Apple Must Make Critical Decisions as Chinese Mobile Apps Challenge New Privacy Rules

Following media reports on Chinese technology companies attempting to bypass Apple’s new privacy policy in its latest 14.5 system update, Apple warns companies like Baidu, ByteDance and Tencent not to violate the latest changes on user privacy. The smartphone company further threatened to take down applications that attempt to evade the new privacy requirements from its App Store.

The California-based technology giant will add new requirements on its iOS 14.5 update to ensure that users’ permission is gained before applications can track them for targeted advertising. For companies like Facebook, Bytedance and Baidu, the new changes on user privacy may lead to users not consenting to data tracking, which will significantly impact those platforms’ advertisement revenue.

In China, Financial Times reported that companies like Baidu, ByteDance and Tencent are planning to work around Apple’s new policy using a system called China Advertising ID (CAID). Financial Times reports suggest that CAID is a system developed by the China Advertising Association and a government think tank. The proposed system would identify users with a unique ID to allow apps to track users for advertising purposes without explicit consent.

In response, Apple issued a statement claiming that the company will take down applications that try to disregard the new requirement. “The App Store terms and guidelines apply equally to all developers around the world, including Apple. We believe strongly that users should be asked for their permission before being tracked. Apps that are found to disregard the user’s choice will be rejected.”

There are other proposed workarounds, such as using fingerprints or device-specified information like IMEI numbers to create unique user identifiers. Apple responded that those attempts had violated the company’s guidelines for more than 10 years.

It is evident that Apple has the power to remove applications that do not comply with the company’s guidelines. However, the American technology company now needs to consider factors beyond enforcing its privacy guidelines. Future growth, marketing and even geopolitical factors are issues that Apple needs to consider before deciding how strict it enforces the upcoming app privacy policies.

Key Chinese technology companies like Baidu and Bytedance are concerned about the new privacy changes, just like other companies such as Facebook that rely on users’ data for targeted advertisements. Yet Baidu and Bytedance now receive help from CAID and also the Chinese government who support the CAID system. Thus for Apple, a decision on keeping a blind eye on CAID or removing applications from App Stores is not as simple. The efforts on protecting users’ privacy could lead to other consequences, including the possibility of facing repercussions from the Chinese government and being shut out of the Chinese consumers’ market.

If Apple is to enforce its privacy rules and remove companies that attempt to bypass the new changes, popular applications like WeChat (owned by Tencent) and TikTok (owned by Bytedance) will vanish from iOS devices. Apple’s sales would also be impacted by not having those applications on its app store.

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According to reports from Business Insider, the United States and China accounted for more than 10% of Apple’s net sales in 2020. The Chinese market generated $40 billion in sales, only second to the $109 billion in sales from the United States. There is significant room for Apple to grow in China, as 78% of smartphones in China are Android devices. Unlike its major competitor Google, Apple remains complacent to Chinese government censorship and regulatory measures. In addition to removing applications from its app store at the request of Chinese government authorities, Apple also kept its mainland China users’ data in the country and transferred the data to Chinese state-owned companies in 2018. Those actions raised significant human rights concerns in 2018, yet the company did not reverse its course on taking directions from the Chinese government.

Yet if Apple is to make an exception for those gigantic Chinese companies, it will face backlash from companies like Facebook and other countries. Such a position would also go against its original statement that vowed to protect users’ privacy. Apple is already facing criticism for cooperating with Chinese officials on censorship.

On the geopolitical front, Apple also faces challenges amid China’s increasingly high nationalism sentiment. With the U.S. government implementing a series of measures against Chinese technology companies like Huawei, ZTE and Xiaomi, public opinions in China turn hostile toward American companies like Apple. Some are calling on the government for more support for Chinese companies and to start countermeasures against American companies like Apple by cutting off their access to the Chinese market. Although those public opinions are not likely to change the Chinese government policies, Apple should also consider those factors when the CAID system is in place for Chinese companies to get around Apple’s privacy rules in the recent future.

According to reports from Financial Times, the China Advertising Association has 2,000 members and selected companies in recent months to promote free trials. It is reported that Apple is aware of the tool but chose to turn a blind eye to the platform in the past. With the CAID to be publicly released in the near future, Apple will need to consider its strategies in China to uphold its integrity while preventing potential damages in its second-largest market.