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Technology

Apple pressed by shareholders over China censorship

But motion requiring company to disclose government requests is defeated

Apple CEO Tim Cook is seen at the Diaoyutai State Guesthouse in Beijing. The company's business is heavily reliant on the Chinese consumer market and the country's supply chain, as evidenced by the recent coronavirus outbreak.   © Reuters

CUPERTINO, U.S. -- Apple shareholders raised concerns about the company's compliance with the Chinese government's censorship demands at an annual investor event on Wednesday.

Hundreds of shareholders gathered at the Steve Jobs Theater in Apple's California headquarters to vote on issues such as board member nominations and management compensation.

One shareholder proposal raised this year by consumer advocacy group SumOfUs required Apple to disclose details of censorship requests from the Chinese government or other nations.

The proposal did not pass, but preliminary results show about 40.6% of Apple's shareholders were in favor of such a motion -- a much higher percentage than two other shareholder proposals that were also voted down Wednesday. Votes on human rights-related issues in previous years had only received support in the single digits. 

“Today, Apple’s investors have sounded the alarm that [Apple CEO] Tim Cook needs to listen to the concerns raised by frontline communities such as Tibetans and Uyghurs who have long suffered under a tech dystopia,” said Sondhya Gupta, a campaign manager at SumOfUs, who did not attend the meeting.

The group previously demanded Google drop its controversial Dragonfly Project, a partly censored search engine with which the company aimed to re-enter the China market. Google ultimately abandoned the project.

Regarding Apple, the group said the Cupertino-based company had removed 517 apps in China at the request of the government, in addition to the 600 virtual private network apps Apple confessed to blocking in 2017. VPNs are internet tunnels that allow users to bypass censorship and are crucial for human-rights defenders to evade surveillance and political backlash.

"How Apple manages its business in China and other repressive regimes will have a direct effect on the reputation of the company" as well as its value, a SumOfUs representative said at Wednesday's meeting.

The death of Dr. Li Wenliang, a Wuhan ophthalmologist who was detained for "spreading false information" after alerting colleagues about the coronavirus in its early days, was an example the representative cited.

The incident has prompted many in China to question Beijing's crackdown on free speech and the perceived mishandling of the public health crisis, the Nikkei Asian Review previously reported.

Apple's business is heavily reliant on the Chinese consumer market and the country's supply chain, as evidenced by the recent coronavirus outbreak.

"We have a challenge right now with the coronavirus," Cook said at the Wednesday event.

"It is obviously a fairly dynamic situation," he added, without further elaborating on the topic.

Apple has warned shareholders that it might miss the next quarter earnings guidance due to the outbreak. The U.S. handset maker will likely miss its schedule for mass producing a more affordable iPhone, while inventories of existing models could remain low until April or longer, despite suppliers in China gradually resuming production amid the coronavirus outbreak, the Nikkei Asian Review previously reported.

"Our hand-holding thesis since this coronavirus outbreak began is that it is primarily a timing issue for iPhone demand, and ultimately once the supply chain gets back toward full capacity, the Apple renaissance of iPhone growth" will resume, said Dan Ives, managing director at Wedbush Securities, said in a note to clients this week.

According to Ives, in the worst-case scenario that Apple's supply chain is not up and running to full capacity until about June, the launch of a new low-cost iPhone will be delayed to midsummer, while the highly anticipated 5G iPhone might not be available for this year's holiday season in the U.S.

On a more positive note, Apple shared its road map for growth in India on Wednesday. It plans to open its first online Apple store and first retail location in the country next year.

"I'm a huge believer in the opportunity in India... It's a country with vibrancy and demographics are just unparalleled," Cook said.

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