Apple Stock Up 3.5% After Secret $275BN Deal With China Revealed

Reports have emerged of a previously unreported agreement between US phone maker Apple and China. The deal, estimated to be worth over $275 billion, was signed by Apple’s CEO Tim Cook in 2016. The recent emergence of the iPhone as the top-selling smartphone in China — its second-largest market — is now being attributed to this secret deal.

The agreement was made during the first of several in-person visits made by Cook to China seeking to quell regulatory actions against his company. This crackdown saw iPhone sales plunge in China amidst the government’s fear that the company was not contributing enough to the local economy. A compromise was reached, with Apple significantly helping to develop China’s economy and technological prowess through investments, business deals, and worker training.

Apple Dominates The Chinese Smartphone Market

Apple’s renaissance to be the top smartphone brand in China comes almost six years after it last held the position. This was due to the iPhone 13 series’ excellent performance, which helped boost sales up 46% month on month in October. This showing is more impressive when accounting for the slow 2% growth witnessed in the Chinese market over the period.

Local Chinese original equipment manufacturers (OEM) Vivo and OPPO had both held the #1 OEM spot in 2021 before Apple’s emergence. These companies provide flagship smartphones with similar build and quality as iPhones for half the price of Apple’s top-end handsets. The rise of Chinese phone companies such as Xiaomi, OPPO, Vivo, and Huawei, resulted in the iPhone losing its previous dominance. However, they then all saw declining sales as more Chinese citizens opted for the iPhone. 

A notable absentee from the list of OEMs is South Korean tech giant Samsung. Since 2019, Samsung has been off the Chinese smartphone scene following the closure of its last phone factory in the country. The move occurred after years of poor sales in China, and a damaged reputation caused by incidents like the exploding Samsung Note 7. This greatly affected customer confidence in the brand and led to a drastic fall in demand for Samsung phones.  Before the crisis, it was one of the country’s top smartphone vendors, accounting for roughly 20% of the Chinese market in 2013.

Microstrategy’s CEO, Micheal Saylor recently called on Apple to purchase Bitcoin to double the value of its stock. However,  following the report of the secret deal with China, the company’s stock prices saw a slight upward surge. Previously trading at around $165, the price shot up by about 3.5% to its current value of $171.17.

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Meanwhile, China Seeks Share of Europe’s Phone Market

As telecommunications giant Huawei plans to extend its reach to the European market, unconfirmed suspicion exists of the Chinese government’s involvement. The move is seen by some as an effort by the Chinese government to share in the region’s smartphone market. Huawei is currently fourth with just 11% of the Mobile Vendor Market in Europe, behind Apple, Samsung and Xiaomi.

In 2019, the chief secretary of Huawei’s board of directors, Jiang Xisheng, explained the company’s ownership. He noted that Huawei is owned by a labor union that solicits donations from employees. The firm holds that its employees own it and that no outside organizations own shares, including any affiliated with the Chinese government. Despite this explanation, doubts remain regarding Beijing’s noninvolvement,  although no solid evidence exists to substantiate the belief.

In early 2022, Huawei’s Harmony OS-powered smartphones are expected to be available in Europe. Huawei phones, particularly flagships, are currently hard to obtain in Europe due to the US government’s blacklisting of the corporation. Concerns over national security have been raised by the US, with Google services banned on Huawei products.

The reaction of the US government to this revelation is one to watch out for. Despite agreeing to a deal with Apple, the Chinese government still competes with the US tech giant in European markets. The battle for dominance and supremacy between both countries is undoubtedly far from over. 

Do you see Chinese smartphone companies toppling Apple soon? Let us know in the comments below.