Throughout my product development career I’ve used Asian resources to supplement the work being done in the U.S. to bring new consumer tech products to market more quickly. When designing cameras at Polaroid in the 80s, I worked with Japanese camera manufacturers. Years later when I was at Apple developing the Newton, I used resources in Taiwan, the first time Apple developed a product in Asia. While I led the way at Apple, the practice was already being followed by numerous companies from around the world; Apple was just late to the practice.
My motivation was to utilize expertise that allowed the product to get to market more quickly, often a requirement for success in the world of consumer products. The U.S. had limited expertise and resources in consumer tech manufacturing, in part because our government never made the investments that the Asians did.
But, never would I have predicted how dependent Apple has become on China decades later; so much so that it’s put the company at risk and dangerously dependent on the whims of a Chinese dictator.
Apple in China is the riveting story of how Apple used many of the benefits of China to their advantage to become one of the world’s greatest companies. But, simultaneously, and almost unknowingly, they increased their dependency to where they are now so intertwined in China, that they’ve lost the ability to move elsewhere, putting them at an existential risk.
Apple initially moved to China to utilize China’s growing low cost labor force and take advantage of the government’s willingness to make huge investments in the technology industry. It enabled Apple to avoid the huge costs of building and running their own factories. Going to China allowed them to do much more, much faster, and at lower costs. They worked with partners such as Foxconn, who developed and ran huge manufacturing complexes and hired the workforce, all at their own expense and with government subsidies, in exchange for manufacturing Apple’s products.
Apple was the only foreign companies to operate in China without forming a joint venture with a Chinese company. Instead they did something even more significant to curry favor with the government. They worked with thousands of their Chinese suppliers to teach them all aspects of high tech product development to bring their skills up to the level that their products required. It allowed Apple to create a huge network of capable suppliers, while simultaneously improving China’s skills in high tech.
Patrick McGee, a reporter for The Financial Times, interviewed hundreds of people (including this writer) in researching his book, and seems to have covered nearly every important interaction between Apple and China over three decades, not only in manufacturing, but the sale of iPhones in China, the creation of Apple China, and the run-ins with Chinese authorities and the Chinese press.
He weaves one story after another into a compelling tale that reads like a novel. We learn about the personalities of the major players, both the good and bad decisions coming from Cupertino, and the contention and rivalry between the employees on two continents. The details he reveals required deep digging and access to many of those involved, to a trove of documents, and to numerous other sources.
A major portion of the book focuses on the time during Tim Cook’s ascendancy to CEO and the challenges he has had to placate both Xi and Trump. He had to continue to affirm his commitment to China, even while conducting a facade about building a new plant in Texas to build computers. Even more disturbing, Cook has had to remove apps from the China app store that the government didn’t like, including popular news sites and VPN products, and eliminate the data privacy policies other iPhone users enjoy.
While Apple has been able to open to build iPhones in India, we learn that it’s only a tiny percentage of their needs and will take years to reach significant numbers. Surprisingly, many of Apple’s factories in India are actually Chinese subsidiaries that followed Apple.
As one who follows Apple and Asian manufacturing closely, I never realized how tenuous a situation Apple is in and how much Apple has contributed to China’s dictatorial regime by making it more competitive with the U.S. Ironically, the technology Apple brought to Chinese companies is now being used by new Chinese phone manufacturers to overtake Apple in the Chinese phone market with products more advanced than the iPhone.
As McGee notes, “The grand irony, though, is that Apple isn’t dependent on the advantages it found in China; Apple is dependent on the capabilities it created there.”
This book will likely be one of the best business books of the year, and one that will change how we think about Apple. It’s a remarkable book that will be read by government officials, business leaders, and many at Apple.
