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But the supply-side problems are only part of the Apple story. The American company is thriving in China, even as other Western tech firms struggle with local competition and communications restrictions imposed by the authoritarian state. Apple products now serve as the ultimate totem of upward mobility in a country with a fast-growing middle class. "There's tremendous opportunity for companies that understand China, and we are doing everything we can to understand it," said Timothy Cook, Apple's chief executive, during an April earnings conference call. "It was an incredible quarter [for Apple] in China. It is mind-boggling that we could do this well."
Apple's relationship with the People's Republic embodies some of the global economy's brightest opportunities but also its thorniest dilemmas. An American tech giant must decide how much to adapt its practices in a faraway land. Should Apple represent the best of the West in the Middle Kingdom, or must it conform to the less salubrious way China Inc. operates? From China's side, how much longer will an increasingly nationalistic government allow foreign companies like Apple to profit so handsomely on its shores? Caught in the middle are 1.3 billion Chinese whose toil in factories and taste for luxury products will dictate the future of the world's marketplace.
American Icon
The cult of Apple is booming in china. An iPhone, the most popular Apple product by far, isn't just a cool gadget; it's a signifier of success. "Apple in China is a vanity product, not so much about functionality," says Alan Guo, chairman of LightInTheBox.com a China-based online retailer. "Because money was made so fast in China, rich people aren't very secure, so they want an easy status symbol to show they've made it." The number of potential Apple customers is growing each day. "China has an enormous number of people moving into higher-income groups," noted Cook in April.
So far, much of Apple's growth in China has been a lesson in how to prosper without really trying. Apple has only six stores in Greater China; four of those are its most profitable stores worldwide. The pervasive Apple billboards and marketing campaigns in the U.S. have no Chinese analogue. The iPhone was introduced in China in 2009, two years after it went on sale in the U.S. The latest iPad model, released in March, is still not available in mainland China--even though it is made in the southwestern city of Chengdu, where Apple's biggest supplier, Foxconn, has a major base. Until last year, the company's App Store didn't accept Chinese yuan. Apple has yet to sign a full agreement with the world's largest cell-phone carrier, China Mobile, which boasts 672 million subscribers, to support the iPhone.