Apple increases its commitment in China with $1bn investment

by borne . May 15, 2016

Apple has not really had a good time of it lately, especially in China. With news that its value has contracted for the first time in 13 years followed by the news that a trademark infringement case has ruled against Apple over the use of ‘iPhone’ as a trademark in China it would be fair to think that Apple may well be reconsidering its strategic need for the nation.

 

This theory can be borne out further what with Apple CEO Tim Cook recently highlighting India as a vital market for Apple to expand into.

 

For a short while at least Apple’s love affair with China seemed like it was a tad precarious to say the least.

 

So when the news broke that Apple was spending a cool $1bn of investment capital in Chinese Uber-esque ride hailing company Didi Chuxing it kind of made everyone sit up and take notice.

 

Leaning the Chinese market

 

What these recent Apple failings have shown is that no company can ever hope to ride the crest of a wave. Even if that particular wave lasts 13 years.

 

China, as an emerging market has masses of potential for growth and it is a market in which Apple has been keen to get its products in. With these latest setbacks however Apple needed to either reinforce its intent in China or branch out into other markets. It has decided on the former.

 

In an interview discussing the investment Tim Cook said that Apple was “making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market.” This is a clear statement that Apple is not only buying into a company from an investment point of view although the company will clearly like to see a return on its cash in years to come. But what it does is shows that Apple wants to learn from its deficiencies in the market and understand how to operate better in China.

 

The investment also sends a statement of intent to the ruling powers in China that Apple is serious about being a player in its domestic market and is putting its money where its mouth is so to speak.

 

All in all, while the investment news has come as something of a surprise it makes sense as it helps to prevent the slide and it clearly allows Apple to be more nimble in China where perhaps it hasn’t been before.