I know it's an obvious question to say like, oh, what should Apple do? And the point of the book is like there's nothing for them to do. Like they are stuck. Well, the chaos of Trump's tariffs shone a light on how dependent major American businesses are on cheap Chinese labor. And no company is more entwined with the Far East as Apple. Patrick McGee's new book, Apple in China, chronicles the subsurface relationship between Apple and China and reveals that behind this lucrative relationship lies manipulation, violence, and abuse. Patrick McGee, welcome to Times Radio.
Thanks, Hugo. Good to have you here. In your book then you explore the symbiotic relationship between Apple and China. Exactly. How intertwined are they and how important is China to Apple's business model?
So absolutely, I mean mutually symbiotic is how Tim Cook has described it. If I was being cynical I might say mutually exploitative. What I mean there is that Apple is able to get cutting edge automation, great talent pool, and just all sorts of tailor-made policies that make it easy to build electronics at scale and to ship them at scale throughout the world. Exploitative in the other direction because what China gets from the relationship, I think long-term, and China famously thinks long-term, is even greater because there's just technology transfer engendered in Apple's business model. So you might have the greatest designs coming out of a studio from Johnny Ive, but to actually conjure those into reality, especially when you're building almost a quarter billion iPhones a year, someone's making them. And the Chinese, historically, did not have the competence to make them. And so Apple literally would fly engineers out by the plane load to train, train, train, audit, supervise, install machinery in the billions of dollars into these factories. And so, of course, once you have those skill sets, what do you do with them? You supply your local market. And so China's gotten tremendous out of this relationship, let's just say.
Well, you write that within 24 hours of completing his transition to power, Xi Jinping went after Apple. Was that a move of extraordinary foresight on his part? Foresight in what way?
Well, in that he saw how important it would be for the Chinese economy. Oh, no. Actually, I don't think so. No, in a sense, it was myopic. If he knew all that Apple was doing for China, he wouldn't have gone after them, right? Sure. But Apple is famously secretive, and so they had this huge impact on hundreds of factories, but nobody knew it. I don't even think Apple necessarily knew the extent of what their impact on the country was. And so if you just looked at public data, I mean even if you're Xi Jinping, I don't think you have much more than public data in a sense to go on like who's making what in terms of margins. You would see that Apple was crushing it. Over a 12-year period, their margins go from like 1% to 25%, and their revenues I think go up by 60,000% between 2003 and 2012. I mean, it's just a remarkable number that sounds like a typo, but it's right. But a company like Foxconn, the chief assembler, indeed even the chief enabler of that growth, they see their margins go from something like 10% to 2%. And so it looks like Apple's this exploitative force that's not sharing the wealth, and so Xi Jinping really doesn't like this idea, and he goes after Apple yet indeed within 36 hours of assuming the presidency in 2013.
I mean, other Chinese companies today like Huawei, like Xiaomi. Am I saying that right? Xiaomi? That'll do. I'm never sure how to say that. They've thrived by making products that are often superficially quite similar to Apple products. To what extent are they really rivals? And to what extent has their development been slightly parasitic on the advances that Apple has brought to China?
Yeah, I would say that's like a 2016 question, right? In the sense that back then it really was mimicry. I think we're either witnessing in real time the Chinese going from imitators to real innovators. Or the baton has already been passed. The example I point to in the conclusion of the book is that if you wanted to have the most luxurious, sex appeal smartphone in the world right now, it's not made by Apple. It's called the Huawei Mate XT, and it's a trifold phone. So it's a little bit thicker than an iPhone, but it unfolds twice to become a 10.2 inch tablet. And once you've unfolded it, it's thinner than an iPad Pro, which Apple builds as the thinnest Apple product ever. So it's really a marvel of industrial design, and it's a marvel of engineering, and they're actually shipping it. So just to give one last point, it's about $2,800. So critics have derided it as, well, who's going to pay this much? And it's like, you're missing the point. It was only 10 or 11 years ago that the Chinese were only doing imitations of the iPhone, and now they're coming out with things that are more expensive, more luxurious. It's like the Porsche of phones rather than the Corolla of phones.
Would these Chinese firms have got to that place had it not been for Apple beforehand?
God, no. No, absolutely not. So, my argument explain why though. So, my argument literally sounds unhinged until you've gone through multiple chapters. And, you know, this is something that's on page like 270 or something, right? But I have a chapter called 'A Marshall Plan for China.' And I imagine if you're an Apple head or a Mac head and you open the table of contents, you think, 'What the hell is a Marshall Plan for China?' And it's because Apple's influence on the country is literally like that of a nation-building effort. I did not think I was going to go there when I was pitching the book, but the more I spoke to people, the more I understood what sort of influence Apple was having on the country, the more you get there. So, let me just give you two ballpark numbers that always blow people's minds. By Apple's own count, the number of Chinese workers they have trained in their supply chain since 2008 is 28 million.
My god, that's bigger than the labor force of California. Help me out if you want to give me a UK analogy as to like, know is that like, you know, labor London times three. I don't know what it is.
I mean, sheer population is London times two and a bit. Sure. Exactly. So just absolutely enormous. And the amount that they were investing in China. So this is sort of counted as like money that was staying in the country. I'm not counting things like the bill of materials. I'm not counting the value of chips in the phone or anything like that. Was $55 billion per year. That is so extraordinary that if you compare to President Biden in the US, he had a flagship Chips Act. This is to bring chip fabrication back to America. That's $53 billion over four years. So you can think of this as a once in a century investment. That's what Secretary of Commerce Gina Raimondo called the Chips Act. Every year, but in America's chief adversary on behalf of America's greatest company.
What's been in it for Apple? And look, I can see what's been in it for Apple. But is there any way Apple could have done this without China?
I really don't think so. And in a way that thesis is probably going to be borne out in the next 10 years as they try to do it in India. And I think there's an element of hubris on the part of Apple where they look back at the last 25 years and they pat themselves on the back and say, 'Look what we were able to achieve.' And it's like, yeah, but China was a once-in-a-century partner. I mean, if they needed to build eight-lane highways to and from factories, going to world-class ports, if they needed to build entirely new runways just because the Zhengzhou factory needed it within three months' notice of an iPhone going on sale. I mean, that's the kind of thing they would do. Neither of those are made-up examples. This is the kind of stuff that happened. I mean, I want to be really pro-India. I want to be pro-world's biggest democracy, but like good luck doing that in Karnataka.
You've had some pushback from Apple about the book. Not really. Have you not? No.
They've called it full of inaccuracies and wrong, but they also said it the day before it went on sale when they hadn't read it. So I don't give them much credit.
