Apple tackles China

17 January 2012

BEIJING: Apple, the electronics giant, is tackling a variety of challenges in China, from keeping up with consumer demand and meeting local regulations to ensuring its supply chain is ethically sound.

The company planned to launch the latest iPhone4 in China last week, but a scrum among the crowd waiting at its Beijing store meant the police ordered the shop's closure, which produced the sort of commotion the Chinese authorities seek to avoid.

Apple then postponed the device's introduction across its five branches in China. During a peak in 2011, some 40,000 people visited the firm's retail outlets in Beijing and Shanghai per day, showing the extent of customer interest.

Tim Cook, Apple's CEO, described the current situation as "unfortunate", adding that the safety of shoppers must assume "upmost importance". He also stressed the organisation had "taken all necessary precautions."

"I think we were all taken by surprise," he told the Wall Street Journal. "We will learn some things for the future and change some things."

Late last year, Apple reported that China was generating the most rapid growth rate of its major markets worldwide, and projected annual sales should hit $13bn.

Alongside meeting popular expectations, it has been required to follow a diverse range of official regulations. As a result, for example, it started selling the iPhone without a Wi-Fi web connection in 2009.

One much-discussed aspect of the firm's activity in China has been its supply chain, especially after several staff at the Shenzen plant run by Foxconn, the components group, committed suicide in 2010. There was also an explosion at Foxconn's Chengdu factory in 2011.

In addressing such concerns, Apple has released its first formal assessment of 156 businesses in its global supply chain, collectively receiving 97% of its expenditure on components, manufacturing and assembly.

Overall, 62% of the enterprises analysed fell short of Apple's criteria on working hours, as did 35% when it came to protecting employees from injury, and 32% regarding their management of hazardous substances.

"I have spent a lot of time in factories over my lifetime and we are clearly leading in this area," said Cook. "It is like innovating in products. You can focus on things that are barriers or you can focus on scaling the wall or redefining the problem."

Data sourced from Wall Street Journal; additional content by Warc staff