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But then people could build web apps that could cut into the App Store revenue. We can’t have that happening.

I never understood why that's the case; on Android you can submit your PWA to the Playstore easily via Trusted Web Activities - Apple could just do the same thing to monetize Webapps.. don't quite understand what's hindering them here

They don't want you to build PWAs at all. They want to lock you into their proprietary iOS APIs.

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