Apple Denies Chinese Media Claim of iPhone Security Risk

The Report Alleged the Phone's Location-Tracking Could Result in Leak of State Secrets

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The mapping app on an iPhone 5.
The mapping app on an iPhone 5. Credit: Simon Dawson/Bloomberg
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Apple denied claims by Chinese state-owned media that its iPhones pose a security risk, saying location-tracking functions of its software can't be used to identify the activity of individuals in China.

China Central Television, or CCTV, had reported Friday that the software could result in a leak of state secrets. Influential CCTV has singled out major international corporations in the past, including Apple: Last year, after the broadcaster said iPhone warranties in China didn't meet its international standards, Apple CEO Tim Cook apologized to Chinese consumers and altered its policy.

In response to the new claims, Apple said on its Chinese website that the location-tracking feature is designed to speed up applications, with data stored on the phone and protected by a password. The company added that it has never worked with any government agency for access to its products.

U.S. technology companies are attracting scrutiny in China amid escalating tensions over cyberspying after five Chinese military officers were indicted for allegedly hacking into American companies. Apple, Google and Facebook have been criticized by state media since U.S. prosecutors announced the charges in May, which followed last year's revelations by Edward Snowden of a National Security Agency spying program.

"There has been a lot of back and forth lately between the Chinese and the U.S. governments on cyberspying and digital security issues," James Roy, a Shanghai-based analyst for China Market Research Group, said today. "A report on CCTV is not the same as a government ban on iPhones, but all the same this should be alarming for Apple."

The location tracking function isn't a default setting on Apple devices, which means users have to choose to enable it and the feature can be turned off, Apple said.

Singled out
"We want to make sure all of our customers in China are clear about what we do and we don't do when it comes to privacy and your personal data," Apple said in the statement. "We appreciate CCTV's effort to help educate customers on a topic we think is very important."

Apple, based in Cupertino, California, posted March quarter sales of $9.3 billion from the greater China area, a region that includes Hong Kong and Taiwan, according to data compiled by Bloomberg.

"Tracking of location features are almost standard across all major smartphone vendors/platforms globally," said Bryan Wang, China country manager for Forrester Research. "Apple was singled out by the state media CCTV probably in alignment with the critical negotiation timing between the U.S. and Chinese governments now, where a lot of things are on the negotiation table and also with consideration that Apple's China revenue is the largest among all U.S. companies."

Marketing spend
The CCTV report and other criticism by state media are not likely to impact iPhone sales, according to Sandy Shen, a Shanghai-based analyst with Gartner Inc.

"Many Apple fans probably don't care about this," Ms. Shen said. "Many mobile apps collect location data without any clearly stated policy as to how the data is being collected and used."

Last month, a commentary on the microblog of the People's Daily newspaper said Apple, Microsoft, Google and Facebook cooperated in a secret U.S. program to monitor China.

CCTV, the national broadcaster, said a provincial government was told not to buy computers with Microsoft Corp.'s Windows 8 operating system. It quoted a professor calling the software a potential threat to China's information security.

The report by CCTV on the iPhone came after China told its state-owned wireless carriers to cut marketing expenses because they overspent on subsidies and advertising for devices such as the Apple handsets, people familiar with the matter said.

Xiaomi, Lenovo
The carriers are China United Network Communications Ltd., China Mobile Communications Corp. and China Telecommunications Corp., which each have a Hong Kong-listed unit.

China Mobile, the world's biggest carrier, began selling the iPhone in January after six years of negotiations. Discounts for the Apple device are one reason why subsidies on all phones will rise 29 percent this year, China Mobile Chief Financial Officer Xue Taohai said in March.

A reduction of subsidies would make high-end devices like the iPhone or Samsung Electronics Co.'s Galaxy S5 more expensive in the world's largest smartphone market. The cut would benefit domestic phone makers including Xiaomi Corp., Lenovo Group Ltd. and Coolpad Group Ltd., which offer less costly models.

- Bloomberg News -