More Snowden fallout? China bans Apple services in latest blow to US tech industry

While Beijing has largely left Apple alone in the aftermath of US surveillance disclosures, their relations are beginning to deteriorate.
Written by Zack Whittaker, Contributor

A man is taking photos Apple iPhone 6s and 6s Plus go on sale at an Apple Store in Beijing, China. (Image: file photo)

Beijing is now targeting the crown jewels in the US economy in its latest, ongoing effort to distance the country from its long-term "frenemy."

Apple is the latest victim in a long list of Silicon Valley giants, who have had their wings clipped in the billion-plus nation. A report by The New York Times on Friday said that the government had shut down Apple's iBooks Store and iTunes Movies, six months after their debut.

The Beijing media and culture regulator reportedly demanded the stores' closing, according to sources speaking to the newspaper.

It's another sign that China's relations with the US tech industry are deteriorating.

The company's "services" unit, which houses its content stores, accounts for $4.8 billion in revenue as of its fiscal first quarter earnings -- or about 3 percent of its revenue -- representing a small but growing part of the company's business.

But it's still not clear why the move was made to pull the stores.

Some suspect it's an attack on free speech and expression, or a "crackdown on Western ideology," as the Times put it. Given the country's history of censorship and free speech violations, it wouldn't be all that surprising.

But while that may in part be true, this could be just another chapter in a long list of smaller events that have distanced the country from its Western counterparts in the wake of the NSA surveillance revelations, after whistleblower Edward Snowden leaked thousands of classified documents to journalists.

Since the debut of the spying disclosures, a number of key technology giants -- including Cisco, Intel, and McAfee -- were removed from the Chinese government's list of approved technology brands. Chinese officials feared that the US government had seconded their products for foreign espionage.

But other companies were feeling the effects, too. Google, Cisco, IBM, Qualcomm, HP, Microsoft, and other major tech titans have all complained in their quarterly earnings of "tough market" conditions and "execution issues."

In non-geek speak, they're losing money in the face of domestic rivals.

China remains a vital geography for most internationally-facing US technology giants, not least Apple, which attributes about one-quarter of its revenue to the country, its second-largest region.

Apple has enjoyed a strong business in China since its aggressive push into the country in late-2013, and has in recent years been on reasonably good terms with the Chinese government. While some companies have faced raids and lengthy investigations, Apple has been largely left alone.

Sales of iPhones and iPads -- where the company makes most of its revenues -- are likely not at risk. Putting them in danger would be cutting off the hand that feeds the government, given that Apple manufacturers most of its products in the country. That didn't stop state broadcasters from accusing the company's then-newest iPhone of being a "national security concern" in 2014 though.

Targeting a smaller but excusable part of the Apple's business signals a darkening mood on Beijing's part, with the expectation of potentially more to come.

Apple will report its fiscal second-quarter earnings on Wednesday.

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