Apple Adds China Telecom to Host User Data Amid Security Concern

Aug. 15 (Bloomberg) -- China Mobile will cut $2 billion from the subsidies that help consumers pay for smartphones from Apple and Samsung. Former Google China Executive Crid Yu and Bloomberg Contributing Editor Paul Kedrosky discuss on “Bloomberg West.” (Source: Bloomberg)

Apple Inc. (AAPL) is shifting mainland Chinese users’ data to servers run by China Telecom (728) Corp., a move that may address concern by government officials that the information could be a security vulnerability.

The data is encrypted, so state-controlled China Telecom, the country’s third-largest wireless carrier, won’t be able to access it, Cupertino, California-based Apple said in an e-mailed statement. Apple’s iCloud service lets users store contacts, e-mails, photos and other personal information on external systems they can access virtually.

“Apple takes user security and privacy very seriously,” the company said. “We have added China Telecom to our list of data center providers to increase bandwidth and improve performance for our customers in mainland China.”

The maker of the iPhone and iPad is counting on more growth in the world’s most populous nation, even as Chinese government scrutiny of U.S. technology companies has intensified. Sales from the Chinese region, including Hong Kong and Taiwan, made up 16 percent of Apple’s $37.4 billion in revenue last quarter, according to data compiled by Bloomberg. IPad sales in the country increased by 51 percent and Mac sales by 39 percent, Chief Executive Officer Tim Cook said July 23.

Photographer: Nelson Ching/Bloomberg

Wang Xiaochu, chief executive officer of China Telecom Corp. Ltd. Close

Wang Xiaochu, chief executive officer of China Telecom Corp. Ltd.

Photographer: Nelson Ching/Bloomberg

Wang Xiaochu, chief executive officer of China Telecom Corp. Ltd.

Apple has joined a number of U.S. technology companies excluded from some state purchases as tensions between the countries escalated over assertions of hacking and cyberspying. State-run China Central Television last month questioned the security of Apple products, reporting that iPhone software may result in the leak of state secrets. Apple rejected those claims.

The government omitted 10 Apple products, including iPads and MacBook laptops, from a procurement list distributed in July, according to people familiar with the matter. A separate procurement list includes some Apple computers that departments can continue to buy on a smaller scale, defined as purchases totaling less than 1.2 million yuan ($195,000), according to a state purchasing website.

To contact the reporter on this story: Jing Cao in New York at

To contact the editors responsible for this story: Pui-Wing Tam at Crayton Harrison, John Lear

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