Apple CEO Cook to China: Our bad
(MoneyWatch) Although Apple (AAPL) rarely apologizes for its mistakes, the company is expressing regret over its practices in China. Not for the labor conditions for workers on the mainland who make the company's gear, but rather for what critics contend is the company's indifference to Chinese consumers.
In what is less of a mea culpa than a mea gulpa, CEO Tim Cook apologized to Chinese customers Monday for not appearing to take their complaints about Apple products more seriously. It signals how tentative the position of even a retail giant is in China, where the government has mounted a multi-pronged attack on Apple over its product warranty policies.
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The state-controlled China Central Television accused Apple of "infringements of customer's rights, such as the adoption of differentiating repair policies by Apple" by "offering discriminatory after-sales services in China." The story claimed that Apple "offers shorter warranty periods in China compared with other countries and uses refurbished parts when repairing broken devices." CCTV did say that Apple had "fine-tuned parts of the controversial repair policies" in August 2012.
The People's Daily newspaper also ran a front-page article that called Apple's initial response "empty and self-praising." Comments by Chinese celebrities on China's answer to Twitter seemed to some to be a further part of a government-led attack on Apple.
By contrast, an analysis of Appl's store purchase policies by Fortune's Philip Elmer-DeWitt suggested that the company's policies in China were the same as those in the U.S. But China is extremely important to Apple. The greater China market, which includes Hong Kong and Taiwan, is the company's third-largest after the U.S. and Europe. More important, China offers an opportunity for the type of sales growth necessary to keep Apple's investors happy. Citi analyst Glen Yeung estimated that the furor in China could cost Apple $13 billion in sales.
Cook apologized for "any concerns or misunderstandings" and said that Apple might have badly communicated with Chinese consumers. But whether that will change things in China remains to be seen. Yeung sees Apple's problems as part of a pattern in which media outlets have criticized such foreign companies as Yum Brands and McDonald's, possibly as a way to open room for domestic competitors.