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talking about Apple. That's a company we talk a lot about on a show that's interested in the future of tech and media. Today, though, we're using a different lens to look at Apple. We're talking about how Apple products get made, which means we're talking about China. And we're talking about how Apple is nearly 100% dependent on China to make iPhones and everything else. And crucially, what that means is Apple is under increasing pressure to not be dependent on China.
Here to walk us through all of that is Patrick McGee, who just literally wrote the book on this. It's called Apple in China. It's out now. Patrick is a veteran business journalist who spent several years covering Apple for the Financial Times. He's used that background to create a really comprehensive history, telling a story that very few people truly understand, and it's obviously incredibly timely. So let's get to it. Here's me talking to Patrick McGee.
i'm here with patrick mcgee financial times correspondent covered apple for a long time now has a timely new book it's called apple in china the capture of the world's greatest company. Welcome, Patrick. Thanks, Peter. A lot of times I know people will start a book project, something is interesting to them, and it's in the moment, and the book comes out two years later, and the time has passed. That is not the case for your book. You couldn't have had more fortuitous time.
I mean, not only was it like it went to the printers literally the week of Liberation Day, right? So we entered a trade war essentially the week that it went to the printers. Where you're killing yourself like, oh my god, I can't believe I don't have time to go add on a whole new chapter here.
There's always the paperback version. No, I thought it was all right, because the book, as you know, is pretty historical, right? It's kind of a 30-year look. So in a sense, it doesn't matter what happens right now. You're not going to resolve the problem that I'm pointing to anytime soon. And so all the last 30 years would still be relevant. The other perfect timing is that ChatGBT and the AI race just caused every reporter to zig one direction the whole two years that I was writing this.
And so I just like to zag on the hardware. You guys go chase OpenAI and chat GPT. I'll go write about the past. I was terrified that somebody would write some great story about Apple's supply chain problem. And honestly, just nobody even attempted to. Why did you want to write about Apple's supply chain problem?
So in the summer of 2022, I became overly bullish on Apple, which I think is a sort of terrible place for a reporter to be a beat reporter, right? It looks like I've drank the Kool-Aid of the company. And I wasn't really digesting Apple's message. I was looking at statistics. seeing that like Android to iOS was like a steady accretion towards Apple and it doesn't really go in the other direction.
And especially if you look generationally, you know, like our generation, sort of like 50-50 Apple, Android.
The high school generation, at least in America, is like 9 out of 10. I was just asking my son about this, whether there's anyone who has an Android, and the answer was no. Yeah, so I just thought, oh, wow, it's going to be the first $4 trillion company as well. So, you know, I wrote a few stories about that, but essentially it was like, okay, instead of writing all these optimistic stories like, What could go wrong?
And so I started talking to people from Moody's, let's say, when you're looking at Apple as a sort of credit risk, what are you looking at? And they said antitrust.
And I've just never thought the Angie Just argument about Apple was very good. And even if it is good, it's going to be at the margins, right? It's going to be something like, you know, taking away Google paying Apple $20 billion a year just to be the search engine. It's massive. It's not all that big for revenue, but it's 20% of their profit.
right? So that is insane. That could go away, sure, but it'll take years, there'll be stuck in appeal, etc. The China risk just was clearly the Achilles heel. And the China risk is Apple is, and we'll get deep into this, but Apple is deeply enmeshed in China. Can't make iPhones without doing it in China. That's kind of well known, I think, at least among anyone who is remotely familiar with Apple. what did you want to get to in the book and just,
We're going to go into the book. I want to start in the present tense, but just before we get there, what were you trying to prove out with this book? So I did a two-part series for the Financial Times. The first one was called How Apple Bound Its Fortunes to China.
When I was doing that, basically it got a really good reception, and yet I knew that I'd only scratched the surface because some of my best stories were things I couldn't put in the piece because I didn't feel they were documented enough, right?
In a sense, the breakthrough was I was talking to these people called manufacturing design engineers, or sometimes just MD. And these are the people that are usually Californian, and they go over to Asia, primarily China, and they teach and audit and supervise. just all kinds of Chinese factories, literally hundreds of them.
to not just rely on what some component maker comes up with and make sure, oh yeah, that's cutting edge, let's put that in the iPhone, but actually building those parts and processes. So they were often designing the actual production lines, designing the machinery. And because these suppliers, especially 20 years ago, didn't have the money to actually do this stuff, Apple was...
buying its own production machinery. Right, it wasn't just they were out handing out checks, they were literally basically building the infrastructure. Yeah, and then installing it. And we're talking about like to the tune of billions of dollars.
And so you sort of began to understand there was like a nation building effort here where the most important thing for Xi Jinping is the high advanced electronics industry. And Apple, I was just beginning to realize two years ago, had played this unparalleled role, you know.
engendering what the Chinese call indigenous innovation. You want to tell that history. That just seemed like an extraordinary story and there was so little ever reported on it. I mean, literally look up Apple manufacturing design engineers and Google News and like nothing comes up. Look up Apple industrial design. Too many articles come up. Everyone knows about Johnny Ive. Nobody knows about, you know, Ducal Pazmouge and Nick Ferland.
So I do want to start with the present tense and maybe some guessing about the future. We're recording this on Monday, May 12th. Things can always change by the time you hear this two days from now. It looks like the Cold War between the U.S. and China has at least paused for a minute or pulled back off. But prior to today's announcement that basically the tariffs are going to get pulled back a bit, there was this
It wasn't really a debate. I mean, you've got people from the Trump administration saying everyone, including Apple, should move all their manufacturing. to the US and you and anyone else who knows anything about Apple saying that is literally not possible when it comes to iPhone. So I think my listeners have heard this argument, but give me the shortest. explanation of why you don't think it's feasible for Apple to really move manufacturing to the...
We're lacking so many things. The density of population is one. So, you know, lots of people know a factory town might have 500,000 people just putting together the iPhone. I think the thing that people don't understand is they're not doing that year round. They're doing that for three or four months.
And then it tapers down significantly. They're sort of coming in from the sticks, basically. Yeah, and then they're moving on to another project. So Apple doesn't bear the cost. It's using the likes of Foxconn as manufacturing as a service. And so, you know, there's an analyst quoted last month who said it would be like the city of Boston. Every person in the city dropped what they were doing and just worked on iPhones.
And as significant and quotable as that is, that understates the challenge because it would be like the city of Boston. transporting itself to some other place like Milwaukee, assembling iPhones for a few weeks, and then moving on to some other project, right? China has this floating population. That's literally what it's called. That workforce alone is greater than America's entire labor force.
So we're never going to match them in terms of density of population and more especially dynamism of the population, let alone that it's happening at way lower labor rates. let alone that it's got way better machinery and automation. I mean, so we just don't have, like, it's not a matter of willpower and cost, right? Willpower and investment. That seems to be what, like, the MAGA dream is based on. And it's like, guys, it goes so much beyond this.
