Apple Inc. AAPL has intensified its efforts to compel Tencent Holdings Ltd. TCEHY and ByteDance Ltd. to modify their popular Chinese apps. The iPhone maker is pressuring the companies to close loopholes that allow in-app creators to bypass Apple’s 30% commission.
What Happened: Apple has demanded Tencent and ByteDance to close the loopholes that their in-app creators use to direct users to external payment systems, thereby circumventing Apple’s 30% commission, Bloomberg reported, citing people familiar with the matter.
Apple has warned Tencent that it may reject essential WeChat updates unless the company eradicates the links that mini-game developers use to accept payments off Apple’s platform. Apple has also asked ByteDance to disable similar payment loopholes in Douyin, the Chinese counterpart of TikTok.
These aggressive moves by Apple in China could potentially strain its relationship with key creators, especially at a time when its business practices are under global scrutiny. The company’s recent actions also risk upsetting the delicate balance between platform operators like Huawei Technologies Co. and China’s major internet firms.
Apple did not immediately respond to Benzinga's request for comment.
Why It Matters: Apple’s aggressive stance in China is part of a broader pattern of regulatory challenges and strategic maneuvers. In late June, the company faced accusations from the European Union of violating the Digital Markets Act due to its restrictive App Store policies.
The EU claims these policies limit competition, and non-compliance could result in fines of up to 10% of Apple’s global revenue.
Despite these challenges, Apple remains optimistic about its long-term prospects in China. CEO Tim Cook expressed confidence during a recent earnings call, noting that the 6.5% sales decline in Greater China was less than 3% on a constant currency basis.
Cook highlighted that the iPhone install base in Greater China set a record, and Mainland China saw a June quarter record for upgraders.
Apple’s third-quarter earnings report exceeded expectations, despite the challenges in China. The company saw strong performance across various product categories, although its stock dipped slightly due to concerns over its China and Services performance, as well as Mac revenue.
Moreover, Apple has continued its robust capital return program, returning over $32 billion to shareholders in the third quarter of fiscal year 2024.
Price Action: Apple Inc.’s stock closed at $218.36 on Thursday, marking a decline of 1.68%. In pre-market trading, the stock fell slightly by 0.16%. Despite the recent drop, Apple’s stock has witnessed growth this year so far, increasing by 17.63%, according to data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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