Patrick Magee, let's start by just talking about how you went about this research, how you gathered the data.
One thing I would say is that I think often when you're talking to Apple people, the layperson thinks you're talking to disgruntled employees. Well, I didn't talk to 200 disgruntled employees, but I did speak to a lot of people who are unhappy with the consolidation into China over the last quarter century. So, they'll have, you know, the time of their life, their biggest career highlights at Apple, but they're not big fans of how Tim Cook, the CEO, has really just consolidated Apple into China to such an extent that they really are quite stuck there.
Just set out precisely the scale of Apple's investment in China and how it compares.
So, Apple did an internal study in 2016 and determined that in the previous year they had invested $55 billion into China. There's got to be some better UK equivalent that I could give you, but the US one I use is that Biden's flagship act called the CHIPS Act is about bringing chip fabrication back to America. That's $53 billion over 4 years. So, you can think of this as a CHIPS Act every year, but in our greatest adversary's country.
And it exceeded the post-war Marshall Plan in scale.
Isn't that insane? I mean, it just sounds totally nuts.
And not only does it exceed by basically a factor of two the Marshall Plan's impact on Europe, but that was for 16 countries, this is for one. Apple is in one sector and one sector only, and it's advanced electronics, and that's been called by Barry Naughton, a China scholar and economist, the most important thing to Xi Jinping. So, what makes Apple distinguished from basically everybody else is they don't rely on suppliers to come up with their own innovations and they then they'll say, 'Oh, that's cutting edge, we'll use that.' They go build those parts, and they'll even build the machinery and do the software for the machinery to come up with all those innovations.
So, it's kind of mentoring, American mentoring, supervising, auditing. And the very machines we're talking about cost billions of dollars in the aggregate, and Apple would foot the bill for all of that in the early years of moving into China. So, they're not just making these suppliers work beyond their perceived capabilities, they're making them work beyond their actual capabilities. And once you understand how maniacal Apple is about the details, and that they're building iPhones at about a quarter billion per year, you begin to realize that, oh, we are literally talking about a nation-building effort here.
So, just that you talked about flying American engineers over that over the over to China. They actually persuaded the airlines to lay on extra flights, didn't they?
Yes. So, there's sort of three crazy stats here. So, in 2014, Apple basically tells United Airlines, we need you to start flying to Chengdu, a place they call iPad City, three times a week because we will buy so many of the first-class seats that if the rest of the plane is empty, they'll still make money. And it becomes the longest non-stop flight that United has on the globe. Two years later, they do the same thing to Hangzhou, which is sort of an industrial cluster outside of Shanghai. And in 2019, United accidentally leaks that Apple was their biggest corporate client flying 50 people first-class per day from San Francisco to Hong Kong.
And this came at a cost in some ways to, you know, the American families who were sort of split up by this commute.
Yeah, so many marriages are broken up in the first 5 years of Steve Jobs' comeback after 1997 that engineers begin referring to the DAP, the divorce avoidance program, which is a series of measures, bonuses for spouses, time off for certain workers because their marriages are on the line. So, it's like, where is Cathy this weekend? We need Cathy in the factory. And it's like, Cathy's marriage is so close to being over that we need to understand that she can't come to work today. And she's not going to be here tomorrow, and you need to understand that. But, eventually, we need Cathy in the factory. So, the policy evolves a little bit. So, your spouse would be getting $10,000 for every unexpected trip that Cathy takes to China.
I'm sure he'd consider that a bargain.
So, standing back, who's exploiting whom here? Is the US exploiting China, or is it the other way around?
Mutual exploitation. Tim Cook calls it mutually symbiotic, and I would be a little more cynical. So, what Apple is getting out of the country, I think is relatively clear, really low wages, cutting-edge automation. I mean, there's all sorts of tailor-made policies from tax-exempt bonded zones for your production. I mean, a whole host of things. China is brilliant at luring in foreign capital and making it a sort of multinational playground. And Apple is just a company that sort of exploits that best.
But, engendered in the way that Apple sets up its operations is technology transfer. And because Apple is so epic, the technology transfer is epic. And so, you know, in the US, we're not building any advanced electronics, certainly not Apple. And yet, we're doing all of it in China. And so, the effect is that the shop floor innovation, the tacit knowledge, the experiential knowledge is all sort of taking place in China. And the proof is in the pudding that, you know, one out of two smartphones in the world built today is the Chinese brands whose suppliers are also damn good because Apple trained them all.
I mean, you compare Apple to Prometheus, you know, giving China the gift of fire.
