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Apple Denies China Assertions on IPhone as Security Risk

By Jeff Green
July 13, 2014 12:24 AM EDT 99 Comments
Personal location information is stored only on the iPhone, protected by a user password, and isn’t available to third parties, Apple Inc. said.
Photographer: Tomohiro Ohsumi/Bloomberg
Personal location information is stored only on the iPhone, protected by a user password, and isn’t available to third parties, Apple Inc. said.

Apple Inc. (AAPL) assured Chinese customers that location tracking on its iPhone can’t be used to identify activity of individuals, a day after China’s state-owned television broadcaster said the software poses a security risk.

The iPhone function can collect data and may result in a leak of state secrets, China Central Television reported on July 11, citing Ma Ding, head of the online security institute at People’s Public Security University of China.

In response, Apple said on its Chinese website that it has never “worked with any government agency from any country to create a backdoor in any of our products or services.”

The tracking function is used to speed up applications designed to show iPhone users their own location or assist in driving directions to avoid traffic. It can be turned off, Apple said in its statement. Personal location information is stored only on the phone, protected by a user password, and isn’t available to third parties, the company said.

“We appreciate CCTV’s effort to help educate customers on a topic we think is very important,” the company said in the statement, according to an English translation provided by Apple. “We want to make sure all of our customers in China are clear about what we do and we don’t do when it comes to privacy and your personal data.”

Hacking Allegations

Apple, Microsoft Corp., Google Inc. (GOOGL) and Facebook Inc. (FB) are among U.S. companies criticized by state-run media amid an escalating spat over cyberspying and hacking allegations. The tensions follow indictments by U.S. prosecutors of five Chinese military officers for allegedly hacking into the computers of American companies and last year’s revelations by former security contractor Edward Snowden of a National Security Agency spying program.

Last month, a commentary on the microblog of the People’s Daily newspaper said Apple, Microsoft, Google and Facebook cooperated in a secret U.S. program to monitor China.

CCTV, the national broadcaster, said a provincial government was told not to buy computers with Microsoft’s Windows 8 operating system. It quoted a professor calling the software a potential threat to China’s information security.

The report by CCTV on the iPhone came after China told its three state-owned wireless carriers to cut marketing expenses because they overspent on subsidies and advertising for devices such as the Apple handsets, people familiar with the matter said.

China Mobile Communications Corp. (941) began selling the iPhone in January after six years of negotiations. Discounts for the Apple device are one reason why subsidies on all phones will rise 29 percent to 34 billion yuan ($4.4 billion) this year, Chief Financial Officer Xue Taohai said in March. The company hasn’t received formal notification of the SASAC policy, said Rainie Lei, a Hong Kong-based spokeswoman for the listed unit, China Mobile Ltd.

A reduction of subsidies would make high-end devices like the iPhone or Samsung Electronics Co.’s Galaxy S5 more expensive in the world’s largest smartphone market. The cut would benefit domestic phone makers including Xiaomi Corp., Lenovo Group Ltd. and Coolpad Group Ltd., which offer less costly models.

The three state-owned carriers are China Mobile Communications, China United Network Communications Ltd. and China Telecommunications Corp. (728) Each has a Hong Kong-listed unit.

Apple, based in Cupertino, California, posted March quarter sales of $9.3 billion from the greater China area, a region that includes Hong Kong and Taiwan, according to data compiled by Bloomberg.

Apple shares were little changed at $95.22 on July 11 in New York.

To contact the reporter on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net Stanley James

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