Privacy is the new battleground. Sounds simple, but it's not. This war is really about the power of networks, and legacy versus disruption.
The Wall Street Journalreported Facebook (FB) - Get Free Report pulled its iPhone data security app last week, after Apple (AAPL) - Get Free Report ruled the service violated its data collection policy.
Apple is building a strategy around privacy to mask its weaknesses.
There is a good bit of irony involved. Facebook is still reeling from its connection to fake news and the 2016 presidential election cycle. Many members of the media immediately concluded Facebook, and its lax stewardship of user data, was responsible for President Trump's victory. In their zeal, it appears they have become unwitting co-conspirators in more fakery.
Corporate managers, despite lip service, do not care much about user privacy.
No company has mastered the charade better than Apple. In the age of software, the Cupertino company has become an apostle to hardware. Zealots crowd its glass box stores to bathe in the magnificence of aluminum iPhones, iPads and Mac computers. Warren Buffett thinks the iPhone is massively underpriced.
Apple & China
Most of its staunchest devotees are Chinese. Although iPhone X, its flagship device, retails for $1,266 in China, it's still the best-selling device. In May, the company reported fiscal second quarter sales in China spiked 21% to $13 billion, about the same level as all of Europe combined. During the last four quarters, Apple logged $49.14 billion in sales from China.
There is no debate. Apple is succeeding in China.
Oddly, its advocacy for user data privacy does not extend to the People's Republic. Apple transferred the operation, including the security keys, of its Chinese iCloud service to Guizhou-Cloud Big Data, in February. GCBD is a state-owned enterprise.
The state is currently developing a social credit system for every man, woman and child. Data culled from mass surveillance, social media, banking histories and personal devices will become the basis for a national reputation database.
It is every bit as dystopian as it seems. The government is using the database to restrict movement, and in some cases, intern residents who have been identified as threats by predictive analytic models.
Apple is a willing party to all of this. By choice, the company does business in China.
And in the U.S.
In the West, Cupertino is often portrayed as a beacon of privacy rights. The branding is both strategic and cynical.
Software companies are a tremendous threat to Apple. Powerful cloud computing networks and inexpensive sensors, coupled with artificial intelligence are changing the way people interact with technology. Hardware, even the aspirational fare Apple makes, is getting abstracted away.
Although Apple revolutionized smartphones in 2007 with iPhone, application services developed by Alphabet (GOOGL) - Get Free Report and Facebook continue to dominate smartphone downloads. And Amazon.com (AMZN) - Get Free Report is building an important new network for personal digital assistants. Forget Siri, Alexa is being fully embraced by car, consumer electronics and household appliance companies.
Collecting and understanding personal data is the common denominator for all of these new networks.
Apple managers would have us believe that if we are not buying the product, we are the product. It's clever, yet wholly self-serving given its Chinese business. It's also part of a larger fear, uncertainty and doubt -- known in the industry as FUD -- campaign to malign fellow network competitors.
It is noteworthy that Onavo, the Facebook virtual private network app at the center of the current dustup with Apple, has been available as a free download on the App Store for several years. In exchange for protecting the identity of users as they browse, Onavo collects information about browsing habits and interactions with other apps.
As bad as it seems, it's not like Facebook is looking the other way while a totalitarian regime adds users' entire digital life to a database to determine if they are eligible for promotions, mortgages or travel.
I own shares of Apple.