WeChat support set to continue but 'Apple Tax' a bone of contention

Apple is likely to keep WeChat on its upcoming iPhone 16, which may come as a relief to 1.3 billion active users of China's most popular social networking app. However, there is an ongoing debate about how much WeChat should pay the phone maker.

The so-called "Apple Tax," which refers to the up to 30 percent commission fee that Apple imposes on transactions made through its App Store and in-app payment, will remain a contentious issue.

The 30 percent rate has been a point of contention between Apple and major tech companies and organizations including Epic Games, Europe Union and now Tencent-owned WeChat.

Choice between iPhone and WeChat?

Apple is trying to pressure WeChat into blocking a payment loophole for in-app purchases. If app owner Tencent fails to comply, Apple says it would block essential updates, according to recent media reports.

WeChat allowed mini-app developers to include links to external payment services, which, as Apple said, contravened the terms and conditions of App Store. Tencent, which didn't monetize through the mini-program business, has refused to block this for the industry's "sustainable and fair" development.

Then tags "#AppleRespondsToiPhone16NotSupportingWeChat" and "#WhatIfAppleRemovesWeChat" trended on Chinese social platform Weibo this week, triggering widespread speculation among users in China. One comment was that people have to "make a choice either Apple or WeChat."

Both Apple and Tencent hadn't made an official comment on the issue until Wednesday but most industry insiders expected the choice or no support for WeChat to be "unlikely."

"Chinese consumers can live without iPhones; they can't live without WeChat," said industry media 9to5Mac, which said both Apple and Tencent know that.

One possible solution proposed online was to switch to Huawei or other Andorid models from Apple to continue using WeChat. Something that Apple can't ignore as it bets on the new iPhone 16 and AI services to reverse declining market share in China.

The "Apple Tax" disputes

The "Apple Tax" has been a longstanding bone of contention between Apple and app developers worldwide. The fee structure has been seen as a barrier to the growth of local app ecosystems. Tencent, in particular, has been vocal about the issue, arguing that the high fees limit the potential for innovation and competition in the app market.

The "Apple Tax" reflects a broader tension in China between Apple's global business practices and the specific needs and expectations of Chinese customers and the industry.

In 2023, global "Apple Tax" income reached US$22.3 billion, with China contributing a quarter of it, according to researcher Sensor Tower.

Another dispute is the Apple's high commission rate in China, at 30 percent now compared with 17 to 27 percent in major economies. The rate for small business and new developers in China is 15 percent, compared to 10 to 12 percent in other regions.

Meanwhile, Apple is allowing some in-app links directing users to transactions outside the app in Europe and South Korea, which is strictly forbidden in China.

In Europe, Apple has adapted new App Store policies after facing law suits, fines and antitrust survey.

The Europe Union said the App Store terms prevented app developers from freely steering consumers to alternative ways to pay, making Apple the first tech firm to face accusations of breaching its new law known as the Digital Markets Act (DMA).

Earlier this year, the EU slapped Apple with a 1.8-billion-euro (US$2-billion) fine after similar findings in a probe launched in 2020 following a complaint from Spotify.

As for the future direction of Apple and WeChat in China, experts expected that the two sides will reach a consensus through negotiation.