With an unprecedented $1-billion investment in Didi Chuxing, Apple didn't just buy a piece of China's biggest ride-hailing service. It also became a stakeholder in China's growing tech sector at a time when the Cupertino, Calif., company needs goodwill from Beijing more than ever.
In China, where Apple faces flagging sales and regulatory hurdles, Didi dominates a sector that could soon dwarf the ride-hailing markets in the United States and Europe combined. And it has, so far, outpaced its American rival Uber thanks to the backing of some of China's biggest Internet companies and state-owned investment groups.
The investment marked an unusual move for Apple, which tends to buy companies outright rather than invest. Its investment in Didi is its biggest-ever and its first since the turn of the century, according to Pitchbook, which tracks the flow of money to start-ups.
But these have been unusual times for a firm that until this week was the world's most valuable company by market cap.
Apple's quarterly sales recently dropped for the first time in 13 years, and its stock price, at about $90 a share, is the lowest since the summer of 2014. Late last month, Apple said that its sales in the "greater China region" – which includes mainland China, Taiwan and Hong Kong – plunged 26% in its fiscal second quarter, mainly because of the iPhone's fading luster. It marked the biggest percentage drop of any of Apple's geographic regions, a major blow considering China represents Apple's second-biggest market.
Add to that its regulatory headaches. Apple's iTunes Movies and iBooks services have been suspended in China since April -- indicative of a tightening political environment in which foreign firms and organizations have been subject to stricter scrutiny by authorities.
"We think the investment makes sense as it should help improve Apple's relationship with the Chinese government amid regulatory concerns," Angelo Zino, equity analyst at S&P Global Market Intelligence, said in a statement.
Despite its price tag, Apple's move could prove to be an investment with a low risk and a high reward. A billion dollars is loose change for a company sitting on $233 billion in cash and marketable securities. About 90% of that money is overseas and is subject to U.S. taxes if repatriated. Some investors have implored Apple to invest that war chest to diversify the company away from its slowing iPhone business. And if Didi takes off the way Uber has in other countries, Apple stands to gain a windfall.
"For Apple, this represents an investment of 0.6% of its net cash balance and two days of cash flow from operations," said Richard Windsor, an analyst at Edison Investment Research. "Consequently, if it all goes wrong, it will be virtually unnoticed. But given the current valuation of Uber, Apple could double or triple its money quite easily."
Amazon, Google, Facebook and General Motors would have loved to make an investment in Didi too, Windsor said. But Apple has been one of the only U.S. technology companies to be allowed to flourish in China.
Betting big on a home-grown company could help burnish Apple's image, especially as it rolls out its payment product Apple Pay in a country where domestic rivals, including Alibaba's Alipay and Tencent's WeChat Pay, have a big head start.
Didi isn't exactly known for having world-beating technology. But in China it has held its bitter rival Uber at bay by partnering with both taxis and private drivers to put more cars on the road. And unlike Uber, Didi drivers accept cash.
Didi says it works with more than 14 million drivers in 400 Chinese cities and has 300 million users who place 11 million ride orders a day.
Uber, based in San Francisco, has struggled to gain a foothold in China. Uber Chief Executive Travis Kalanick recently told tech site Betakit that his company is losing $1 billion a year there.
Chinese analysts also speculate that Apple might be interested in tapping Didi's massive trove of data on ride-hailing and car usage to inform Apple's own development of a high-tech, self-driving car, which has long been rumored. Map services are another conceivable area of cooperation.
In announcing the deal, Apple Chief Executive Tim Cook said Didi "exemplifies the innovation taking place in the iOS developer community in China," and that Apple "looks forward to supporting [Didi] as they grow."
Cheng Wei, founder and chief executive of Didi Chuxing, was equally circumspect.
"The recognition from Apple tremendously encourages Didi that was founded four years ago," he said. "Together with drivers, ride sharers and friends from the world, Didi will continue to make efforts on enabling everyone to have various ways to travel, helping solve urban transportation problems, and environmental and employment challenges."
Didi later joked on its Weibo social media account that Apple had invested in Didi because both companies were named after fruits. The company's officially registered name is Beijing Xiaoju Technology Inc.; Xiaoju means "Little Orange."
Not to be left out of the joking, Uber's Chief Executive Travis Kalanick tweeted Friday: "girlfriend owns @apple shares which makes her a didi investor... #Smh #ridesharewars #domesticissues #thanksALotTim."
Apple's phone-making rivals in China are rapidly moving into the automotive industry.
Le Eco, which makes smartphones as well as flat-screen TVs and other electronic products, is backing the Faraday Future electric car venture in California and Nevada. The company recently announced plans for its own branded vehicle, promising a seamless user experience that would take entertainment features and control functions from one's mobile phone to the driver's seat.
Le Eco has offices in Silicon Valley as well, not far from Apple's campus.
Le Eco is also cooperating with the Chinese ride-hailing platform Yidao, a rival to Didi. At a recent media event, Le Eco Chief Executive Jia Yueting talked about his vision for integrating the two services. For instance, voice-recognition software built into phones could give users the ability to simply push a button and say "please pick me up" without launching an app or entering any other information.
Didi has recently partnered with U.S. ride-hailing platform Lyft, giving Chinese users access to Lyft services stateside and vice versa.
Uber, meanwhile, continues its efforts to eat into Didi's market share in China. It has a partnership with the Chinese search giant Baidu and is spending heavily to acquire customers and drivers in the Chinese market.
Yingzhi Yang and Nicole Liu in the Times' Beijing bureau contributed to this report.