You know, we often say Americans don't want to do these jobs, like the Chinese don't want to do these jobs. But there are so many people that would rather be doing that than toiling in the fields for 14 hours a day. But we just don't have a base of labor that would do that. And one of the other arguments I think you and others make is there's people, but there's also just this huge infrastructure, right? It's a whole series of plants and subplants and subcontractors that are sort of built around
getting Apple the products, the elements it needs, sort of a drop of a hat, whatever volume they need. And the amount of time that it would take China to build a new factory, we would still be doing the environmental paperwork.
But yet, in the last earnings call for Apple, they said, we're not terrible. They didn't say the word tariff, I don't think, ever out loud. And they said, we're not worried. But they were trying to tell Wall Street to chill out. They said a couple of things that were fascinating to me. One, they said, for the next quarter Basically, every iPhone we sell is going to come out of India, and most of our electronics, our AirPods, etc., are going to come out of Vietnam.
So on the one hand, we've been saying, well, it's impossible to move. China has this infrastructure, the people. On the other hand, Apple said we've already moved enough that we can literally supply at least for a quarter.
the us with all the stuff we normally sell so what am i missing here it makes it seem like apple has gone ahead and figured out how to move this stuff out of china yeah not at all so think of it like this if there's a thousand steps in making an iphone and the final one is now in india You're avoiding Tara. right that's that's
The final assembly is considered... You're literally putting it together in India. Yes, after it's already been sub-assembled, after it's already gone through so many steps, literally, from the raw minerals being refined and everything like that.
every step of baking a cake except for putting the icing on or putting it in the box. Maybe even the candles. Yeah, I mean, honestly, not much is happening in India. That might change the next five to ten years, but the idea that there is like substantial, like actual production happening in India. is just wrong. And so Apple knows that, obviously. Apple expects that analysts know that. They presumably assume that the government of the US knows that. So everyone understands.
that when you're shipping an iPhone, it says made in India, it's not really made in India? I don't think most people understand it. But I mean, the people who are complaining about tariffs and trying to figure out the impact. Yes, and most of all, I think China understands it. In other words, China realizes there's not a big risk here.
And if there were a big risk... If you want to literally move... We've got basically a completed iPhone and you want to pack it all up and move it to India and basically put it in a new box and send it in the U.S. That's what you're describing. That's okay with us. You'll buy an iPhone next year, Peter, if you do. it'll say made in India I think that's a near certainty that phone will be no less dependent on the China-centric supply chain than any other iPhone you've ever purchased.
And the other thing Apple said in their call that, and again, they really wanted to emphasize this, that Apple normally discloses very little, they said the effect of, I can't remember if they said tariffs or not, but this is going to be $900 million. Yeah. Again, I think for the quarter. which is a big number, close to a billion, but Apple makes $100 billion in profit a year. It certainly seems like not a very big deal. I assume that is what Apple was trying to sort of tell.
wall street did that number surprise you did that seem low to you I hadn't sort of done the financial math beforehand. I think what might surprise people is I think a layperson might go, well, that's nice to have $900 million of revenue for the United States because that's a tariff. Well, actually, it's probably more Narendra Modi's $900 million because he has tariff.
Right, Apple said these are the additional costs we're going to have to pay to deal with the tariff regimes. But it doesn't equate to sort of new revenue like a tax base like for America, right? Because India has tariffs on stuff coming from China.
So they're counting that as well. What percentage it is, I don't know, but that would be substantial. If that was just sort of literally the only impact from the tariffs and everything sort of stayed steady state, which again, we've got no idea where things are going to go. That seems like a pretty solvable problem for Apple, right? Yeah, absolutely. It's a pain in the ass to move all this stuff from China to India. It costs us actual money, but we can make a difference.
Yeah, absolutely. So where I think things are much dicier is that I think the political ties that Apple has with China. are like unbreakable. I shouldn't say political ties. I'm really meaning the business ties. Like they are not going to leave China anytime soon. And yet, the technological transfer that is engendered by designing products, cutting edge every year, and building them in China, inherently causes a technology transfer from America to China on a crazy level.
And I think if you think of China as a threat, if you think of them as America's biggest adversary, it is insane that the world's greatest company is equipping China with this technological know-how year in, year out. And that's kind of the big thesis of your book, right? That really is, and I think that's incredibly overlooked over the last 25 years. So we will get there. Just one more future question, at least for this section.
The Journal, and I know journalists are loathe to comment on other people's reporting, but the Wall Street Journal this morning said it was kind of a weird story that Apple is thinking about considering maybe tacking on costs, additional of these additional costs to the next round of iPhones they start selling this fall. They won't say that out loud. They won't ever say the word tariff because it's politically sensitive.
That makes it seem like if they're really considering that, that they really are, they really do think they're going to take on meaningful costs well above that $900 million a quarter. First of all, does it seem plausible that Apple would eventually start raising the price of their iPhones? We had this scenario like, oh, if Apple was going to move their iPhone production to the U.S., it would be a $3,000 phone. You said that's never going to happen. Apple's saying, according to the Journal,
Just in terms of the real world, what's happening right now, things might be, we might have to pass some of this cost on other consumers. Does that sound right to you? Yes, because the other alternative is that you're squeezing out more from your suppliers and in a sense making them pay. And some analysts have suggested that. And that's kind of laughable because if there's anything to squeeze out of the supply chain, you damn well better know that Apple's already done.
Apple pays its suppliers very slim margins. There are not a bunch of fat cats out there that they can just be squeezed. The irony is that if they really needed to do that, then what you would actually have is more and more Chinese companies rather than multinationals operating in China getting those orders because they're the ones who can operate at like zero margin because they sort of exist in a political paradigm where they would rather...
sort of own the manufacturing, right? Because China's goal, in a sense, is to do better and better at all sorts of manufacturing because by doing so, out-competing everybody else, it essentially de-industrializes the rest of the competition. We'll be right back with Patrick McGee, but first a word from a sponsor. In today's business world, trust matters more than ever.
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This is all super helpful, and we'll probably go back to some prognosticating, but now let's go back and say your book, which a lot of it concerns history, so 30 years of history. I think a lay person, someone who has a vague understanding of Apple, knows they make phones in China. They might remember from 10, was it probably 15 years ago, stories about terrible conditions at Foxconn. The contractor was sort of doing a lot of the work and literally...
Chinese workers killing themselves because conditions were so terrible. They might further know that Tim Cook is not really a product guy, but he's a supply chain guy. He's credited with sort of really getting Apple deeply into China.
Throughout your book, you say a lot of the narrative about China and Apple is wrong. So am I getting some part of that wrong? So what I think you're getting... perfectly right is that is the full extent of what really anyone knows about apple operating in china they know they can name foxconn they might not know it's taiwanese and they know that there were suicides and they might know that there were suicide nets put up to basically solve that
And yeah, they would say, oh, Tim Cook was hired in the late 90s and he just shut down Apple manufacturing and moved everything to China. And he's CEO because he did that, essentially, because he's really good at supply.
