What’s with all these Apple R&D centers in Asia?

Beijing and Shenzhen. Shanghai and Suzhou. One in Hyderabad. Three in Jakarta.

Mark Hibben touched a raw nerve in a post Saturday on Seeking Alpha. Surveying Apple’s recent press releases, he counted eight new R&D centers built or promised in major Asian cities—four in China, one in India, three in Indonesia.

Breaking into new markets in Asia is never easy, and for multinationals it often requires greasing the local wheels of power. What’s paying off for Apple, Hibben says, is something he calls “constructive engagement.”

This has consisted of dialog with political leaders and a certain amount of judicious largess in the form of local investments.

Is Apple’s “largess” the usual wheel-greasing or something different? Both sides are well represented in Hibben’s comment stream, but “Wiseyou”—a regular who identifies him/herself as a Rutgers University professor—brings facts to the argument:

While it may make the provincial governments happy to have Apple investing in their local economy, this is not fluff research…

Apple recently announced that Siri can speak Shanghainese. Apple must have put a lot of effort into teaching Siri Shanghainese. If Siri learns to speak Cantonese, this would boost sales in Hong Kong and Southeast Asia where many people still speak Cantonese. Likewise, it Siri speaks Fukienese, it would be more popular along the southern coast and in Taiwan. In my opinion, one reason why many Chinese don’t use Siri is because it is simply not that great in recognizing Pudonghua and its many accents. Many of the accents really stem from the dialects. By training Siri in the various dialects, Siri may be able to recognize and speak the Pudonghua better. I believe that more Chinese would use Siri when it gets as good in Chinese as it is in English.

Character recognition is actually quite good and accurate on the iPhone but they need to do it for the Apple Watch. The Apple Watch face is actually just the right size to write a character and Chinese characters take so little space that the watch is not a bad place to so Chinese messages, aphorisms, and tweets.

Finally, a lot of work needs to be done to improve GPS navigation in China. Since Apple is in China and Google is not, this is one place where Apple Map can beat Google. There are so many new stores, services, gas stations, and restaurants in China, this represents a huge advertising market for Apple.

So, there is good reason for Apple to invest in research and development in China.

My take: Apple, as usual, is playing the long game.

8 Comments

  1. Gianfranco Pedron said:

    As a side benefit, the thousands of people working in those R&D centers will be better able to afford Apple products.

    1
    March 19, 2017
  2. Richard Wanderman said:

    I agree PED. Maybe a few different long games.

    0
    March 19, 2017
  3. George Providakes said:

    I think the reasons given are good, but my guess will be an emphasis in app development and support for developers. The best long term strategy is to create a vibrant, successful, and large community of developers building localized apps for these countries.

    Yeah this seems a bit off the traditional view of R&D, but it’s strategic value for is to engage these countries populations in Apple Apps and associated Services. For the countries, it’s a great boot strap for economic development, modernize country, and foster a high tech entrepreneural culture and business support.

    So yes, Apple plays the long game well, but more importantly it creates a win win situation for itself and the hosting countries.

    You bambozzle with appearance of investment, but in the long run this reveals itself to the bambozzlers disadvantage, but Apple sees the pie growing bigger for everyone not merely grabbing bigger share. Investment in supply chain, environment, energy, supply chain employees, etc., pay off at grass roots and national levels as well as improving Apple’s reputation and business.

    Yeah, Apple gets beat up because it doesn’t always achieve its goals (noted above) but that is because we have high expectations and Apple does’ always succeed in meeting all them everywhere.

    Recall the narrative by NY Times regarding Apple suppliers employees being treated poorly (and there were some isolated cases to point at), but when given the choice the workers overwhelming prefer working on Apple products and would quit rather than work on another companies products due to pay and working conditions.

    3
    March 19, 2017
    • Fred Stein said:

      Agree – Apps, long game, etc.
      The talent pool in these regions, where Apple plans R&D centers, is vast, and highly motivated. They’re learning AI, Deep Learning, Neural Networks, etc.These skill are so highly prized in Silicon Valley that some experts are getting 7 figure compensation. AR is another area. It’s all about building more value around iOS.
      Apple Pay and Maps, needs localization for basic and advance functions. And both can be fundamental for future service revenue and customer loyalty.
      For many in these regions, the SmartPhone is ‘it’, the one device that all must have.

      1
      March 19, 2017
  4. George Knott said:

    Great article Phillip.

    0
    March 19, 2017
  5. David Drinkwater said:

    I thank Horace Dediu for explaining that Asymco stands for asymmetric competition. In China and India, we have a case of asymmetric population:

    Rank Country or area Population (1 July 2016)
    — World 7,432,663,275
    1 China 1,382,323,332
    2 India 1,326,801,576
    3 United States 324,118,787

    That’s a huge long game to play for.

    2
    March 19, 2017

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