Recruiting in China

Reuters reports that Apple is to build its first research and development center in China, citing a statement by the official Chinese state broadcaster.

Tim Cook reportedly made the commitment to Vice Premier Zhang Gaoli, stating that the center will be built by the end of the year.

The pledge comes after the head of China’s industry and technology regulator in May told Cook he hoped Apple could deepen its cooperation with the country in research and development and stressed information security.

Apple likely has two reasons for investing in R&D within China …

First, Apple wants to be able to recruit the best research staff worldwide, not all of whom are willing to relocate to the USA. It has established – or is establishing – R&D centers in a number of locations around the world, including France, Israel, Japan, Sweden and the UK. A center in China has long been rumored.

Second, the company is seeking to establish closer ties to protect its interests in what is currently its second-largest market.

Apple has long had a somewhat precarious relationship with the Chinese government. China has in the past questioned the security of iPhones and banned government purchases of Apple products. More recently, China has said that Apple will be subjected to greater security scrutiny, its iBooks and iTunes Movies services were shut down by a government agency, and a Beijing patent office has ruled that the iPhone 6 copies a Chinese phone.

Reuters even suggests that Apple’s $1B investment in Chinese Uber competitor Didi Chuxing – key to Uber abandoning its own operations in the country – may have been partly motivated by political considerations.

Before Cook’s charm offensive in Beijing in May, Apple announced a $1 billion deal with ride-hailing app Didi Chuxing, a move many experts saw as an attempt to curry favor with Beijing.

Apple’s Q3 earnings report revealed that the company’s sales in China were down 33% year-on-year as it battles local brands.