Apple folds to China's demands (AAPL)

Apple Revenue, by Region

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Apple on Sunday announced the removal of several virtual private network (VPN) services from its app store in China, according to Reuters.

The Chinese government has been pressuring the company to ban all VPNs — which allow users to bypass China's heavily regulated internet — that aren't approved by state regulators. Apple's compliance is being criticized by some as bolstering China’s censorship efforts.

From Apple's perspective, the move is likely a gesture of good faith as it continues its efforts to maintain strong ties with China’s government, which has heavily restricted the ability of western technology companies to compete.

This is not the first time Apple has complied with China’s demands, which appear to contradict its stance in other markets. Earlier this month, the company announced plans to begin storing its Chinese users' data on servers run by a Chinese government-controlled company, The Australian reports. This could arguably give the government access to users’ personal information. Meanwhile, CEO Tim Cook has taken a hard line against sharing user data with the US government.

However, staying on the safe side of China’s increasingly strict regulatory body is likely integral to the company’s bottom line. China is Apple’s largest market outside of the US, accounting for over one-fifth of Apple’s total revenue in the 2016 fiscal year. Moreover, the country is also the largest source of iOS app revenue, according to App Annie. This is particularly important for Apple as it aims to expand its presence in the country, which the Chinese government must permit.

Google’s absence in China likely serves as a warning to other mobile and internet companies over the risks of disregarding the country’s requests. Although Google Play dominates Apple in terms of app downloads, the iOS App Store continues to derive greater revenue. This is likely not helped by Google Play’s absence in China since 2010. Apple could be concerned that it might receive the same fate if it gains the ire of China’s government.

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