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China says iPhones are a security threat; should Apple worry?

Bernice Napach

In America the tracking location function in mobile phones is either considered a convenience or an invasion of privacy. In China, it's a "national security concern." That's what China's Central Television called the location function in Apple's (AAPL) iPhone iOS 7 operating system.

CCTV cited a research report concluding that those with access to iOS 7 could learn Chinese state secrets.

Apple had not yet responded to these comments.

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China has already banned Microsoft's (MSFT) latest Windows 8 operating system from government computers.

"I don't think Apple should be concerned about sales falling off [in China]," says Mike Santoli, senior columnist at Yahoo Finance, "but definitely concerned about just how open this market is going to be for them long-term."

Related: China may have hacked your company, too

Apple currently has a 6% share of China's smartphone market but dominates the high end of the market, which has overtaken the U.S. as the world's fastest growing.

Earlier this year it reached a deal to sell iPhone on China's Mobile (CHL) network, which Apple CEO Tim Cook described as a "watershed" moment.

The biggest challenge for Apple in China isn't that local officials will pressure residents to not buy Apple products but competition from Samsung, HTC and other local providers, says Santoli. "There are many, many obstacles for Apple becoming a dominant brand in China and the price is just one of them."

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