Apple Inc. (AAPL.US) refuses to install Indian surveillance app, citing security and compliance concerns.

Three informed sources said that Apple Inc. (AAPL.US) will refuse to comply with the Indian government's regulations to pre-install a state-owned network security app on its smartphones, and will communicate its concerns to authorities in New Delhi. This move by the Indian government has raised concerns about surveillance risks. The Indian government has privately ordered companies such as Apple Inc., Samsung, and Xiaomi to pre-install an app called "Sanchar Saathi" (meaning "communication partner") on their phones within 90 days. The app is designed to track stolen phones, lock devices, and prevent their misuse. The government also wants manufacturers to ensure that the app cannot be disabled. For devices already in the supply chain, manufacturers are required to push the app onto phones through software updates. The Indian Ministry of Telecommunications later confirmed this measure, stating that it is a security measure to address "serious threats" to network security. However, Prime Minister Narendra Modi's political opponents and privacy advocates criticized the move, calling it a government attempt to gain access to the 730 million smartphones in India. Two industry sources familiar with Apple Inc.'s concerns said that Apple Inc. does not plan to comply with the directive and will inform the government that the company does not comply with such regulations anywhere in the world, as they pose a range of privacy and security issues to Apple Inc.'s iOS ecosystem. "It's not just like using a sledgehammer; it's more like using a double-barreled gun," the first source said. To address the recent increase in cybercrime and hacker attacks, India is working with global regulators (most recently Russia) to establish rules to prevent stolen phones from being used for fraud or promoting government-supported public service apps. "Big Brother cannot watch us" The directive has caused a stir inside and outside the Indian Parliament on Tuesday, with several lawmakers accusing the government of introducing an app that will act as a surveillance tool. Rahul Gandhi of the main opposition Congress Party said he plans to speak about the app in Parliament. The Congress Party has called for the directive to be revoked. Senior party leader KC Venugopal said on social media, "Big Brother cannot watch us." The Modi government's press release stated that the app will help address incidents of copying or forging IMEI numbers, which are fueling fraud and online abuse. India has a large market for second-hand mobile devices, the Ministry of Telecommunications said in a statement later on Monday. There have also been instances of stolen or blacklisted devices being resold. Other companies assessing Indian government directive While Apple Inc. tightly controls its App Store and proprietary iOS software (critical for the company's $100 billion annual services business), Alphabet Inc. Class C's Android system is open source, giving manufacturers like Samsung and Xiaomi greater flexibility in modifying their software. A second source said that Apple Inc. does not plan to resort to legal action or make public statements, but will inform the government that it cannot comply with the directive due to security vulnerabilities. The source said, "Apple Inc. cannot do it. That's it." Industry sources also said that other brands, including Samsung, are evaluating the directive. The sources said that the government pushed through the directive without consulting the industry. $38 billion antitrust penalty unresolved As the app directive was issued, Apple Inc. is currently in court battles with an Indian regulatory authority under India's antitrust penalty law. The Competition Commission of India is investigating complaints filed by the Indian Startups Alliance and Tinder's parent company Match, alleging "abuse of dominance" by Apple Inc., forcing developers to pay high commissions for in-app purchases. In documents filed with the Delhi High Court, Apple Inc. stated that if calculated at 10% of the global services business average revenue for the past three fiscal years (until 2024), the "maximum penalty risk" for Apple Inc. could reach $38 billion. India's antitrust regulator told the New Delhi court that Apple Inc. is trying to delay the antitrust proceedings against it by challenging India's antitrust penalty law. This statement was in response to the legal challenge made by the tech company.