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Apple apologizes to Chinese consumers, revamps service

A visitor tries an iPhone at an Apple store in Beijing March 28, 2013. REUTERS/Kim Kyung-Hoon
A visitor tries an iPhone at an Apple store in Beijing March 28, 2013. REUTERS/Kim Kyung-Hoon

By Terril Yue Jones and Poornima Gupta

BEIJING/SAN FRANCISCO (Reuters) - Apple Inc Chief Executive Tim Cook apologized to Chinese consumers on Monday and altered iPhone warranty policies in its No. 2 market after more than two weeks of condemnation in the state-run media of its after-sales service.

From China Central Television to the People's Daily newspaper, government-controlled media outlets bashed the world's largest technology corporation for its "arrogance," protesting among other things that its current one-year service warranty was far shorter than in other markets.

Apple, which initially dismissed those criticisms, on Monday promised to overhaul its consumer practices. Cook has previously said the world's second-largest economy is a crucial market for the iPad-maker.

"We are aware that owing to insufficient external communication, some consider Apple's attitude to be arrogant, inattentive or indifferent to consumer feedback," Cook said in a letter written in Chinese on the company's local website. "We express our sincere apologies for causing consumers any misgivings or misunderstanding."

Cook's apology, unusual though not as rare as during his predecessor Steve Jobs' tenure, highlights the importance of the market for Apple.

The country is typically the brightest spot in Apple's quarterly financial statements. Revenue from Greater China -- which includes Taiwan and Hong Kong -- totaled $7.3 billion in its fiscal first quarter, up 60 percent from a year ago.

Apple will begin detailing quarterly sales results from the region starting this month.

Cook said in the lengthy letter that Apple has "much to learn about operating and communicating in China."

China has long been a prime market for Western corporations hoping to capitalize on its growing economic power and increasingly affluent middle-class. Still, companies face many pitfalls operating in the country.

'MUCH TO LEARN'

Since it joined the World Trade Organization and opened up its markets, many have run afoul of perplexing and sometimes arbitrary local regulations, fickle consumer sentiment - and occasionally capricious media coverage. Regardless, many corporations view the country as prime expansion territory as growth slows in the developed world.

Apple is hardly the first Western brand-name to come under fire in the media for a variety of real or perceived missteps, or the first to alter its policies.

In 2012, CCTV spotlighted McDonald's Corp and Carrefour SA for minor food safety violations. The companies were forced to apologize and their shares slumped as China's army of half a billion microbloggers unleashed their anger online.

Successful foreign brands like Wal-Mart Stores and Gucci have also come under fire for various product and labor issues. More recently, KFC parent Yum Inc issued a mea culpa in January for its handling of reports that chicken from some of its suppliers contained excess amounts of drugs and hormones. It subsequently outlined how it would improve food safety and quality control.

The targeting of Apple may be part of a policy that China has adopted to favor homegrown companies, said Robert Atkinson, president of the Information Technology and Information Foundation.

"This does seem to be part of a growing strategy by the Chinese government to criticize and single out for unfair treatment leading foreign companies in China," he said.

And it is happening as the U.S. government calls out China "on their egregious economic and trade practices, including cyber attacks," he added.

Apple has been expanding in presence in China slowly but steadily, especially through increasing its retail footprint. Its iPhones, iPods and computers are considered aspirational products in China with cache among the countries growing middle class.

Criticism of Apple began on March 15 with the broadcast of an annual show on CCTV about consumer safety and rights, which has become an annual ritual targeting foreign, along with Chinese consumer firms.

The program assailed Apple for its after-sales service, including Apple's failure to offer new replacement iPhones with a one-year warranty in the case of major repairs.

Now, Apple will offer full replacements of iPhone 4 and 4S instead of major repairs, adding a one-year warranty starting from the date of replacement.

It will provide simpler and clearer explanations of warranties on its website and allow customers to offer feedback directly, Cook said. The company will also provide refresher training to service providers to explain the new warranty policy, he added.

The iPhone 5, the latest model, already carries a similar warranty to the new iPhone 4 and 4S coverage.

CCTV's show this year became the subject of online ridicule over claims the network paid celebrities to post micro-blog comments against Apple. Thousands of Chinese have come to its defense online, criticizing Chinese firms as being the ones that lack transparency and consumer trust.

(Additional reporting by Edwin Chan; Editing by Jane Baird, Alden Bentley and Leslie Gevirtz)

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