Thanks to AI, Apple's China problem is only getting worse

For years, Tim Cook insisted Apple could change China from the inside. Instead, China changed Apple.

The latest evidence? Apple spent billions developing cutting-edge electric vehicle battery technology with Chinese automaker BYD, only to watch its innovations become the cornerstone of BYD's rise to global electric vehicle dominance. Apple walked away with nothing. China walked away with everything.

This isn't just another story about corporate research and development gone wrong. It's a cautionary tale about how even America's most valuable company has become trapped in China's web of technological control — and how that web is about to tighten even further.

The battery partnership reveals a familiar pattern: American innovation flows into Chinese hands, strengthening Beijing's technological ambitions while weakening America's competitive edge. 

But BYD isn't the real story here: It's about how deeply Apple has become entangled with the Chinese Communist Party's strategic objectives. The company that once removed the Dalai Lama from its ads to appease Beijing now faces an even more consequential test: artificial intelligence.

As Apple races to roll out Apple Intelligence globally, it faces a stark choice in China. The country's strict AI regulations require companies to hand over their algorithms for government review and ensure their AI systems "adhere to the correct political direction." For Apple, this means either walking away from its largest overseas market or creating a separate, censored version of its AI assistant that advances the Chinese Communist Party's surveillance and control objectives.

History suggests Apple will choose accommodation. The company already stores Chinese users' iCloud data on state-owned servers, removes apps at the government's behest and blocks VPN services that could help users evade censorship. When China claimed Apple was a national security threat in 2014, the company didn't push back — it handed over its encryption keys.

The cost of resistance is simply too high. China accounts for one-fifth of Apple's sales and produces 95 percent of iPhones. When CEO Tim Cook recently spent $40,000 to dine with President Xi Jinping, it wasn't just courtesy — it was a necessity. Apple's dependence on China has become so profound that it ranks as the third most China-dependent major U.S. company.

Yet this accommodation strategy isn't working. iPhone sales in China fell 19 percent this year as consumers shifted to domestic brands like Huawei. The Chinese Communist Party's demands, meanwhile, only escalate. Each concession Apple makes doesn't buy breathing room — it only increases Beijing's leverage to demand more.

This dynamic exposes the fundamental flaw in Cook's famous defense of operating in China: "You show up and participate ... nothing ever changes from the sideline." The reality is that Apple's participation hasn't changed China's system — the system has changed Apple.

The implications extend far beyond one company's bottom line. As artificial intelligence reshapes the technological landscape, America's leading tech companies face a choice between their values and their profits. Apple's trajectory suggests many will choose profits, inadvertently strengthening an authoritarian regime's capability to control information, monitor its citizens, and advance its technological ambitions.

The solution isn't simple, but it starts with recognition: America's economic engagement strategy hasn't made China more free — it's made American companies less so. Until policymakers address this reality with stronger guardrails around technology transfer and data sharing, companies like Apple will remain caught between Chinese demands and American interests. And increasingly, China's demands will win.

Geoffrey Cain is the policy director of the Tech Integrity Project and author of “The Perfect Police State: An Undercover Odyssey Into China's Terrifying Surveillance Dystopia of the Future.”