Yeah. Yeah, absolutely. And it sort of bespeaks Steve Jobs' confidence in his own creations in the sense that, you know, you didn't need a product guy to follow Steve Jobs. What I need is a guy who can make this stuff at massive scale. Absolutely. And he was right about that. I mean, you know, for the next...
for the next 10 years. I mean, that is basically what Tim Cook did and that's what caused Apple to become a $3 trillion giant. No question about it. Who should follow Tim Cook? Product guy, operations guy, open question. But I think Steve Jobs
can be credited with making the right call there. There's a little bit of nuance. I think Tim Cook never would have left the company. And so everything that Tim Cook has offered Apple, I think you still could have got it even if he remained COO and that you did have a product guy come in.
that's just counterfactual history that I like to think about and whatever but obviously there's no real answers there it's just speculation the story so it's not that any of those things are wrong so much as my god is a more complicated narrative so first of all the global outsourcing strategy. So the idea that Apple's not going to make its own products, but work with outsourcers who build it for them. That begins in 1996, so before Steve Jobs has even come back.
Indeed, it even goes back to the laser printer made by Canon in Japan. You know, branded Apple has the colorful rainbow logo on it and everything. But that's the product that saves the Macintosh. People forget that the Mac was really a failure. until someone invented desktop publishing. And that was made possible by what's called WYSIWYG. What you see is what you get. So the Mac had this beautiful graphical user interface, but unless you had a printer, it didn't leave your monitor.
Once they figured out how to do it with Canon, in Japan, then you had this outsourcing operation where Canon was building sort of the killer app, if you will, through the form of a printer and through Adobe, a young startup at the time. And that's what sort of made the Mac a special product before Windows 95 came out. Again, we're talking about the late 80s into the 90s. It is not unusual for American companies to start moving operations out of the U.S. What's unusual is that Apple didn't do it.
So, you know, aside from this canon example, which I only bring up because when they're forced to do this in 1996 because everybody else has and Apple's like, you know, weeks away from bankruptcy, I mean, literally days away from not being able to make payroll, you know, literally hiring chapter 11 lawyers. in the spring of 1996. What I point to is that when they had to do it, they had a decade of experience of executives going back.
to and from japan realizing oh wow like the asian manufacturing force the you know the automation stuff is really good so they weren't sort of starting from scratch but they were well behind everybody else So you're saying it's the scale and effort that Apple put into this that distinguishes them from other people. I think it's kind of philosophical in a way. So everybody's in China in the early 2000s.
What Apple gets out of it is different. So I think when Michael Dell, for instance, looks at China, he sees consumer savings, he sees low cost, he sees low margin. Sorry, higher margin, higher margin. I think I can make my Windows computers More efficiently, cheaper. Absolutely.
You know, my joke is, what's your favorite Dell computer from the early 2000s, right? I mean, there isn't one because there's no Johnny Ive at Dell. Apple looks at the same thing and says, if we've got people working at, you know, sort of a limitless number of people in these factories the size of football field.
and they're all working for 50 cents an hour, and they're willing to do it for 12 hours a day. I mean, never mind making like a little poke-yoke box, which is like this Japanese term for mistake-proofing, like a really easy way to assemble something, you know, just snaps together. They begin to understand we can create something ridiculously intricate and complex and complicated.
And we'll have an army of workers put these things together. So they begin just with wild designs. And this is where you get things like, you know, the iPod mini coming in five different colors and that sort of stuff. I mean, just try to think of like... Steve Jobs and Johnny Ive create this stuff.
That is really impressive, but then someone's got to figure out how you can make it at scale, and that's where Tim Cook comes in and the operations people come in and say, we can do this in China. Yeah, so the line I use is, Steve Jobs made Apple products unique. Tim Cook made them ubiquitous. And you talk in the book about just the amount of money that Apple was putting in at one point. You bring up the number $55 billion a year for, I think, four years. That's Apple.
Doing what? What are they buying with that money? So that's per year, but let me come back to that. So what people, I think, don't generally understand is that year in, year out, the designs that Johnny Ive was coming up with, was not something where you would just send blueprints over to capable factories in China. They will stamp that out for you.
What's that? Yeah, right. It's not just saying, we'll stamp out this gizmo for you. They didn't know what to do. Right. I mean, they're staffed by people that have been toiling in agricultural fields, you know, a thousand miles west in China. They don't know how to put together a computer.
So Apple began orchestrating just enormous logistics and manufacturing and sort of really operating under the radar in ways that their competitors didn't know what they were up to. Nobody knew that Apple was good at supply chain and they were mastering supply chain, but like their secretive company, right? So nobody knew.
until the products just started emerging and they just were operating in this amazing way. Explain the political climate in China at the time when Apple starts investing real money. to make things like the iPhone possible. China is receptive to this, wary of this. What's the attitude? Yeah, so before Xi Jinping in late 2012, China has led for a decade by Hu Jintao. and he's nicknamed the woman with bound feet. He's considered a leader that doesn't really make much decisions
And so what's going on in China is that it's sort of a multinational playground. This is when everyone believes that China is the future and it's telling everyone, telling themselves that if we invest in China, being the last that will democratize China. It'll bring sort of China into the community of nations. Yeah, absolutely. We're not just getting cheap labor out of this.
we're helping China and we're really helping ourselves because we're going to have a democratized, westernized trading partner. Totally, yeah. We're helping ourselves, but we're building the next democracy, essentially. And obviously that turned out to be wrong. I don't know that it was
always going to be wrong. I don't know that it was inevitably wrong. I think if we held China to account after they entered the WTO in 2001, possibly things would have gone a different direction. Instead, what happens is you've got September 11th. and you've got the financial crisis. So that entire decade, our eye is completely off the ball. We're concerned about the Middle East, you know, all the discussions about Iraq and Afghanistan and then Lehman Brothers.
We're just not thinking about the loss of jobs going to China. Right. But the tech community, meanwhile, is like, of course we're going to China. Of course we're going to make our stuff there. And of course it's a huge market. And China made it. So easy. I mean, literally free land, free machinery, you know, that would put up.
put up buildings so quickly. I mean, in really shoddy ways, right? I quote this engineer who said he would walk up the stairs of a building and he would count the stairs and notice that from one floor to the next, you had 16 stairs one time and then 12 stairs the next. and the stairs were different heights and stuff. I mean, they're really handmade in a shoddy way. I think the line I use is that they wouldn't pass an audit based on a glance, let alone a deep view.
So there's downsides in terms of quality. Those standards are often horrendous back then, and yet they were just building, building, building. And so just anything Apple needed, an army of laborers would just get it done. you get the sense of your apple, my God, are we powerful. These people are willing to bend over backwards and do anything that we want. And I think it's only really in hindsight that, you know, I think...
We didn't have the power. We weren't calling the shots. We were responding to the siren call of an emerging superpower. So explain Shiji. Ping, again, this is well beyond sort of what I normally cover on this podcast, but I don't think people could tell you much about him, but he's obviously, he has shifted the way China views the world. He came to power 2012, 2013.
