Apple: iPhones still on sale in Beijing as company appeals patent ruling

For Apple, a week that started off with a triumphant display of new features of its operating systems is ending with the world’s most-valuable company embroiled in a dispute over selling iPhones in Beijing.

Before almost all Americans were awake Friday, the Beijing Intellectual Property Bureau told Apple it had to stop selling the iPhone 6 and iPhone 6 Plus in the city because the smartphones violated a patent held by Chinese phonemaker Shenzhen Baili. The dispute, which has been going on for more than a year, is over a patent covering the external design of Shenzhen Baili’s 100C phone.

However, Apple has appealed the order to halt iPhones sales, and said in a statement, “As a result, the order has been stayed pending review by the Beijing IP (intellectual property) court.”

Apple said that during the appeal process, its iPhones, including the iPhone 6s, iPhone 6s Plus and iPhone SE, as well as the iPhone 6 and iPhone 6 Plus, “are all available for sale today in China.”

Gene Munster, an analyst who covers Apple for Piper Jaffray, said the clampdown on the two iPhones in question is more symbolic than anything, due to the timing of the move and when Apple is likely to release the next iteration of the smartphone.

“The bottom line is that the ruling is unlikely to have any impact on numbers because the iPhone 6 and 6 Plus model will be discontinued in September,” Munster said. “Even if the device were banned through all of China for the September quarter, it would likely be no more than a 2 percent to 3 percent headwind,” on Apple’s sales during the period.

The importance of the Chinese market to Apple can’t be underestimated. China surpassed Europe as Apple’s second-largest revenue region last year, and the country trails only the Americas in terms of sales. When Apple reported its fiscal second-quarter results in April, revenue from China totaled $12.5 billion, compared to the $19.1 billion that came from sales in the Americas.

However, sales in China fell by 26 percent from a year ago, and the performance of the country was one of the main reasons given for why Apple reported a decline in year-over-year sales for the first time since 2003.

UBS analyst Steven Milunovich agreed with Munster about the Chinese agency’s ruling on Apple’s immediate business, but said the decision highlights the tricky situation Apple faces when it comes to doing business in China. An example of that came earlier this year, when Apple had to shut down its iBooks store and sales of iTunes movies¬†due to new Chinese laws against the publishing of content by foreign companies.

“China is an existential threat to Apple in that the government could decide to favor local suppliers,” Milunovich said. “However, we view this as a long-term risk.”

In addition to trying to boost its own sales in China, Apple has invested in other opportunities in the country. In May, Apple made a $1 billion investment in ride-sharing company Didi Chuxing, which is considered to be the top rival to Uber in China.

Photo:¬†The Apple logo displayed on a screen at Apple’s annual Worldwide Developers Conference presentation at the Bill Graham Civic Auditorium in San Francisco on Monday.
Apple said its iPhones were still on sale in Beijing pending an appeal of a Chinese ruling that some iPhones violated the patents of a Chinese smartphone maker.

 

 

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