Apple will invest $1 billion annually in films to break into theatres.
Apple Inc. AAPL.O said on Thursday that it had invested $1 billion in Didi Chuxing, a Chinese ride-hailing service. Apple Chief Executive Tim Cook claimed that this investment will help the business better understand the crucial Chinese market.
Although the iPhone industry that pushed it to record profits shows signs of ageing, the tech giant's unique investment provides it with a foothold in two expanding waves of technology: the sharing economy and vehicle technology.
Cook is visiting China this month as Apple attempts to revive sales there, where it has been under increased pressure from regulators.
In a move that coincides with expanding partnerships and cross-investments between automakers and technology firms, Apple is now aligned with Uber Technologies Inc.'s main Chinese competitor. For instance, General Motors GM.N recently acquired Cruise Automation, a provider of autonomous driving technology, and has invested in Lyft, a ride-sharing service based in the United States.
In an interview, Cook stated that he saw further prospects for cooperation between Apple and Didi Chuxing.
"We are investing for a number of strategic reasons, including the opportunity to learn more about certain China market sectors," he added. Of course, we think it will eventually provide a good return on our investments as well.
According to an announcement from Didi Chuxing, formerly known as Didi Kuaidi, this was the single largest investment company has ever received. The business, which has raised several billion dollars in the past, rules the Chinese ride-sharing industry. The business claimed to have over 87 percent of the private car-hailing market in China and to complete more than 11 million journeys per day.
According to a source familiar with its current investment round, Didi Chuxing is worth at upwards of $20 billion, but the business has been burning through billions fighting Uber for market dominance in China.
Experts claim that the transaction shows a possible commercial diversification strategy for Apple as iPhone sales plateau. According to Moor Insights & Strategies analyst Patrick Moorhead, Apple has stressed the growth of its income from services like Apple Music and Apple Pay, a strategy that the ride-sharing investment looks to support.
It's all starting to make sense now that they've dropped so many hints about just the service industry and their future goals, he added.
Investors are anxiously awaiting news of Apple's entry into the car industry. According to individuals who spoke to Reuters, Apple has employed a wide spectrum of automotive specialists and is considering developing a self-driving vehicle.
Cook stated that Apple's CarPlay technology, which connects iPhones to vehicle infotainment systems, remained focused on the in-car experience.
We will have to wait to see what the future will hold since that is what we already do in the auto industry, he added.
Although Apple's sales in China declining due to the country's sluggish economic expansion, Cook insisted he was still optimistic about the region.
Cook stated that "(the transaction) represents our delight about their expanding business... and also our sustained long-term trust in China's economy."
Compared to other American internet businesses, Apple has better connections with the Chinese government. Yet, officials recently shut down Apple's online book and movie services, raising fears among investors. According to Creative Strategies analyst Ben Bajarin, the real benefit of Apple's investment in Didi may lie in strengthening that connection.
In addition to assisting Didi in developing a ride-sharing network, he claimed that this was also about conveying signals about their level of commitment to that nation.
In Beijing's effort to reorient the economy towards higher-value services, Didi Chuxing serves as the face of Chinese technology.
Executives from Didi Chuxing had meetings with a number of China's senior officials, notably President Xi Jinping in December.
The president of Didi, Jean Liu, is a political buddy whose father is Liu Chuanzhi, the man behind the politically linked Lenovo Group Limited 0992.HK in China.
When asked if Didi Chuxing will improve Apple's government relations in China, she responded, "There are a number of things that we can engage on jointly."
