Credit: Didi Chuxing

Why Apple's $1bn investment in Uber's Chinese rival Didi won't help it

Apple may be getting into bed with Chinese mega-unicorn Didi Chuxing, but it's thinking about the Chinese communist party.

by Adam Gale
Last Updated: 24 May 2016

Like any tech giant worth the name, Apple likes to keep people on their toes. The iMac, iPod, iPhone and iPad all to varying degrees surprised and delighted. And now, it’s done it again. No, not the Apple Watch – there hasn’t been some mass realisation while you were asleep that we can’t live without smart watches after all. Instead, without a world-changing new product of its own, Apple has decided to buy into someone else’s.

Boss Tim Cook just made public a $1bn investment in Chinese ride-sharing giant Didi Chuxing (formerly Didi Kuaidi). This makes Apple one of the largest investors in Didi, along with Alibaba and Tencent, and puts it directly at odds with Google, which is an investor in Didi's arch-rival Uber.

‘We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market,’ Cook told Reuters. There’s probably some truth to that, but is it really the main reason? Having a close relationship with Didi could give Apple insights into the behaviour of Chinese consumers, but it’s hardly short of those insights, given how popular the iPhone still is there (its recent decline notwithstanding).

It could have more to do with the Chinese automobile market specifically, suggesting a possible tie up between Apple and Didi on driverless cars. But even if Apple really is going to produce a driverless car, you have to wonder why it’s looking to China rather than the US, where an Apple car would almost certainly make the most immediate impact (whatever the 'iCar' will look like, it won’t be cheap).

The most likely reason Cook’s flirting with Didi is to butter up the Chinese communist party. Apple may have done better than most western tech firms in navigating the often hostile environment the party has created for them. Unlike Facebook and Google, it isn’t banned, for instance. But it is still suffering from regulators disrupting its services and a legal framework that doesn’t adequately protect its intellectual property from local rivals.

While Mark Zuckerberg tries to woo officials with his newly-learnt Mandarin, Apple’s speaking to the Chinese in a more universal language, the dollar. Investing in Didi gives it the ear of China’s tech titans, which in turn gives it the ear of the state.

The idea’s fine, but it’s unlikely to do Apple much good. China’s playing a very long game to restore itself to international pre-eminence. It very deliberately allows foreign firms just enough opportunity to bring their know-how to China (so long as they play by the rules, of course), but not enough to let them defeat the local copy-cats in the long term battle for market share. It’s highly unlikely they’ll make an exception for Apple or anyone else.

Of course, even if the Didi stake doesn’t pay off in terms of Apple’s Chinese sales or its driverless car ambitions, it could still be a good bet. Apple has $200bn gathering dust in offshore accounts, which it can’t repatriate to the US without paying hefty taxes on it. Investing in a very rapidly growing Chinese firm gets round that problem.

A lucrative distraction, then, but no substitute for the next world-changing product that Apple investors are hoping for. Cook had better hope the car project delivers, when he eventually unveils it.  

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