Apple's Tim Cook went on a major tour of India earlier this year and made several major investments in that country in the hopes of opening a wider door into that market. Cook met with Prime Minister Modi, but at the end of the day, Modi refused to announce that Apple could open stores in their country. It was almost insulting. In July the Indian Government was set to approve a plan allowing Apple to open its first flagship store. Yet there was never any follow through report on that debate to say that they actually approved it. A new Bloomberg report published today would strongly suggest that the Indian government was unable to grant Apple that favored status that they've been seeking to begin plans to open their first flagship store.
Bloomberg's latest report states that "India's relationship with the global tech industry has become increasingly fraught. This year alone, the government has banned Facebook's free web service and declined to exempt Apple from local sourcing rules and open its own stores. Now India could force companies to use technology cooked up in a government-funded lab."
The report further notes that the new Indian Government "initiative is part of a national biometric identity program called Aadhaar (Hindi for foundation). Millions of Indians use fingerprint and iris-scan authentication to access a range of public and private services that now includes banking. Failure to join the effort could limit the tech industry's access to a vast and growing market, but companies like Apple and Google are expected to resist opening up their phones and operating systems to the Indian registration, encryption and security technology.
A few weeks ago, government officials invited executives from Apple Inc., Microsoft Corp., Samsung Electronics Co. and Alphabet Inc.'s Google to a meeting to discuss embedding Aadhaar encryption into their technology. None of the companies will comment on what transpired at the gathering -- and Apple didn't show up at all" which is telling.
Ajay Bhushan Pandey, who runs the Unique Identification Authority of India and convened the meeting, says the industry representatives listened politely and were non-committal. But Pandey says he was frank about the government's position, telling his visitors: "Go to your headquarters and work this out so that we can have Aadhaar-registered devices."
India's biometric identity program is something of a path breaker. While the Federal Bureau of Investigation and U.S. VISIT visa program use similar technology to respectively track criminals and foreign visitors, no other country has taken the concept as far as India.
Tech companies, especially Apple, will probably also object to allowing the government to install its authentication software on their gadgets for fear of security breaches and hacking attacks.
Apple has strenuously resisted the U.S. government's demands to build a back door into its operating system so law enforcement can track the movements of terrorists and criminals.
On the other hand, foreign tech companies could be at a competitive disadvantage if they don't go along because Indian companies like Flipkart, Paytm and Snapdeal are already making their digital payments and services compatible with Aadhaar.
Samsung is the only global device-maker currently making an Aadhaar-friendly device, a tablet that's reportedly selling well.
Microsoft is said to be working with the government to link Skype with the Aadhaar database so the video calling service can be used to make authenticated calls.
Fresh from battles with Washington over encryption, Apple, Google and other U.S. tech companies are less likely to compromise without a fight. For more on this, see the full Bloomberg report here.
Tantamount to Market Protectionism
In April Patently Apple posted a report titled "As Promised, China begins Crackdown on Apple over Content under the Guise of Security." In that report we noted that China's government sent a letter to American companies asking them to ensure that their products are "secure and controllable," a catchphrase that industry groups said could be used to force companies to build so-called back doors — which allow third-party access to systems — provide encryption keys or even hand over source code.
Signing the new pledge could set a precedent of American tech firms openly cooperating with Beijing and enabling snooping on users. Conversely, a refusal could bring fresh restrictions or penalties for companies in China's enormous market."
Technically what India and China are waving in front of American tech companies is a protectionist flag under the guise of security. Forcing tech companies to give up their device source code or embed government security software in their device is a way to keep foreign competition out or to severely curtail their success against local companies who will be seen as "complying" with government rules and laws.
And yet Chinese President Xi Jinping recently blasted countries thinking of protectionist policies. Yet U.S. President Barack Obama cited it in an interview with CNN to describe the other world superpower China. It means a nation increasing anti-outsider trade regulation to ensure its own companies prosper. The report noted that "It's unlikely anyone outside China took him seriously."
As Apple's new markets are starting to push their own brand of protectionism, no wonder Presidential candidate Donald Trump is pushing for an American First policy and promising to rip up trade deals that were negotiated as one way deals favoring foreign countries. China, according to Donald Trump, manipulates its currency any time they feel that America is gaining an inch in their country.
In respect to India's latest demands, Apple didn't even attend the government's recent meeting that's pushing their new biometric security system and if this trend continues, Apple could very well be forced to rethink their push into the Indian market and rightfully so.