Apple’s Expansion in China is a Smart Move

china flag and stock charts

By now, it’s no secret that IPhone 7 sales are considered a disappointment, especially to analysts, who were particularly troubled by the lack of growth in China. One of the main reasons for that is the choice of less expensive, but still innovative, phones offered by Chinese manufacturers Huawei and ZTE to its citizens.

Apple seems to believe that immersing the company more fully in China will give more insight into taste and preferences of consumers there. To that end, it will be opening up a second R&D center in Shenzhen, a bustling metropolis north of Hong Kong.

Apple already has one in Beijing, which cost the company $45 million. But Apple has very good reason for opening one in Shenzhen, though it might have been wiser to start there in the first place.

Shenzhen is where Chinese rivals Huawei and ZTE are headquartered. It is also the location of companies that are already making some of Apple’s gear. But mainly, as Tim Cook said in Shenzhen on October 11, the city has a “skill level… [that]…is gradually leading other parts of the world.”

There are a couple of other bonuses, as well.

  • Payroll for the Shenzhen R&D center will almost certainly come in far below its Silicon Valley counterpart.
  • China doesn’t like foreign companies coming into the country and making big profits without re-investing some of those profits back into the Chinese economy. Businesses who don’t realize that, or those who ignore it, could find their China operations running less smoothly than those who make an effort to comply. The infusion of cash from two separate R&D centers in China should be more than enough for both the government and the public to look kindly upon Apple’s operations.

Now we just have to wait and see if that will make any difference to future iPhone sales.