Tim CookSource: Apple

What you need to know

  • A new report claims Apple signed a secret $275 billion deal with China.
  • It was reportedly brokered by Tim Cook to stave off regulatory action.
  • Documents claim to show Tim Cook personally lobbied officials and helped forge the agreement.

A new report claims Apple CEO Tim Cook helped personally broker a $275 billion deal with Chinese authorities to stem the tide of regulatory action against the company.

The Information reports:

Apple's iPhone recently became the top-selling smartphone in China, its second-biggest market after the U.S., for the first time in six years. But the company owes much of that success to CEO Tim Cook, who laid the foundation years ago by secretly signing an agreement, estimated to be worth more than $275 billion, with Chinese officials promising Apple would do its part to develop China's economy and technological prowess through investments, business deals, and worker training.

According to the report Cook made a series of in-person visits in 2016, helping to broker a five-year deal "to quash a sudden burst of regulatory actions against Apple's business." The report claims Apple execs were "scrambling" to salvage Apple's relationship with China, which "believed the company wasn't contributing enough to the local economy."

The report claims iPhone sales plummeted because of the bad press, and that Tim Cook "personally" helped lobby officials regarding threats made to some of Apple's services such as iCloud and Apple Pay. An Apple government affairs team helped draft a document setting out the relationship between Apple and China's National Development and Reform Commission:

The cornerstone of Cook's strategy was a memorandum of understanding between Apple and the National Development and Reform Commission, China's powerful economic planning agency. The 1,250-word agreement was originally conceived by Apple's government affairs team in China as a way to improve relations with Beijing and win an audience with senior leaders, according to a person familiar with the agreement. Face-to-face meetings with top Chinese officials became a priority for Apple brass after regulators shut down iTunes books and movies in April 2016, the person said

Apple's investment in Didi Global of $1 billion was also reportedly to "mollify authorities." The report says as part of the agreement Apple committed "to strictly abide by Chinese laws and regulations", the only thing China offered in return was "necessary support and assistance." The report notes these deals between U.S. companies and Chinese authorities are commonplace, and usually done publicly with ceremonies and high-profile visits, noting two signed by Microsoft in 2002 and 2006. The report says the deal "helped Apple rejuvenate its tattered ties with the Chinese government", stating Chinese officials thought Apple had grown "too arrogant" and neglectful of its obligations to China.

The deal allegedly helped to stem the tide of a series of regulatory restrictions headed Apple's way in exchange for investment. Apple pledged to help Chinese manufacturers develop more advanced technologies and train workers, as well as use more Chinese suppliers and software firms. The five-year deal would have expired earlier this year but had an automatic one-year extension if no objections came.

You can read the full report here.