed noticed reports in the media regarding security incidents related to Apple iPhones.”

Apple last week issued an emergency software update after a previously unknown vulnerability allowed Israel’s NSO Group to inject its Pegasus spyware remotely and surreptitiously on to iPhones and iPads.

China contributes about a fifth of Apple’s revenue. Bank of America estimates that the country accounts for up to 50mn units of annual iPhone sales and that a government ban could reduce this by about 5mn to 10mn units.

A senior official in a Chinese provincial-level government said on Wednesday that while there was no “official document, policy or regulation” banning iPhone use for civil servants or state-owned enterprise workers, and that the rules were oral or informal, they were nevertheless “mandatory”.

“What can we do? Protest against it and lose our job?” the official said.

But foreign executives in China and analysts said the government stance on official iPhone use was probably mainly intended to protect state security and to subtly warn Washington over tech controls rather than to seriously impede Apple’s business or scare off foreign investors.

Experts estimate Apple indirectly supports more than 1.5mn jobs in China and is an important participant in the country’s consumer electronics industry.

Unlike some other US tech groups, such as Google, Meta and Micron, which have had their products restricted or banned in China, Apple has built strong relations with various levels of government in the country.

But it has also begun diversifying its supply chain to China’s strategic rivals, such as India, a move that some pro-government scholars in Beijing see as part of western efforts to decouple and “contain” the world’s second-biggest economy.

Additional reporting by Nian Liu in Beijing

Financial Times

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