Apple: Will China Be an Ongoing Risk?

It seems Apple (NASDAQ:AAPL) CEO Tim Cook’s apology to Chinese consumers was a necessary step to hang on in the country, and the company may continue to face scrutiny simply as the status quo.

Apple had been criticized by Chinese state-run media outlets for the past few weeks, and the pressure was seen by industry commentators as dangerous because China is Apple’s second-largest and fastest-growing market. The initial criticism was over reportedly biased consumer services in China — Apple didn’t replace back covers on iPhones it repaired and didn’t add an extra year onto warranties — and the media outrage only increased when Apple didn’t respond initially.

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On both counts the company’s was forced to change its position, and it had to apologize. Cook said, “we recognize that some people may have viewed our lack of communication as arrogant or as a sign that we didn’t care about or value their feedback. We sincerely apologize to our customers for any concerns or confusion we may have caused.”

Having taken the necessary steps to rectify the sources of criticism, Apple may be in the clear for now. But this could have simply been the beginning of a number of hoops the company will be forced to jump through in order to its business up and running in the country. China recently named a new premier, Li Keqiang, who pledged to rid the country of consumer abuses, and China Central Television — the broadcaster that began it all — said it would work even harder to protect customers’ rights.

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Apple’s shares jumped up by 1.7 percent after China’s positive response to Apple’s apology, but its efforts to end the smear campaign may drag on Apple’s shares in the long run, as the new warranty policies will cost the company money to maintain. However, if Apple can continue to increase its presence in China, it may well be worth the effort, as China accounted for $22.8 billion of the companies sales in fiscal 2012. Apple even sold more than 2 million units of the iPhone 5 in its first weekend on sale.

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