Govt ends Apple purchases

Security fears cited as major reason: report

Security concerns have prompted the removal of Apple Inc's iPads and MacBook laptops from Chinese government procurement lists, according to government officials who spoke on condition of anonymity.

The officials, who had seen the list, told Bloomberg that 10 of Apple's products, including iPad, iPad mini, MacBook Air and MacBook Pro, were excluded from the government procurement list released in July. These products were on a June version from China's National Development and Reform Commission (NDRC) and Ministry of Finance (MOF), the report said. The information has not been made public.

The officials also said that products from US companies Dell Inc, Hewlett-Packard Co and Chinese company Lenovo Group are on the list, according to the report.

The NDRC and Apple could not be reached for comment by press time.

Apple is not listed as one of the two winning bidders to provide desktops and laptops to China's central government and ministries according to a July 1 announcement on the MOF's procurement website. The contracts will go to Chinese company Tsinghua Tongfang Co and Lenovo.

It is unknown whether the iPhone has also been removed from the government procurement list, but in recent weeks there have been increased concerns that foreign IT products could be vulnerable to security leaks through "back doors."

A China Central Television program on July 11 criticized the iPhone for being open to invasion of privacy, which if used by officials, could threaten national security.

Fang Xingdong, founder of China's leading high-tech think tank chinalabs.com, last week wrote a commentary in the Global Times calling for a ban on civil servants using iPhones.

In the wake of the high-profile Snowden leaks, which revealed that the US National Security Agency was using the spy program PRISM, the Chinese government has become more cautious in using foreign IT products. Among others, PRISM targeted foreign leaders, reportedly including former Chinese leader Hu Jintao.

China's State Internet Information Office announced in May that it would start security vetting of major IT products and services used by national security and public entities.

In May, China also prohibited use of Microsoft's Windows 8 operating system in all desktops, laptops and tablet PCs purchased by central government organs in a bid to ensure computer security after the shutdown of Windows XP.

China also excluded Symantec and Kaspersky, two foreign security software developers from the supplier list for the central government, which only approved five Chinese-developed antivirus software, the Xinhua News Agency reported Sunday.

Fang said the Chinese government's recent moves out of security concerns are common practice for any sovereign country. "Some countries even impose stricter controls than China does," he told the Global Times.

A US congressional investigation in 2012 claimed that Chinese telecom companies Huawei and ZTE were potential security threats and suggested the US government should not use any equipment from them. The two companies, which have won a significant share of global telecom markets, are still experiencing great difficulty accessing the US market.

Fang said that foreign companies are expected to see more limitations in future in sensitive areas, including the finance and transportation sectors.

The possible ban may cause government departments and State-owned companies to decide to purchase homegrown high-technology products instead of foreign-invested ones, which is likely to influence the foreign companies' performance in the Chinese market, said Fang.

But Li Wei, director of the Institute of Security and Arms Control Studies, China Institutes of Contemporary International Relations, said that the impact on Apple will be limited, as its products are very popular among ordinary consumers.

He noted that security concerns may not be the only reason why the central authorities prohibited government agencies from purchasing Apple hardware, as higher costs and the compatibility of Apple's operating system with other software would also be factors.

The Greater China region ranks third in terms of Apple's revenue, next only to the US and Europe, which brought $5.9 billion income to the company with 28 percent year-on-year growth, according to Apple's earnings report of its fiscal 2014 third quarter from March 30 to June 28.

Some foreign companies have tried to keep their market presence by cooperating with Chinese partners to assure the Chinese government.

Dell announced on August 1 that it will cooperate with Chinese software producer China Standard Software Co to preinstall the latter's NeoKylin operating system in Dell's commercial PCs, media reports said.