Apple, Inc. (NASDAQ:AAPL) has found a lot of success in China of late, as sales of iPads and iPhones have exploded there as the country embraces some limited capitalism in its economy. Bu with Apple’s rare earnings miss in its more recent quarterfly report, and the much-anticipated launch of iPhone 5 in the fall, China is being looked upon as a key component in whether Apple right itself and makes the recent earnings report an anomaly, or the start of a trend.
So it really doesn’t do well for Apple to run into a possible regulatory problem in its largest emerging market. But two different stories out of China are reporting that Apple, Inc., has been running afoul of the country’s strict consumer-protection laws, and that may seriously affect the marketplace when the iPhone 5 launches, unless Apple addresses the issues.
Both stories focus on the southern province of Guangdong, where the local consumer advocacy group has alleged consumer-protection violations by Apple in regards to how the company handles after-sale service – specifically, the repair of iPhones. Apple is alleged to have replaced damaged parts in iPhones with other used or remanufactured parts and in some cases did not renew a warranty when the iPhone malfunctioned within the warranty timeframe.
Chinese consumer laws require companies to fix products using brand-new parts, and when a product is repaired within the warranty period, that warranty is to be renewed with the installation of the brand-new parts. Word is that Apple, Inc., is working with all parties involved to modify their after-sale service standards to be in compliance. However, some local China legal analysts have indicated that the changes being made won’t be enough, and Apple will have to do more or risk losing China as a marketplace for its iPhone 5.
This is something to which market-watchers will pay attention as the i5 launch nears. Will Apple be too arrogant to truly fix the issues, or will it acknowledge its need for a robust China market?