Apple-IBM alliance may hit a speed bump in China

Mainland worries about intrusive US technology could pose a stumbling block to the two companies' new app alliance targeting business users

PUBLISHED : Thursday, 17 July, 2014, 1:22am
UPDATED : Thursday, 17 July, 2014, 8:05am

Security concerns by Beijing could throw a spanner in the works for Apple and International Business Machines in mainland China, after the two technology giants teamed up to bring advanced mobile enterprise applications for the iPhone and iPad to businesses.

Apple and IBM announced on Tuesday in the United States an exclusive partnership to build a new class of about 100,000 "made-for-business apps" targeting worldwide opportunities in retail, healthcare, banking, travel and transport, telecommunications and insurance, among other industries.

Under this landmark collaboration, IBM will sell iPhones and iPads with the industry-specific apps to its business clients. Apple will provide mobile service and support to corporate information-technology departments and individual business users.

"I'm not sure how much traction this partnership will have in China, given the whole geopolitical tensions," said Alberto Moel, a senior analyst at Bernstein Research.

In May, the State Internet Information Office introduced a plan for more stringent checks of information-technology products and services on the mainland. No timetable for implementation was provided.

State media said the vetting would bolster national security by preventing the use of hi-tech products "to illegally control, disrupt or shut down their clients' systems, or to gather, store, process or use their clients' information". The new procedures were announced just days after Washington indicted five Chinese military officers for alleged industrial cyber-theft.

Moel said Apple was already singled out in a report by the mainland's state-owned broadcaster last week, which claimed that the user location-tracking function of the US firm's iOS mobile operating system could be a national security threat. Apple has rebutted that claim.

IBM, which has been operating on the mainland for more than 30 years, has been on a sales slump in the market since last year, caused by a backlash against US technology companies. That was sparked by fugitive whistleblower Edward Snowden's revelations about US cyber-spying.

"I think those security concerns [on the mainland] apply more to the public sector than the private sector," Shanghai-based Gartner analyst Sandy Shen said. "Enterprises with a large installed base of iOS device users will likely adopt the new IBM apps."

Apple and IBM plan to make available their new apps - including device management, security, analytics and mobile integration - on the iPhone and iPad starting this autumn and into next year.

Ezra Gottheil, a principal analyst at Technology Business Research, said Apple's new partnership "increases its business presence at the expense of Android, Windows and BlackBerry".

In a report yesterday, Bernstein senior analyst Toni Sacconaghi said Apple's "biggest upside opportunity may be in incremental iPad sales". He estimated that Apple currently sells about 70 million iPads a year globally.

Data from Analysys International showed that Apple remained the leading media tablet supplier on the mainland, with a 57.11 per cent market share in the first quarter.

"In our view, the big question surrounding the [Apple-IBM] announcement is how much new business will ultimately be created," Sacconaghi said.