Apple to boost China investments as demand slows

BEIJING — Apple Inc will boost its investment in China, one of its largest but increasingly challenging markets, and build its first Asia-Pacific research and development centre in the country, chief executive Tim Cook said on Tuesday.

Mr Cook made the pledge during a trip to China, at least his second in four months, as demand for Apple’s iPhones has plummeted in the world’s second-largest economy and the government remains wary about foreign technology.

Apple’s new research and development centre will be built by the end of the year, Mr Cook told Vice-Premier Zhang Gaoli, one of China’s most senior officials, according to CCTV, the official Chinese state broadcaster.

Apple has more than doubled its number of corporate sites in China to 45 since 2011, so the move may help it consolidate some of those facilities. Apple did not specify the office’s location or planned number of employees.

“The centre will open later this year, bringing together our engineering and operations teams in China as we develop advanced technologies and services for our products,” Apple said in a statement.

The centre is also intended to deepen the company’s ties to partners and universities, it said.

China has become an increasingly attractive location to develop new products. The total spent on manufacturing research and development in China jumped from US$92 billion (S$124 billion) in 2008 to US$243 billion in 2013, according to the Organisation for Economic Cooperation and Development.

In the United States, it increased from $204 billion to US$221 billion in the same period.

Apple’s announcement came after the head of China’s industry and technology regulator in May told Mr Cook he hoped that Apple could deepen its cooperation with the country in research and development and stressed information security.

Sales in Greater China, once touted as Apple’s next growth engine, decreased by one-third in its fiscal third quarter, after having more than doubled a year earlier. The results did not include inventory drawdowns as retailers sold phones in stock faster than new supply coming from Apple, meaning that demand was not as weak as it seemed.

China’s slowing economy is stocking concerns about Apple’s prospects there.

The company was forced to shut down its iTunes Movies and iBooks services there in April, six months after they were permitted to operate, after Beijing imposed strict curbs on online publishing, particularly for foreign firms.

It also lost a patent case against a little-known Chinese rival relating to the iPhone 6 and 6 Plus, along with a trademark dispute over the use of the word IPHONE on leather goods, and faces anti-US sentiment from consumers there.

Before Mr Cook’s charm offensive in Beijing in May, Apple announced a US$1 billion deal with ride-hailing app Didi Chuxing, a move many experts saw as an attempt to curry favour with Beijing.

Other technology firms, including Microsoft and Qualcomm, have pledged investments in China, often with mixed results. AGENCIES