In retrospect, could you sort of see that coming if you knew him and knew about him, or does this sort of take everyone by surprise? I'll answer the question in a second, but let me just first say that my hope for the book, I mean I have many hopes, but one of them is that the reader is buying the book on the sex appeal of products from apple right wanting to know something more about the company that is sort of you know
$1,000 worth is probably in their pocket, you know, maybe another $200 on their ears and so forth. Got a couple thousand dollars on the table right here. Yeah, exactly, right? And so it's an appealing company. But in a way, it's a bit of a Trojan horse of a book and that what I want you to come away with is a better understanding of China. a better understanding of sort of U.S.-China tech development race.
And, you know, some Chinese history, I don't think I overwhelm you with Chinese history, but, like, there's no better way of understanding some of China's political history than putting it through the lens of a sexy company like Apple. Because I'm not expecting most readers. To flock out to read a book about China's industrialization policies. Yeah, why would you? I mean, absolutely.
So, yeah, I mean, even supply chains, you know, like during COVID, I think we all sort of got up to speed a little bit on supply chains. But nevertheless, like, you know, something as basic as... We know when they're broken. Yeah, exactly. But something like, you know, Foxconn as a contract manufacturer...
It was a Taiwanese company working in China. But the history of why Taiwan is good at this kind of stuff is interesting. And I point out that contract manufacturing was an American idea. It comes out of Huntsville, Alabama, for a company called Spacecraft Incorporated. that did things like built satellites and played a role with the Saturn V rocket that goes to the moon. But then it starts building the IBM PC.
And this is why Apple is in such crisis in the mid-90s, which is that everybody adopts what SCI does. And so they offload manufacturing off the balance sheet. And what's really interesting is that when IBM makes these deals, right, you have like the manufacturing know-how moving from company to company, right? You're losing the knowledge of IBM and you're giving it to SCI.
And that's kind of fine in the 80s and 90s, but in this race for survival, race for margin, when companies no one's ever heard of are all combining. Selectron, a company probably nobody's heard of.
you know, had 20 acquisitions in the 1990s and they're growing at double digits per year. I mean, the darlings of Wall Street because there's so much M&A happening. Once they start moving everything to Asia, that transfer of knowledge continues to happen. But instead of company to company, it's country to country. And so we're really losing our own ability to make stuff.
And we're empowering Asia, but later on, in particular, China, into how to do everything. So just to fast forward a little bit, like Apple absolutely still knows how to make the iPhone. It's got loads of people with the experiential know-how. The trouble is they can't execute any of the plans without China because it requires a thousand components all being made. a million of them a day for
for the iPhone. Put a pin in that thought, we'll come back to it. Yeah, I mean, it's just happening on an insane level and with crazy quality. I was asking about Xi Jinping. Here's another version of that question. Do you... do you think he understood in 2012 2013 that I have this long game and it's gonna involve this
transfer of knowledge and technology to my country and I'm going to benefit from it, my country's going to benefit from it, and I'm going to suck out all the value. Do you think he saw that? 10 plus years ago? Yes and no. Sorry, China has a policy of joint ventures, right? Going back to the 80s. There's a business in China.
We're going to own half the... Exactly. And so the specific policy there is we're going to learn the ins and outs of whatever business it is, and we're going to thrive on our own, and eventually we will oust you. I mean, they're quite explicit about that. Apple is operating without a joint venture. So anyway, so if you're just thinking does Xi Jinping have that plan, all the Chinese leaders have that plan.
What Xi Jinping doesn't understand when he becomes president in sort of late 2012, but then he doesn't become president until 2013, not so different from how we have an election in November, and then the guy comes in and... He doesn't understand the value of Apple. Apple doesn't seem to be sharing the wealth. If you look at public documents, you would see that Apple's profits absolutely soar from the iPod Mini in 2003.
to the iPhone being ubiquitous in 2012. Well, what happens to Foxconn profits in those years? Margins collapse, revenues skyrocket, but they're not making much more money. Apple is taking all of it.
and so Apple faces this political crisis when Xi Jinping comes in and state-sponsored media attacks the company And basically, the thesis of my narrative, after all sorts of foundational stuff about building IMAX and the Czech Republic and Wales and, you know, Mexico and all this stuff that I don't think people know because we haven't covered them as a manufacturing company, despite them, you know, doing sort of... for manufacturing what Uber did for taxi rides, right?
Apple has to explain, okay, it's true that all of these suppliers, you know, this massive network and these industrial clusters, they're not making much money. But guess what? We are training them. We are giving them the Ivy League equivalent of hardware engineering. year in, year out. And so Apple sort of accidentally, unwittingly, is becoming this massive supporter of indigenous innovation in China. And once the Apple realizes that,
Tim Cook goes to Zhang Denghai, the citadel of communist power equivalent to the White House, to deliver that message in May 2016. And the reason he had to do that is because that was the first sort of stirring of China saying, whoa, whoa, whoa, we don't like this imbalance. We need to sort of rebalance things. Basically, you say the government essentially sort of threw its propaganda arms as saying, Apple's a bad actor, treating us poorly. It's the first time Tim Cook has to go, oh.
I need to go smooth this out. Yeah, and worth knowing, Steve Jobs never went to China. That's not a role that he ever had to play. He was not a statesman in the way that Tim Cook absolutely has had to be a statesman. and so yeah in 2013 Apple worries that his products are going to be blacklisted. And that's not a crazy thought. Facebook is blacklisted. Google is blacklisted. It's not a big deal. It's not a unique thing for your product not to be allowed in the country.
And there's almost like an embarrassment on the part of hardliners in Beijing that the younger Chinese love their iPhones, right? It's become this iconic symbol, and they're quite happy to crush the materialists. the individualist and the Western instincts of the younger generation and the iPhone sort of embodies that whole idea. So you've got, Apple under Tim Cook increasingly spending time, money, effort to build up in China, to figure out how to work with China, to placate China.
At the same time, this is under Xi Jinping where China is saying to pretty much every other tech company, Get out. Either we don't want you here, leave, or we're never going to do better. Mark Zuckerberg spent a long time trying to break open China. Got nowhere, right? Google basically forced to leave. Netflix. in 2015 was confident they were going to be in China and a year or two later, like actually it's not going to happen.
So China is pushing out just about every other Western tech company, a couple exceptions. but it is more and more in bed with Apple. How does China see that at the time? So part of the distinction there is actually just that Apple is primarily a hardware company, right? And so...
It's almost a false equivalence or whatever to look at Google and others because they're all offering services and that's distinctly what Beijing does not want in the country. So Apple hasn't actually had that much luck with Apple TV Plus or even the iTunes Store. Things like that get banned.
in China as well. So if you were looking at other Western companies, it'd probably be more proper to look at Microsoft doing their hardware there, Xboxes are built there, that sort of thing. And so they're not unique in that sense. I suppose where they're unique is that the retail market for Apple goes crazy. And so from Beijing's perspective, Apple isn't giving back, even though it's Chinese consumers that are largely driving its growth.
