With Russia's attacks on Ukraine intensifying, I expect Apple to join the list of companies leaving the Russian Federation. This reflects the company's commitment to environmental, social and corporate responsibility.
Will Apple leave Russia?
I have been thinking about the implications of such a move by Apple ever since Ukrainian Deputy Prime Minister Mykhailo Fedorov urged it to stop offering products and services in Russia. At first I thought it might deprive the Russians of essential tools they could use to oppose their rule. My thinking has evolved, though Apple will also have a duty of care to its Russian employees, who could face retaliation if the company goes out of business. I am not going to delve too deeply into the politics of current events. Newsweek, Slate, and others do a much better job of this, but I'll try to explore what the meaning might be.
First of all, what is Russia for Apple?
Russia is (or was) the XNUMXth largest economy in the world. As we know, Apple is still looking for markets for its future growth, and although the Russian market was small, it was generating business and Apple has very loyal customers there.
Apple's business in Russia has grown significantly in recent years. Apple's chief financial officer, Luca Maestri, told us that the company was "very pleased" with the results for the third quarter of 21. The most recent data I've seen suggests that Apple's business in Russia generated around $2500 billion. in 2020, or less than 1%. of Apple sales.
Apple probably gets more revenue from selling Apple One subscriptions internationally. Given the cost of these sales, they are unlikely to contribute much to the company's profits.
What is the business environment?
Apple recently complied with a government mandate to open offices in Russia. One of the reasons it was required to do so was so that it could continue to offer online services there. The company also stores certain user data on servers located in Russia. This probably includes iCloud user data.
Apple is not the first smartphone brand in Russia; it is Samsung, according to Burga, closely followed by Xiaomi. Third, iPhones account for about 15% of smartphones sold in Russia in Q2021 45, but they also account for about XNUMX% of smartphone sales. Income may matter less, given the falling value of the ruble.
When a Russian consumer purchases an iPhone, they will see a prompt during installation encouraging them to install software developed in Russia. This was required by Russian regulators and was a step Apple originally opposed but eventually agreed to take.
When it did, the company struck a compromise that means customers can choose or reject which Russian apps they need to install, rather than forcibly pre-installing them.
In particular, other smartphone manufacturers (including Samsung) have not reached the same commitment, meaning that most non-Apple devices sold in Russia come with state-approved software pre-installed. This is the environment in which Apple does business.
What happens when you leave?
But what if Apple leaves the market? A recent example of what happens when financial sanctions are applied: Russian commuters hoping to take the metro find that they can no longer use Apple Pay, Samsung Pay, or Google Pay to pay for the metro. This probably affects the 20% of Russians who use Apple Pay.
As for the supply chain, it seems unlikely that Apple would trust Russian component suppliers. Most of their manufacturing partners are located in the APAC/US regions. The conflict is likely to create disruption to the supply of raw materials with or without sanctions, but perhaps these challenges can be resolved.
There is also the importance of getting out of the market for Apple customers there.
Protect Apple customers
When it comes to using big-name services like Apple and iCloud, it's arguable that brave Russian peace protesters should (and probably already have) embraced more secure cross-platform communication tools like Signal or Briar. They should also disable server-based services like iCloud to protect their privacy and go deeper to secure all the privacy features available on their device.
Of course, fully securing your iPhone degrades the features and services it provides. In its most secure version, an iPhone won't use Apple services and certainly won't store data in iCloud.
iCloud is not encrypted and Apple will share details of data stored on the service with law enforcement in all countries where it operates. Since most dissidents will understand this, Apple's services cannot logically be considered essential to Putin's anti-war protest effort.
It seems relevant to note that Russian government device requests for customer data have risen from fewer than 200 in 2013 to more than 2000 in July-December 2020, according to Apple's own Transparency Report. Apple is not complying with all of these requests, and Russia is not making as many requests as the United States.
What happens next?
I don't think Apple's business will be deeply affected if it decides to pull out of Russia. Globally, I imagine Apple and others are already feeling the decline in consumer confidence, in comparison to which the Russian company may seem modest.
It is a tragedy that we have reached a point where there are no right answers, and even the worst answers seem terrible.
As the invasion began, Apple CEO Tim Cook tweeted:
“I am deeply concerned about the situation in Ukraine. We are doing everything we can for our teams there and will support local humanitarian efforts. I think of the people who are currently in danger and I join all those who cry for peace.
Meanwhile, in Ukraine, developers, including Reddit, MacPaw, Setapp, Readdle, and others, continue to work hard to protect their own people.
As it works 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 deteriorate.
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