Apple has appointed its VP of wireless technologies, Isabel Ge Mahe, to a new role, in an attempt to address declining fortunes in China. Ge Mahe will now be managing director of Apple’s Greater China unit, and is tasked with reversing the consistent sales decline that the company has suffered in its second largest market – with five consecutive quarters of falling revenue in the country, making up $46bn in revenue in the past financial year.
Comprising mainland China, Taiwan and Hong Kong, the market has been attacked by local suppliers such as Huawei, Xiaomi and ZTE, and these are often flanked by the Chinese internet giants that compete with Apple’s software and content deals, like Alibaba, Tencent and Baidu.
Ge Mahe was born in China, in Shenyang, speaks Mandarin, and previously led development teams for Apple’s HomeKit and Apple Pay systems. When working in China, Ge Mahe “worked closely with Apple’s R&D team and carrier partners to develop new China-specific features for iPhone and iPad, including recently announced iOS 11 features, such as QR Code support, SMS fraud prevention, and enabling the use of a phone number as an Apple ID”.
Her experience should position her well for carrying out delicate negotiations with the Chinese government, which has ordered shutdowns for Apple services in the past year.
The authorities demanded that Apple close its iTunes Movies and iBooks services, less than a year after they launched. It is not clear what the reasoning was for the closure, ordered by the Chinese State Administration of Press, Publication, Radio, Film, and Television, but the move surprised Apple – and has been interpreted as a Chinese government attempt to push back against the US company, as part of a wider effort to reduce China’s reliance on western technologies and foster its homegrown industry.
As the New York Times put it, Apple had so far been something of an exception to that policy, going mostly unmolested by new regulations, but the April decision indicated a shift in tone from Beijing – which seems to have applied the same ‘guardian warrior’ approach to Apple that it had been showing to the likes of Cisco, IBM, Microsoft and Qualcomm, all companies which the government believes are too entrenched in China. The sales of these guardian warriors have all suffered, in a climate of investigations and raids.
In a worst-case scenario, the government could lean on the state-owned MNOs to drop the iPhone from their sales programs, or even go as far to remove them from their network coverage. Apple’s retail stores could also be closed, or its Music platform might also be added to the list of banned services – despite what looks like pretty close compliance with government demands, by the iPhone maker. The company has even built a new data center to comply with China’s cybersecurity laws, but it is well aware that it is entirely at the mercy of a somewhat capricious regulator.
Ge Mahe will be responsible for trying to return to 2015 levels of Chinese revenue, which peaked at some $61bn. In March 2015, Apple’s quarterly revenue showed that China accounted for 29% of total Apple revenue, at $16.82bn. Q4 2015 was the peak, at $18.37bn, but since then it dipped to $8.7bn in Q2 and Q3 2016, before jumping to $16.23bn in Q4 2016. Full-year 2016 revenue was just $46bn.
Despite the challenges, China remains a huge opportunity for Apple, given its luxury status and a growing middle class – who are happy to shell out for its comparatively expensive handsets. Apple is facing saturation in more developed economies, but China and other APAC markets will be a focus moving forward, as well as Africa.
The upcoming iPhone 7S and 8 will be incredibly important for Apple, assuming that it is still allowed to operate within the country. Chinese consumers are apparently holding out on device purchases, hoping for a design worthy of being purchased as a status symbol, and so Apple might be feeling the pressure to alter its core designs to better suit the taste of its second largest market.
In a statement, Ge Mahe said: “I am looking forward to deepening our team’s connections with customers, government, and businesses in China, to advance innovation and stability.” CEO Tim Cook said, of the appointment: “Apple is strongly committed to invest and grow in China. She has dedicated a great deal of her time in recent years to delivering innovation for the benefit of Apple customers in China.”