Apple CEO in China, reports say

Updated: 2013-07-31 11:22

By Shen Jingting in Beijing and Yu Wei in San Francisco (China Daily)

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Apple Inc CEO Tim Cook is visiting China, as the electronics giant faces slowing sales in its second-largest market and new allegations of labor right abuses at its manufacturers' factories.

Cook paid a visit to the headquarters of China Telecom Corp Ltd, the nation's smallest mobile operator by user numbers, and China Mobile Communications Corp, the world's largest, on Tuesday, according to several Chinese news websites.

Cook was expected to visit China United Telecommunications Corp on Wednesday, the reports said, quoting unnamed sources at China Telecom.

China Daily contacted Apple China's public relations department, which declined to comment on the reports. Inquiries to Apple's spokespeople at its headquarters in Cupertino, California were not answered either.

Cook's visit comes at a time when the American icon last week released its third fiscal quarter results and was accused by New York-based China Labor Watch that its major supplier Pegatron's three factories in Shanghai and Suzhou violated labor laws.

In its last quarter, Apple reported a 1 percent year-on-year growth in global sales, but in Greater China, its second-largest market, sales fell 14 percent to $4.6 billion. The decline was attributed to fewer inventories and a lessening demand for iPhones.

China has been key in Cook's strategy for growth. While Steve Jobs rarely visited the world's most populous country, Cook has been there three times in 18 months. His attention has paid off: China contributed to 15 percent of its global revenue.

However, the electronics giant has been under pressure from investors, competitors and analysts to launch more competitive and cheaper products in the face of tough competition, especially from Samsung Electronics.

One of the moves that Apple is reportedly expected to take is the release of cheaper iPhones to attract more consumers in emerging markets such as China and India.

While China Labor Watch sent a team of investigators to the Pegatron factories in China to monitor working conditions, they also saw that Apple was making cheaper iPhones at one factory, which Apple would not confirm.

Andy Tsay, chair for operations management and information systems at the Leavey School of Business at Santa Clara University, said Apple's rival Samsung offers a much greater variety of phone and tablet products, with a broader price range and that is one thing that Apple should be paying more attention to.

Another thing that could be a boost to Apple's performance is a partnership with China Mobile.

China Mobile had 740 million subscribers by the end of June, almost twice the combined number of China Unicom and China Telecom. However, mostly due to differences in revenue-sharing and the unique third-generation mobile telecom standard that China Mobile uses, there are no official iPhone contracts to China Mobile's users, in spite of the fact they have been talking for many years.

Greg Linden, a business-innovation researcher at the UC-Berkeley, believes Apple will be helped if it releases a popular new phone for China Mobile customers.

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(China Daily USA 07/31/2013 page1)