I think it's between 2008 and 2012 that China revenue goes up by more than 2,000%. Right. And so if Beijing is looking at what is Apple actually doing for us other than just exploiting us by selling expensive products. it doesn't look like they're doing a lot. That, I think, is wrong, but it's wrong because Apple isn't trumpeting what its impact is.
It's operating under the radar. It's orchestrating events from afar. It doesn't have a single manufacturing facility in the country, right? Not in the sense of like having the bitten fruit outside. And Apple needs to change that as soon as they recognize what a political dilemma they're in and what obstacles Beijing can put up to make their life really difficult. You mentioned Steve Jobs never went to China. Tim Cook does.
The idea that Tim Cook is a statesman, I think, is something that is surprising to a lot of people who don't just think about him, or if they do think about him, they just think of him as a guy who says very little and is kind of bland looking. Is that something he always sort of had in his back pocket or did he have to learn how to... I was always really impressed.
it's from press is i guess the right word during the first trump era where he was both figuring out how to placate trump and china at the same time is that something he had to teach himself did he have someone teaching him how to do that? I don't think there's anything in his background that would say, hey, this is a future statesman. In other words, he spends 12 years at IBM. in the 80s and 90s. Interestingly, he's there, for instance, in 1994 when Apple runs that really anti-IBM.
comma, Orwellian commercial, which I find really interesting. I don't think I've ever heard him comment on sort of what he felt about Apple during those years. It'd be really interesting. So, yeah, I think he does just have to learn it in terms of who learns it. I mean, I could list some officials at Apple who sort of did government affairs stuff. I don't think I'd be...
All that interesting, but someone like Kathy Novelli, who's later Deputy Secretary of State, was someone that Tim Cook was sending to China all the time to figure things out. So perhaps he learned from her and there's some other people. But yeah, I think he probably just learned to be a statesman because he had to.
But I mean, there's other people who maybe in that room wouldn't have been able to take that out. You don't think there's anything particular about his makeup or maybe his understatedness that works to his benefit? So in a sense, the premise of the question is assuming that he's been successful. And he has been successful if you're a shareholder. Yep. I don't think he's been successful if you consider it deeply problematic that
our most iconic company is deeply wedded to that of our biggest adversary. So let's get to that point. So this is the crux of your book, right? This is that Apple has benefited from this up until now, basically. and you think it's an enormous weakness. And I guess the secondary point is you think that, and you lay out the case, that Apple has basically...
transferred an enormous amount of valuable technology know-how to China, sort of a one-way gate, right, is the phrase. And that is a bad thing. So let me start with the second part. Apple trades, puts a lot of money into China, a lot of know-how. In return, gets amazing gadgets made at an enormous scale. Everyone loves them. No one's being forced to do any of this. This seems like a pretty good transfer.
What am I missing? Are you sort of saying like, isn't this just capitalism? Capitalism and like a good version of capitalism. You have labor and technology, infrastructure. We're going to take advantage of that. You aren't just going to get money from us. You're going to get the ability to improve your own economy. Yes. Great.
So I would say this is largely what happens in global history, right? If you're thinking Taiwan, Japan, Germany, Korea, from World War II to, I don't know, 1990, 1995, maybe 2000. Right. In other words, you integrate with the rest of the world. You sort of have like the golden arches theory of diplomacy. No two countries that haven't gone to war to each other. So that's what happens.
But that's what we attempt to do with China. And it's fine, except that... Just to read, because this is one of the questions I've always had, I've always thought, because Apple is so important, not just to the U.S., but also to China, that it actually, its presence there... does sort of keep us, a question I've always wondered, does this presence there keep things from getting too hot?
between the U.S. and China because they both have Apple in common. That's a great question. First of all, if Apple's a bargaining chip of one of the countries, it's Beijing's bargaining chip, not Washington's, which is, I think, extraordinary and sort of inarguable. If, let's say, Apple decides to mount a vigorous defense to my argument, and I don't expect this, I expect them to be silent. But if they were to do that, it would be to somehow come out with the goods.
showing that the US and China were close to war or something, and that Tim Cook has played such a diplomatic statesman role that you know, Apple is the thing that sort of keeps everybody happy and it's preventing Apple, I'm sorry, preventing China from going after Taiwan and annexing the country, right? Something like that.
like there's a plausible argument there we don't know any of that but i do think apple is literally like on that scale of importance right um certainly it's more important than certain countries when it comes to like its diplomatic but most of that's behind closed doors, so I don't think we can really know that.
But if you had all access passed to Tim Cook being, you know, answered this stuff and, you know, had, I don't know, congressional testimony or something, perhaps something like that. Or just the dumber version, which is how bad can things between these two countries really be? if they're both getting benefit from Apple. And you say China gets more out of it, but still it's an enormous part of the U.S. stock market, right? I mean, obviously it's an iconic, maybe the iconic American company.
The fact that it relies on China to get this done. You can be a nationalist and say, well, that's very bad. It should be done in this country. You can say, no, this is just how the world works.
This is not such a bad problem. So maybe this isn't a great analogy, but if our world were for some reason a video game and the video game was now ending, then I don't think there would be a problem. You'd say the last 25 years was the golden era when we did software, like we in the West did software, and trying to put things together for us cheap. The trouble is, it's not a video game, it's going to keep going, and we have none of the skills to build all the stuff that we like.
And China has all of the skills to build it. And they are not content, properly so, you can't sort of get angry at China for this. They're not content with playing the low-value role. So now you have the likes of Huawei, Xiaomi, Oppo, Vivo, to a large extent making better phones than Apple is now.
And if Beijing gets to a state... And you argue that this is because Apple taught the country how to make those phones. Yeah, my line on this is we think Apple killed Nokia. The truth is that Apple has never had more than 20% share. It couldn't have killed Nokia. Chinese imitators of the iPhone killed Nokia, and the reason the imitations were so good is Apple taught all of their suppliers. We'll be right back with Patrick McGee, but first a word from a sponsor.
We have given you the tools and now it's coming back to bite other people but eventually Apple. You have got a whole section of your book where you're talking about 2018 when Apple sales of the XR iPhone just totally faceplant or are well below Apple's expectations and Apple's scrambling to sort of basically obfuscate that. But the point of that
story is to show Apple is being now damaged by competitors that it had helped build. Let me just entice the reader there because there's so much new that's in this book and this was just one of those gold mines where basically what I discovered is that You know, loads of people might know that Apple got sued in 2019 for ostensibly lying about the state of Chinese demand. This is sort of standard shareholder lawsuit where
The company probably wasn't being forthright. You can argue that it hurt investors when it did that. And so you go and you have this big loss. Yeah, and so people reported on the case. It literally got settled last September, like finalized. Apple paid $500 million, admitted no liability. What nobody found was a discovery was made public. And so I was able to come across more than a thousand pages of internal assessments of Huawei, depositions of Tim Cook.
depositions of CFO Luca Mastri, internal emails. And basically what you find is that super secretive company, you're able to sort of look deep into it through this course. It's amazing. So Apple is panicking for three weeks. because their projections are going to be really, really falling. And they hide this from investors, essentially. I mean, they are sitting on data for three weeks. Apple knows, like...
so well about how to chart trajectories of how sales are doing. iPhone XR is just a total dud. And the chapter is called Five Alarm Fire because I'm quoting someone who's saying, you know, what are we going to do here? Tim Cook literally says, this is a disaster. We need all hands on deck now. And after these episodes internally are playing out, they tell Wall Street things are going well. They don't tell people that China revenues are literally shrinking in the country at the time.
