Apple is navigating a perfect storm as it enters the long runway to its iPhone 16 and iOS 18 releases in the fall. A new report has just made this worse, highlighting Apple’s most surprising decision yet, and casting doubt on what we’ve been told.
This is already providing a difficult year for Apple. A hard-hitting report, published this week, will now make that worse, casting serious doubt on what’s behind the major RCS u-turn that had been presented as a cross-platform iMessage/Android concession, and—by many—as a sop to to secure a reprieve from Europe’s DMA.
So, what’s Apple’s problem—in short, China.
We have seen countless recent headlines (1,2,3) on iPhone sales slumping across the huge Chinese market, how these impact Apple’s results, and worse, what’s next from China’s homegrown OEMs, the biggest of which—Huawei—is turning its back on the global (meaning US-led) Android ecosystem and going it alone.
Apple analyst Ming-Chi Kuo warns that iPhone sales in China have “continued to decline year-on-year,” this despite “price cuts at the beginning of the year.”
This week, Apple has (unsurprisingly) won a DMA reprieve for iMessage. Unlike WhatsApp, it will not be forced to open up through so-called interoperability to other messaging platforms. iMessage’s walled garden remains intact. Most reports suggested its RCS u-turn was heavily driven by DMA. But not so fast.
Yes, Europe is important. But China is more important.
“The European Commission had nothing to do with Apple’s reversal on supporting RCS,” John Gruber claimed in his report on February 16. The reason, he said, was much more likely a Chinese government proposal, published last year, that mandates RCS for any 5G smartphone registered for sale in the Chinese market.
RCS is known as 5G Messaging in China. As early as 2020, the Chinese government and telecoms ecosystem started pushing RCS as a critical part of the country’s 5G strategy. But last year, China’s Ministry of Industry and Information Technology went further, proposing that RCS be made mandatory for phones sold in country.
The MIIT’s report was addressed to “all relevant mobile phone manufacturers,” and warned that “in order to further strengthen the cooperation of the terminal network and help the scale of 5G messages… devices [will] need to support 5G messages.”
Manufacturers would be further instructed to “standardize the interface display of 5G messages, and significantly distinguish 5G messages from ordinary short (colour) information and other types of information. The content and form of 5G message display shall not be changed without authorization, and the main body of information release and transmission channels shall not be confused.”
You can read a pretty good translation of MIIT’s PDF here.
Put simply, it mandates RCS on any 5G handset registered for sale on a Chinese network, and standardizes RCS to ensure consistency across networks and devices.
“The surprisingly-commonly-held assumption that the European Commission forced Apple’s change of mind on RCS is just lazy thinking,” Gruber says, arguing that RCS does nothing to comply with the DMA’s push to open up secure messaging “gateways.” Apple treats SMS differently to iMessage—blue versus green bubbles, which is Google’s primary complaint, and it intends to do the same with RCS.
“But then why did Apple do a 180° turn on RCS?” he asks. “I can’t say for certain, but after spending the last few months periodically poking around the trees inhabited by little birdies, I do have good news for fans of coercive government regulation. Apple’s hand was effectively forced. But by China, not the EU… The little birdies I’ve spoken to all said the same thing: iOS support for RCS is all about China.”
If Gruber is right, Apple’s iOS 18 decision on RCS has been heavily influenced by an iPhone 16 Chinese sales decision, more than anything else. The China angle on RCS isn’t new. But it didn’t really get the attention that it warranted last year. Last year wasn’t such a difficult one for Apple in China.
Viewed now, it provides a different steer on Apple’s adoption of RCS and the DMA concession. And it’s especially interesting given that US regulators seem to be looking into iMessage’s walled garden, which is actually all about US Gen-Z users and the social distinction that blue bubbles deliver, and has nothing to do with Europe.
Gruber is right when he says that “China, unlike the EU, seemingly knows how to draft effective regulations to achieve specific goals.” But the same is true of the US.
All of which brings us to a perfect storm for Apple in 2024. iPhone sales under pressure. A Chinese market becoming more competitive, with flagship new releases from Huawei above all due later in the year. A new battlefield closer to home, with Google pushing its AI lead over Apple as an Android differentiator. And RCS.
Apple has to navigate this very tricky path with its iPhone 16 and iOS 18 decisions. Not only does it need to bat away Google’s fast-coming AI upgrades on Android with its much talked about in-house Gen-AI, but it needs to do that while maintaining its privacy on-device ethos. It also needs to bat away Huawei’s new surge, which is the greatest threat it faces in its most critical swing market.
As I first reported in early 2020, “Huawei wants to carve a third-way, an alternative to both iOS and Android. But in doing so, the company finds itself much, much closer to Apple’s model than to Google’s. Huawei’s plan… is arguably be just like Apple.”
This is now coming to fruition. Huawei wants to be China’s Apple, not China’s Google, and it has the whole Apple integrated ecosystem in mind.
China is the Apple angle we need to watch—more critical than Google. More critical than first-off iOS AI releases. More critical than camera specs and titanium finishes. iOS 18 and the accompanying iPhone release are being touted as the biggest in years—maybe so. But the wider stakes for Apple, it seems, just keep getting higher.
I have approached Apple for any comment on the China/RCS report.