Isabel Ge Mahe may have the toughest job in tech and, after CEO Tim Cook, the second most important job at Apple. A Mandarin speaker, born in China, she is the new managing director of Apple’s Greater China business and will be based in Shanghai.
That puts her in charge of the market that has the greatest potential for Apple, but where the company’s revenues have shrunk for five quarters in a row. By 2010, the tech giant’s China business was booming and, in 2015, it generated revenues of $61bn. The very next year, sales slumped to $46bn.
In 2016, for the first time since Apple entered China, its share of the smartphone market declined – from 13.6% to 9.6%. The top domestic producers – OPPO, Huwaei and Vivo being the largest – expanded their share to 57%. The most worrying statistic for Apple is that, in a market that grew 9%, it shipped 44.9m units, 13.5m fewer than in 2015.
The government’s attitude towards foreign businesses has also become less welcoming. A new cybersecurity law led Apple to invest $1bn in a new data centre in Guizhou province in southwest China. It has also poured $1bn into Didi, the country’s leading ride-hailing service which is so successful it is disrupting Uber.
Other irritants for the tech giant in this market include a complaint from a Shanghai government-affiliated consumer group that eight iPhones had exploded and a demand from the State Council, chaired by China’s prime minster Li Keqiang, that Apple explain why many users reported that their iPhone 6 and 6S devices were shutting down abruptly.
In a strange way, Apple’s brand value in China was underlined last year when consumers, outraged by a UN ruling over territories in the South China Sea, posted videos of themselves smashing iPhones – the most obvious symbol of American capitalism – to register their patriotic outrage.
Against this backdrop, it’s easy to see why the question analysts most often ask Cook is: “What do you plan to do about China?” To which the CEO invariably replies – and he said it again when he announced Ge Mahe’s new role – “Apple is strongly committed to invest and grow in China.”
The appointment of a Chinese national is a canny political move by Apple but Ge Mahe has an impressive CV. She has been in charge of Apple’s wireless engineering teams for the past nine years, working on communications for almost every product, and led the drive to tweak iOS 11 to make the operating system more suitable for the Chinese market.
Her experience leading the engineering teams for the mobile payment service, Apple Pay, may prove particularly useful as China is adopting electronic payments faster than any other major economy. For example, Starbucks now accepts WeChat Pay in China, a service used by 200m users of the social media app.
WeChat represents a particular challenge for Apple. As technology writer Ben Thompson blogged: “There is nothing in any other country that is comparable: not LINE, not WhatsApp, not Facebook. All of those are about communication or wasting time: WeChat is that, but it is also for reading news, for hailing taxis, for paying for lunch (try and pay with cash for lunch, and you’ll look like a luddite), for accessing government resources, for business. For all intents and purposes WeChat is your phone, and to a far greater extent in China than anywhere else, your phone is everything.” And because WeChat runs as well on Android as on Apple’s iOS, it makes it easier for Chinese consumers – who are already less loyal than their counterparts in the West – to switch to a new smartphone brand.
China is also integral to Apple’s iPhone production. The company’s supply chain is more complex than popularly supposed – parts for the iPhone 5 and 6 came from China, France, Germany, Italy, Japan, the Netherlands, Singapore, South Korea, Taiwan and the US. The ‘made in China’ label Apple sticks on its products reflects the fact that most of the parts come from China (though some are outsourced to Taiwan) and most of the devices are assembled there.
Ge Mahe’s only worry about the supply chain is whether it can deliver the iPhone 8, for which many Chinese consumers have been waiting, in the third quarter of this year. Initial supply is expected to be limited but there is, as yet, little clarity about what the problem is. So sales in China may keep stumbling for a few months.
Yet the outlook for Apple – and Ge Mahe – looks rosier in 2018. If the iPhone 8 lives up to expectations, it could, like the iPhone 5C, become a status symbol in China – the kind of gadget executives put on the table at the start of a meeting just to show they can afford one.
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