Apple Becomes Voice Of Reason In Cyber War Of Words

Apple promises to safeguard data on Chinese servers

Apple (Nasdaq: AAPL) has emerged as a rare voice of reason in the war of words between China and the west over cyber security, with word that the global tech giant has decided to host some of its users’ personal data on Chinese-based computers. Apple’s move was almost surely a business decision first and foremost, providing its Chinese users with speedier services. But the move also sends a signal that other western companies should consider following, reflecting Apple’s belief that using Chinese infrastructure doesn’t pose a risk to compromising a company’s private data.

The US and China have taken steps to curb the use of hardware from each others’ companies in their domestic infrastructure over the past year, saying such equipment could make their systems vulnerable to spying. The series of actions has dealt a setback to some of the world’s largest tech firms, with Chinese firms including Huawei and ZTE (HKEx: 763; Shenzhen: 000063) and western giants like IBM (NYSE: IBM), Cisco (Nasdaq: CSCO) and Microsoft (Nasdaq: MSFT) feeling an impact from government moves.

Against that backdrop, Apple emerged last week as a rare voice of rationality when it announced its decision to begin storing some of its Chinese users’ personal data on servers located inside the country. (English article) The decision marked a first for Apple, and the accompanying explanation was also a relatively rare move for a company that seldom publicly explains its business decisions.

Apple said it wasn’t concerned about security risks from using servers hosted in data centers owned by China Telecom (HKEx: 728; NYSE: CHA), one of the country’s 3 state-owned carriers that control most of the domestic market for telecoms services. It cited its sophisticated encryption technology for its confidence, noting that such technology would protect its data even if someone managed to access China Telecom’s servers or intercept data as it traveled over domestic telecoms networks.

Such sophisticated encryption technology has always been critical to guaranteeing the security of data, and is widely used by most of the world’s major companies as one of the most important steps they can take to protect customer privacy. Thus by using such technology, Apple’s China-based data should be secure from unauthorized access by any third-parties, both public and private.

Apple’s move was a business decision, since the storage of user data on locally based computers that are geographically closer to its Chinese users will give them faster service. But the move was also a smart public relations tactic by Apple, which has come under fire in China on a number of fronts over the past year for some of its local business practices.

Last year the company found itself at the middle of a negative publicity storm after a report by central broadcaster CCTV revealed inconsistencies with its after-sales service. That storm saw Apple issue a rare apology and promise to fix the problem. Apple has also come under fire for launching its popular iPhones in China weeks or even months after their global roll-outs, though it finally included China in a global launch for its latest iPhone 5s last fall.

At the heart of its image problems was a broader corporate culture that the influential People’s Daily newspaper labeled as “arrogant”. In effect, the company was perceived as earning huge profits from the China market, which accounted for as much as a fifth of global sales, while doing little to invest in China by opening more of its trendy Apple stores or setting up local product development centers.

Thus this latest decision to host user data on China-based servers, and also its public announcement of the move, looks like a smart move by Apple both in terms of improving its Chinese business and also earning local goodwill. Apple’s decision to host its data in China also reflects a belief that it feels secure in its ability to protect its customers’ privacy in such an environment, despite the broader noises coming from Washington and Beijing.

At the end of the day, it’s the responsibility of all companies to protect their own data and their customers’ private information, which is sometimes difficult as reflected by the theft of such data in a number of recent high-profile cases in the west. Other companies and politicians should take note of Apple’s move, and realize that computer equipment will always have its flaws and vulnerabilities. In the end, they should realize that they are ultimately responsible for using tools like encryption and other technologies to protect the privacy of their data.

Bottom line: Apple’s decision to host some user data in China reflects the relatively reliable security of Chinese infrastructure for companies that take appropriate measures to protect their data.

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