And so that's why they're sued. And I think the material that comes out of that is spectacular. Right. So if you're a nerdy reporter... Don't take that the wrong way. No, it's fine. We're all nerdy. That's cool because you've got documents. And again, I would love to go.
diving in to see what Tim Cook was telling everybody. But the point of it is to show that Apple is now being harmed by this infrastructure that they have built to build iPhones is now being used to compete against Yeah, the way I would put it is in 2014, Johnny Ives sort of famously tells Vanity Fair, he's asked about Xiaomi phones, the likeness of them looking just like iPhones, right?
and he says something along the lines of, it's brazen theft, I don't like it, I don't think it's okay. By 2018, the episode we're talking about, the Chinese imitators, if you will, have managed to match um face id right the first phone the 10th anniversary iphone that has like the infinity pool display if you will and apple thinks they're going to be like basking in the halo of this product and instead all four major chinese brands have matched it within months
Fast forward to today, Huawei is coming out with phones that cost $2,800. They're a little bit thicker than an iPhone. They unfold twice into something the size of an iPad, and analysts are hopeful that Apple has something like that in two or three years. So we've gone in just a matter of 10 or 11 years From imitations that cost less to luxurious phones coming out that cost more. That's bad for Apple. Yeah, especially in China. And you'd argue that it's bad for the U.S. You think this is...
This is illustrating the flaw in Apple's approach and moving all that know-how there. Does that extend when we keep hearing in the U.S. about these amazing BYD cards? that are supposedly better than Tesla's for a million different reasons is Is the technology transfer that Apple brought on, is that showing up in non-phone products like amazing battery-powered cars? Yeah, so this is like, think of the cliche for EVs. It's a smartphone on wheels.
Not to get too wonky, but when iPhone volumes were going from 5 million in 2007 to nearly a quarter billion by 2015, Apple faced this dilemma where they didn't want their suppliers to go bankrupt should they obviate the need for a certain component. Remember, this is the time when iPhones are truly being redesigned.
each year. And so if you go from one set of materials to another, and you no longer need that for 100 million phones, and then you need 200 million the next year, I mean, you're totally going to upend a supplier and just cause them to go bankrupt. And this happened repeatedly. So Apple instituted a rule. If you're going to work with us, don't be more than 50% dependent on us. We don't want to work with suppliers who might go tits up in a year because we need you.
to stick around. We need you guys to be sustainable and not just dependent on us. Right. But think of the consequences. This is obviously unintended, but if I am learning from Apple how to do whatever the... in terms of making something that's electronic and works on a phone. Well, what do I do with that skill set? As Apple says, make sure you grow as fast with someone else as you grow with us. Well, I supply the Android universe.
I supply Huawei, Xiaomi, and all these companies that essentially don't exist in terms of making smartphones when the iPhone is in its first early years. and now essentially dominates the market. Like, these are the companies that have more than 50% market share. But you think that tech extends beyond... Yeah, so my point is, let's first get that point that Apple accidentally gave birth to the Chinese smartphone market.
not just in the sense of being the suppliers, but the brand names, right? It's direct rivals, right? It taught all of them. And then what did they do? I mean, Thomas Friedman gave this great interview to, I think, Ezra Klein recently, where he said, you know, I couldn't go to...
trying over the last five years because of COVID. And the biggest thing that's changed is all of the smartphone manufacturers are now all the EV companies. Huawei makes EVs, Xiaomi makes EVs, et cetera. So I think it's actually clear as day that all of the lessons Apple taught these suppliers They turned into turning out gray phones and then they decided to build EVs with them.
Play it counterfactually for a second, though. What's the alternative history if Apple doesn't embrace China this way? If not all of that transfer happens, if they... if they hedge their bets and they spread this out through more of the world, maybe at the cost of less efficient supply chain. But they are able to sort of see ahead far enough to see this potential problem. And they go, let's plan for this in advance. Let's...
place our bets all around the world, not be China-dependent? So I don't think you would put it all around the world. I think you'd probably still want to consolidate somewhere. But let's say it happened in Mexico. NAFTA is quite successful from the signing in 1993 to China's entry into the World Trade Organization in 2001.
In America, because we're sort of a parochial people, we talk about the China shock, right? And the China shock is like the impact of jobs, you know, in factories across middle America and so forth. Well, the China shock on Mexico is even bigger because Mexico really is a direct rival in like low cost manufacturing and stuff, right? So Mexico gets hit by the China shock far more than America does. We just don't talk about it because I guess we're pro-girl people.
So in the alternative scenario in which, as one academic paper talks about it, the uninvited guest doesn't enter the world stage, and you had Apple's investments instead directed to Mexico, I think you might have something like NAFTA on steroids and things would be really good. But you think it would still have to be primarily in one country because you physically need all this infrastructure to be around each other in the workforce there and you can't...
spread it throughout the world so some of the early chapters are on building the iphone i'm sorry on the ipod and on the um sunflower imac if people can remember it's a sort of like anthropomorphic computer kind of looks like the luxar lamp kind of looks like a sun power Iconic. Amazing computer. extremely difficult to make. And it is technically assembled by Quanta in Taiwan, but it's relying on a supply chain about six countries deep, Japan, Singapore, Malaysia, Thailand, all those countries.
And so when you need to sort of like, you know, call a meeting, right, or get a part, like literally like bodies of water are being passed, right, customs borders and everything like that. So when they're comparing in the early 2000s, like products that are being, you know, second supplied in China versus this like six country supply chain network, like China is just winning hand over fist and they're building what they call next door facilities, right?
Beside the final assembly plant is the plastic injection molding plant. Beside that is the metal stamping plant. And you just have these industrial clusters. philosophy, if you will, really wins out. But I don't think it had to be in China. It just happened to be in China. And it looks like the plan B Apple is playing with now is India seems like the best bet for us to move.
a meaningful amount of our production out there. Not just that we're going to put it in the box and say it's made in India, but we're actually going to try to build up and sort of replicate what we did in China. We're going to do it in India. They've got a huge labor force. China had a huge labor force. There's a lot of parallels. Does that seem plausible to you?
plausible yes uh am i optimistic about it no i'm not optimistic about it for a couple reasons one is that i just don't think you have the same like Nietzschean willpower. in India that you did have in China. You mean the government cannot force Indian workers to basically go work for Apple in the way that China basically can? That and like eight other things.
right just in terms of like manufacturing is our thing and we are going to be we're leading at this and like all the five years five-year plans are devoted to that like You know, whatever you think of Narendra Modi, like that's just not what he is thinking. So it's like Apple's trying to do some of that, but it doesn't have the same partner that it had in China. So that's sort of one stumbling block. The other stumbling block is, of course, China.
