With Russia increasing its attacks on Ukraine, I think Apple will join the list of companies leaving the Russian Federation. Doing so reflects the company’s commitment to the environment, society and corporate responsibility.
Will Apple leave Russia?
I have been thinking about the implications of Apple making such a move since Deputy Prime Minister of Ukraine Mykhailo Fedorov called on it to stop providing products and services in Russia. At first, I felt that doing so might deprive them of essential tools they could use against the Russian government. My thinking went on, even though Apple would also be obligated to take care of its Russian employees, who could find themselves in retaliation if the company pulls out of the market. I will not delve into the politics of current events. Newsweek, Slate and other does much better than that, but I’ll try to explore its significance.
First, what is Russia to Apple?
Russia is (or was) the 11th largest economy in the world. As we all know, Apple continues to look for markets for future growth, and although the Russian market is small, it is generating business and Apple has very loyal customers there.
Apple’s business in Russia has has grown significantly over the past few years. Apple CFO Luca Maestri tell us The company is “very satisfied” with the results achieved in Q3. 21. The most recent data I see shows that Apple’s business in Russia generated about $2.5 billion in 2020, less than 1% of Apple’s revenue.
Apple could generate more revenue from selling Apple One subscriptions internationally. With that cost of sales, it’s unlikely they’ve contributed a huge amount to the company’s bottom line.
What is the business environment?
Apple only recently complied with a government mandate to Open an office in Russia. One of the reasons why it forced to do so so that it can continue to provide online services there. keeps some user data on servers located in Russia. This may include iCloud user data.
Apple is not the top smartphone brand in Russia; it’s Samsung, according to Burga, with Xiaomi close to second. In third place, iPhone accounted for about 15% of smartphone sales in Russia in Q3 21 but also accounted for about 45% of smartphone sales. Revenue may be less important, with the value of the ruble plunges.
When Russian consumers buy an iPhone, they will see a prompt during the setup process, encouraging them to install Software developed by Russia. This was requested by Russian regulators and is a step that Apple initially opposed, but eventually agreed to take.
As it happens, the company has successfully reached a compromise that means customers can choose or decline the Russian apps they should install, rather than being forced to pre-install them.
Notably, other smartphone manufacturers (including Samsung) have failed to reach similar compromises, meaning that most non-Apple devices sold in Russia come pre-installed. government-sanctioned software. That’s the environment in which Apple’s business takes place.
What happens when you leave?
But what if Apple pulls out of the market? A recent illustration of what happens when you impose financial sanctions: Commuters in Russia hope to catch the subway, but they can’t use Apple Pay, Samsung Pay or Google Pay to pay for the subway too. This may affect 20% of Russians use Apple Pay.
When it comes to supply chains, it seems it is unlikely that Apple depends on Russian component suppliers. Most of its manufacturing partners are in the Asia Pacific/USA region. Conflict can create disruption of raw material supply with or without sanctions, but perhaps those challenges can be addressed.
There are also significant implications of exiting the market for Apple customers there.
Protect Apple customers
When it comes to using big-name services like Apple and iCloud, arguably Brave Russian Peace Opponents should (and might have) adopted more secure, cross-platform communication tools, such as Signal or Briar. They should also turn off server-based services like iCloud to protect their privacy and dig deep to secure any privacy features available on their devices.
Of course, completely securing your iPhone will degrade the functions and services it provides. At its safest, iPhone won’t use Apple services and certainly won’t store data in iCloud.
iCloud is not encrypted, and Apple will share details about the data contained in the service with law enforcement in any country where Apple does business. Given that most dissidents would understand this, Apple services cannot logically be considered essential to Putin’s anti-war effort.
It seems relevant to note that Russian government device requirements for customer data increased from less than 200 in 2013 to more than 2,000 in July-December 2020, as reported by Apple itself. transparency report. Apple doesn’t comply with all of these requirements, and neither does Russia come close to doing anything as close to as many of them as the US.
What happens next?
I don’t think Apple’s business will be profoundly affected if they decide to pull out of Russia. On a global basis, I imagine Apple and others are feeling a drop in consumer confidence, compared to the seemingly small Russian business.
It’s a tragedy that we’ve come to a point where there are no good answers – and even the least bad answers seem terrible.
When the invasion began, Apple CEO Tim Cook tweeted:
“I am deeply concerned about the situation in Ukraine. We are doing all we can for our groups there and will support local humanitarian efforts. I am thinking of those currently harmed and joining all those calling for peace.”
While working to support the people in Ukraine, I imagine Apple will now also consider what it can do to protect its Russian teams from retaliation as the situation continues to unravel.
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