July 13, 2017 1:36 am JST

Apple bows to China's cybersecurity rules with local data center

US tech giant teams with Guizhou Province on $1bn project to support cloud services

SHUNSUKE TABETA, Nikkei staff writer

A man holds his new iPhone 7 at an Apple store in Beijing.

BEIJING -- Apple will establish a data center in China's inland Guizhou Province as part of a $1 billion project involving the local government, the two parties said Wednesday, as the iPhone U.S. tech titan moves to comply with tighter cybersecurity regulations in order to maintain cloud services in the Chinese market.

China's new cybersecurity law took effect June 1, requiring customer data gathered in the country to be stored there as well. Critics in the U.S. and elsewhere have voiced concern that the law could impede the global use of data. Yet other foreign tech companies may follow Apple's lead.

Apple and the provincial government sign an agreement on the cloud project. (Photo courtesy of the Guian New Area website)

Apple will provide technical know-how for the data center, which will be run by its Chinese partner, the provincial-government backed Guizhou-Cloud Big Data Industry Development. Details such as how the parties will share the investment burden were not made public.

The data center will be Apple's first in China and enable it to keep offering the country its iCloud services, which allow for easy sharing of files including pictures and videos between iPhones and other Apple devices.

Apple held the No. 4 share of smartphone shipments in China last year with 10%, Beijing-based research firm Sigmaintell Consulting says, growing from the 6% range in 2012. The company's revenue in China contributes about 20% of its worldwide total.

Apple had sought a place to set up a Chinese data center for cloud services. Guizhou offers a suitable climate and generous government subsidies, while the province's Communist Party chief, Chen Min'er, is close to President Xi Jinping and rumored to be a candidate for top leadership in the future. Apple appears to have chosen with both the Chinese current leadership and the post-Xi era in mind.

Efforts to regulate corporate attempts to send consumer data abroad are accelerating worldwide. Besides China's June cybersecurity law, the European Union will enforce a General Data Protection Regulation starting in May 2018 that clamps down on the international sharing of personal information. Japan likewise regulates such actions, and has hinted it may slap dominant companies hoarding improperly gathered data with antitrust measures.

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