Like you said, one-way gate. They don't want to see this happening. So, like, you know, I submitted the book in September and then, of course, I made revisions to it about February. But, like, absolutely zero surprise that come January, some of the stories were... Chinese visas, people in China going to India to set up supply chains, were being blocked by the Beijing government. Machinery made in China fit for assembly lines, even if they were at a Chinese company operating in India.
can't do that anymore. I mean, Beijing has no incentive to let this happen. And if you want like the quick and dirty history of sort of quality manufacturing, like after World War II, America controls more than 50% of global manufacturing. Not to get too wonky, but I think this is a good way to put it for people. Alexander Hamilton had this idea that manufacturing was going to cement American independence.
After World War II, the idea is tweaked a little bit and manufacturing is going to cement interdependence, right? And so America actually sends, like Washington sends, engineers to go teach the Japanese.
Here's how you build a radar industry. Here's how you build an electronics industry. We've bombed your country. We've defeated you. We're going to help build you up now. Yeah, and people know people like Deming, right? Edward Deming. These are people that are still known. There's awards named after him in Japan even today and such.
So there was this conscious effort to help Japan build, because if Japan has a good economy, they're going to buy some of our stuff, they're going to make some of our other stuff more cheaply, etc. Well, Japan does so well with that, particularly with semiconductors. the Japanese entrepreneurs get upset with the labor constraints, they get upset with the overvalued yen, and so they go to their former Japanese colonies, South Korea and Taiwan, and they teach them.
And then what does Taiwan do when the same thing happens where it's a small island, they face labor constraints and all that kind of stuff, rising wages, they go to the mother of all developing countries, China. So the next path should be India, if you're sort of following this. But China is saying, wait a minute, we understand this last 50 years of history. We're not going to let this happen.
so that puts apple in a real bind does apple have leverage here i mean you're you're sketching out a scenario where apple is dependent on china but from afar i've always thought Gotta be closer to codependency, right? Doesn't China get a lot out of Apple? They clearly have been getting a lot out of Apple now. Don't you think they want to continue having Apple there? So Tim Cook calls it mutually symbiotic.
So there's definitely a narrative there. I would be a little more cynical and I would call it mutually exploitative. in that Apple gets cheap and abundant labor. You know, there's narratives in their late 2000s, for instance. It's an important market for them to sell on to as well. Yes, but I mean, Apple, remember when I was talking about how they spent billions upon billions and they would mount machinery in their suppliers' factories and stuff?
In the last 10 years, that's actually been reversed a little bit, and there's a loss of control on Cupertino's part because the red supply chain, these homegrown rivals to companies like Foxconn, are wanting to take more of the orders and how do they convince Apple that they should be ready? They buy those machines themselves. So they'll often get state backing. And so instead of Apple having to buy 10,000 CNC machines at $500,000, a million dollars a pop and putting them on the supply chain.
or putting them on the production line of some supplier, the suppliers themselves are coming with that, right? And so China is actually sort of taking more control, if you will, but it's brilliant for Apple because their margins go up because they're not having to do the same capability. Okay, back to my question, right? Where does this all go? You've got Apple cannot exist without China. China could theoretically exist without Apple. Not theoretically.
they could just say we're done. I think, like, There's sort of an obvious reason and a less obvious reason. The obvious reason is that Apple, I'm sorry China, really needs Western manufacturers to be locating their operations there. So if they went against Apple for some reason, they canceled the export license. That industry just goes away. Yeah, the impact would be far away. No one can do business in China. GE or whatever would not go to China if that were the case.
The less obvious thing is that because Apple is training so many people, not just employing them, but training them how to do their jobs, why would you attack a company that's doing that for you? That's a brilliant benefit. So at the beginning of the conversation, saying, look, this is just a very bad thing for America. It's a very bad thing for Apple, this dependency. But it also kind of seems like there's really not an incentive for any of us to change.
especially in the near future, maybe even in the extended future. What is the future of this? Does Apple keep kicking the can down the road? Does China say, we're okay with this, sort of with these terms that we've already established? So it's a great relationship if you're China. I mean, what's not to like?
You're getting free training from Apple. And your own company and your own indigenous innovation is thriving as a result of that. The problem is Washington's view, right? And frankly, consumers' view. Why are we... allowing let's say maybe that's not the right word but why are we okay with our greatest company literally training armies of workers in our chief adversary i mean if you just put this in cold war 1.0 terms
IBM would be insane to go set up shop outside of Moscow. And this is kind of the TikTok argument, right? Like, you know, would we be okay with Russia owning NBC during the Cold War? That's really sort of the most convincing argument about having TikTok kicked out of the US, I think.
But I'm not sure that most Americans are really thinking that way. Maybe some of them are thinking, why don't we have these factories in the U.S.? And you've explained that's really never going to happen, at least in the way we conceive of America today. It seems like there's not a lot of incentive for Apple to change other than, you know, hearing...
and Howard Lutnick yell at them occasionally on TV and then ignoring him. Yeah, no, absolutely. So it's good for Apple. It's good for China. It's working pretty well for Apple. It's working brilliantly for China. I don't think it's working all that well for...
our own political scenario because we have been de-industrialized by everything going to Asia, such that were there any sort of conflict over Taiwan, it's the Chinese who have far better capabilities when it comes to drone warfare and stuff. And that's only going to get better if the best engineers in America are going to Apple and then getting to China on the first flight they can to go train more people how to do it. But to be clear, Apple's answer to this current problem that they're in is,
We're going to move what we can out of China, kind of without saying that and without disrupting people. But we're not moving it to the U.S. We're moving assembly to India. We're moving it to Vietnam. It's never going to come back to the U.S. Yeah, I think Apple is, by and large, maintaining the status quo with a new PR narrative that quite a bit is moving to India.
but not much is moving to India. And Beijing knows not a lot is going to India. And insofar as Apple occasionally does make moves, China makes it difficult for them to do it. So long as people don't read my book and have a better understanding of how this all plays out, I think the status quo works fine. So you come back in five years, there's a new, let's just assume that Donald Trump is no longer president at that point.
Do you think things are significantly different or do you think the relationship that you're sketching out today is kind of in place? I think the status quo is the most likely thing. But of course, what's different about the status quo is the Chinese don't want to just be doing the low-value acts, and they're no longer just doing the low-value acts.
