By Terril Yue Jones and Poornima Gupta
BEIJING/SAN FRANCISCO, April 1 Apple Inc
Chief Executive Tim Cook apologised to Chinese
consumers on Monday and altered iPhone warranty policies in its
No. 2 market after more than two weeks of condemnation in the
state-run media of its after-sales service.
From China Central Television to the People's Daily
newspaper, government-controlled media outlets bashed the
world's largest technology corporation for its "arrogance,"
protesting among other things that its current one-year service
warranty was far shorter than in other markets.
Apple, which initially dismissed those criticisms, on Monday
promised to overhaul its consumer practices. Cook has previously
said the world's second-largest economy is a crucial market for
"We are aware that owing to insufficient external
communication, some consider Apple's attitude to be arrogant,
inattentive or indifferent to consumer feedback," Cook said in a
letter written in Chinese on the company's local website. "We
express our sincere apologies for causing consumers any
misgivings or misunderstanding."
Cook's apology, unusual though not as rare as during his
predecessor Steve Jobs' tenure, highlights the importance of the
market for Apple.
The country is typically the brightest spot in Apple's
quarterly financial statements. Revenue from Greater China --
which includes Taiwan and Hong Kong -- totalled $7.3 billion in
its fiscal first quarter, up 60 percent from a year ago.
Apple will begin detailing quarterly sales results from the
region starting this month.
Cook said in the lengthy letter that Apple has "much to
learn about operating and communicating in China."
China has long been a prime market for Western corporations
hoping to capitalize on its growing economic power and
increasingly affluent middle-class. Still, companies face many
pitfalls operating in the country.
'MUCH TO LEARN'
Since it joined the World Trade Organization and opened up
its markets, many have run afoul of perplexing and sometimes
arbitrary local regulations, fickle consumer sentiment - and
occasionally capricious media coverage. Regardless, many
corporations view the country as prime expansion territory as
growth slows in the developed world.
Apple is hardly the first Western brand-name to come under
fire in the media for a variety of real or perceived missteps,
or the first to alter its policies.
In 2012, CCTV spotlighted McDonald's Corp and
Carrefour SA for minor food safety violations. The
companies were forced to apologise and their shares slumped as
China's army of half a billion microbloggers unleashed their
Successful foreign brands like Wal-Mart Stores and
Gucci have also come under fire for various product
and labour issues. More recently, KFC parent Yum Inc
issued a mea culpa in January for its handling of reports that
chicken from some of its suppliers contained excess amounts of
drugs and hormones. It subsequently outlined how it would
improve food safety and quality control.
The targeting of Apple may be part of a policy that China
has adopted to favor homegrown companies, said Robert Atkinson,
president of the Information Technology and Information
"This does seem to be part of a growing strategy by the
Chinese government to criticize and single out for unfair
treatment leading foreign companies in China," he said.
And it is happening as the U.S. government calls out China
"on their egregious economic and trade practices, including
cyber attacks," he added.
Apple has been expanding in presence in China slowly but
steadily, especially through increasing its retail footprint.
Its iPhones, iPods and computers are considered aspirational
products in China with cache among the countries growing middle
Criticism of Apple began on March 15 with the broadcast of
an annual show on CCTV about consumer safety and rights, which
has become an annual ritual targeting foreign, along with
Chinese consumer firms.
The program assailed Apple for its after-sales service,
including Apple's failure to offer new replacement iPhones with
a one-year warranty in the case of major repairs.
Now, Apple will offer full replacements of iPhone 4 and 4S
instead of major repairs, adding a one-year warranty starting
from the date of replacement.
It will provide simpler and clearer explanations of
warranties on its website and allow customers to offer feedback
directly, Cook said. The company will also provide refresher
training to service providers to explain the new warranty
policy, he added.
The iPhone 5, the latest model, already carries a similar
warranty to the new iPhone 4 and 4S coverage.
CCTV's show this year became the subject of online ridicule
over claims the network paid celebrities to post micro-blog
comments against Apple. Thousands of Chinese have come to its
defence online, criticising Chinese firms as being the ones that
lack transparency and consumer trust.