So right now, Chinese market share for smartphones is above 50%. I think it could be above 60%, above 70%, and so forth. That's already the case with electric vehicles, right? And so... that doesn't seem to be a great scenario for us. Even if you're not thinking of a blow-up scenario like Taiwan as being annexed, it doesn't seem great that we are not capable of creating
any manufacturing at great scale. Now again, I'm bearish on the idea that this can be done in America, but I still like that old idea that came out of after World War II of an integrated world with the golden arches theory and all that. So I'm okay if iPhones are being built in India, truly built, not just assembled there. strikes me as a perfectly politically stable you don't imagine that there's
We're just sort of setting up the exact same scenario that you are with China. Yeah, well, actually, so one thing, so one interesting thing is that when Apple was doing all of these moves, I mean, there was just no industrial policy in America. I don't think anybody knew this was happening.
If you do know this is happening, then actually that's a bargaining chip for Washington negotiating with Narendra Modi. So, I mean, look, I think Apple, Foxconn, a bunch of other Taiwanese companies that know how to do this stuff should basically be pushed kicking and screaming to set up this stuff in India.
and India should be made aware of just how consequential it is to have these operations in the country, and that it has a massive trickle effect for jobs, it has a massive trickle effect for experiential know-how, groups like Tata could do really well if they're doing this kind of stuff, and you could have loads of iPhones being built.
built in India. But I say it with a massive caveat that, of course, Beijing is going to be upset if this is happening. So you'd have to have Beijing at the negotiating table. You have to find something to give China as you're pulling out of China. Yes, or... The sort of Trumpian rhetoric is allowing a sort of political air cover for Apple to make moves that otherwise it wouldn't be able to make.
Do you think if we got Tim Cook here and we sodium pentatoled him, if I'm using that correctly... Is that truth serum or something? I think so. If we gave him truth serum, forget my failed chemistry. And we say, if we can change one thing tomorrow, what do you want to change? Do you want to change Donald Trump, Donald Trump ramping up a trade war? and rattling his saber, or would you like to trade your dependency that you spent 15 years building up in China? Which is a bigger threat for you?
I'm not sure I totally understand the question. Do you think he's more worried about the fact that he is deeply enmeshed with China because China has all this leverage? Or do you think he's more worried that Donald Trump is making his life more difficult by starting this trade war? Well, I hope I'm not rephrasing the question too much, but it's absolutely the case that during Trump 1.0, Trump was a bigger threat than Xi Jinping ever was.
To Apple. Yes, to Apple. And I don't know if that comes across as counterintuitive. It was when it was told to me. But I think it makes sense if you give it a little bit of thought. So in other words, As authoritarian as Xi Jinping might be, he absolutely wants all Apple products being built in China. And also, you can understand what he wants and he says the thing that he wants to do. And he's a rational actor.
Trump is pretty erratic, obviously. I mean, he's called for a boycott of Apple products. This was in 2016. And he absolutely does not want the products to be made in China. I mean, one of his dividers literally wrote a book called Death by China So however you are politically, you can understand that Trump is a greater threat to Apple than Xi Jinping ever was. So is that answering your question in a slight roundabout way? But you now think that Tim Cook understands
that this system that's kind of his life's work, right? Yeah. Building up this China infrastructure is now this core systemic threat to his company. Yeah, so I think if someone were to succeed Tim Cook tomorrow, by far the most important thing that person needs to do is either untie the knot with China or tie a new knot.
presumably in India. So you could either have a new supply chain that is not so dependent on China, or you could have a bifurcated supply chain in a way that Volkswagen cars have a China supply chain and they've got a German supply chain, and they can operate fairly independently. Like, that's a great scenario if Apple's able to do that. And last question here, I think, is one of the narratives, talk about in this podcast, sort of conventional press,
Apple's in trouble because they can't innovate. They've never built something on the order of the iPhone. They haven't had a massive success. You can debate what's a success or not. Apple Vision Pro doesn't seem to go anywhere. Tim Cook isn't a product guy. These are all the big Apple problems because they're never going to be able to figure out how to do a world-denting project like the iPhone again. Seems like what you want to tell us is
That's not Apple's problem. Apple could make iPhone derivatives for the rest of its lifetime. It'd be fine. The problem is it's China-dependent. Yeah, people's critique of Tim Cook is that he's not a product guy. It's a lazy critique. It always has been. Steve Jobs knew that he wasn't a product guy, and he appointed him CEO.
My critique I think is a little more biting and damning because my critique is that he's done something really bad for the supply chain. That's what he was tasked to do in 1998. He did his job, to be clear. He did his job, but he made the calamitous and rookie mistake of putting all his eggs in one basket, and the basket turned into be a surveillance state. Whoops. That's a big deal. Well, let's stop there for a second because there's been this critique of Apple says it has these Apple embraces
Apple has all these ideals and values it puts forth. And then you see in China, when push comes to shove, it goes back on them. China tells Apple to take down an app that people in Hong Kong are using to enable protests. That's one we point out. There's various sort of, oh, you say this, but actually you're not in favor of privacy. But that also seems like the standard critique you would make of
Any global company doing business around the world, everyone has to make compromises to get along in the local market. I think it's very bad, but it also doesn't seem out of the ordinary in the world we live in today. But you seem to think it is a bigger problem. No, look, I agree that you can't expect Apple to just like flout Chinese laws.
Any more than you can get really upset about Netflix taking down an episode of a show on Saudi Arabia because they didn't like the way it critiqued Saudi Arabian rulers. Yes. I guess my distinction is Apple is just operating at such a different level. So A, they built that supply chain, right? and then sort of like said go forth and multiply to their suppliers.
And then the impact extends towards home, as it were, as Apple pushes more into services. So, of course, Jon Stewart had a show on Apple TV+. Yep. Why isn't he there? because he wanted to do a show on China. Maybe one of the reasons. Not for a Chinese audience, but for an American audience. Apple executives basically caught wind of it and said, we'd prefer you don't, and he gave them the middle finger. Yeah, I mean, I think...
I'm not sure that's the entire reason he left, but yes, that was a pressure point. But again, Apple doesn't want you to make shows that show Apple in a bad light. That's not because they're working in China. that's just because it's apple right apple makes sure apple says please have your characters wear beats headphones
whether or not it really makes sense or not. Yeah, I would consider those trivial. I don't expect to see on Amazon Prime a plot line where an Amazon logistics truck plays some nefarious role. I mean, that's understandable, but that seems rather trivial. Yeah, I'm just saying that I don't expect Apple to be... I don't expect Apple's programming to reflect the best impulses of the world. Whatever.
I want to talk to you about AI and stuff like that, but this is such a good book. I want to maybe keep it contained here. Yeah, I don't mind. We don't need to talk about AI because I figure like lots of reporters are talking about AI and I can too, but my nuance or whatever is looking at how they actually manufacture this stuff.
and why has no one written this in the last 20 years? It's called Apple in China. It's a great book. Patrick McGee wrote it. Thanks for joining us, Patrick. Thanks, Peter. Appreciate it. Thanks again to Patrick McGee. Been reading his stuff forever. Finally got to meet him in person.
Thanks to Jelani Carter who edits and produces this show. Thanks to our sponsors who bring it to you for free. Thanks to you guys for listening, reading, writing, telling other people about it, giving me notes. Appreciate all of it. See you next week.