How Apple Helped Build China’s Tech Power

So I wrote a 70-page book pitch to get the book deal. So I certainly had a pretty clear sense of what the book was going to say. But nevertheless, I ended up being flabbergasted by the extent to which Apple had a massive influence on China. So if you've read the book, you know that the thesis in the sense is that Apple had a nation-building-like influence on China. It would be trivial to say that Apple wouldn't be Apple without China. I actually argue that China wouldn't be China without Apple. It's a sort of thesis that sounds, I think, pretty unhinged, even bonkers. Um, but if you go through the 400 pages, I think it's pretty well stacked up. Um, so I didn't think that I was going in that direction. I was trying to write a standard corporate history of how Apple became the most valuable company on the planet, and I ended up writing something that had geopolitical implications, uh, the likes of which I had de minimis understanding before tackling the project.

That's a good question. I mean, I don't want to give the boring answer of Tim Cook, but of course, he was the CEO since 2011. I mean, it certainly wasn't Steve Jobs, right? Steve Jobs, as far as I know, if someone wants to prove me wrong, go ahead. Never stepped foot in China in his whole life. So as instrumental as he was for Apple and product design, he was not the guy running operations or making the decisions. Never went to China, but Tim Cook. Yeah.

That being said, Tim Cook traditionally goes to China 2 or 3 times a year, and it's certainly not difficult to find people who are living in China on behalf of Apple or going there. You know, so many times per year that they would say the idea that Tim Cook is the reason that either we're succeeding in China or whatever is faintly ridiculous because of course, he's more orchestrating things from Cupertino. But there are people on the ground in the weeds, you know, training suppliers and that sort of thing. So it's not a particular individual. I would say it's the unit called manufacturing design, a unit within Apple that specifically goes from Cupertino or from other parts of Asia, but traditionally from Cupertino to factories across Asia and over time, increasingly directly to China to train up factories. Um, you know, we're talking millions upon millions of people were trained at the behest of Apple to meet their quality demands and then to learn how to retain that quality as they scaled. And the result of that was the formation of entire industrial clusters devoted to building something like the iPhone, which of course, goes from 5 million units in 2007 to 230 million by 2015. So yeah, sorry. The reason I don't think that's a boring answer is because Tim Cook may have become CEO in 2011, but Tim Cook was the supply chain guy for a decade before this. So he was the one who was figuring out where in the world these things could be made, and also the supply chains and the complicated supply chains that would make this possible. So I'm slightly being pedantic, but I would say that I disagree with the general notion that Tim Cook was the architect of the China strategy. That's sort of the word people had used to describe him before I wrote the book. I would say you can give him a nice title like Admiral rather than architect. The reason I say that is because when Apple adopts an outsourcing strategy in 1996 and then consolidates basically everything to China in 2003, it's not really that they're deciding, hey, you know, it's a good place to manufacture, it's China. It's that hundreds of suppliers who had previously been in America, but principally in Korea and Japan and especially Taiwan. They were moving to China. And so I say, Admiral, because Tim Cook sort of navigated the macroeconomic seas better than anybody else, but he didn't actually sort of build, uh, or decide that China was the answer. They were kind of late to the game of both outsourcing and moving to China. They just did better than everybody else.

You know, my favorite quote in the book comes from a former vice president at Apple, we're having coffee, and I'm asking all these geopolitical questions about the rise of China. And he says to me, are you sure you're not overthinking your thesis because you keep talking about geopolitics? But I can tell you, I was there in China when we were building up the supply chain in the early 2000s. And we weren't thinking about geopolitics at all. And that might as well be on the back of the book. That is the thesis in a nutshell, that Apple was very engineering minded, perfectionist mindset, very product focused, and wasn't sending people over to sort of learn Mandarin and affairs of state and understand the perspective of their partners. They were there to get stuff done. And they had really demanding bosses, making sure they got stuff done. And I don't think they quite realized the implications or consequences of what it meant to scale just warmest quantities of the most iconic product of the 21st century in a country, just as it became an adversary of the US. I mean, that's the whole tension of the narrative right there.

Yeah. So within the narrative context here, what happens? Xi Jinping comes into power in 2013. And Apple is within 36 hours on the back foot, basically put in a position where they think our products might get blacklisted, not an idle threat. Facebook had been blacklisted, Google had been blacklisted, and Apple had become, by this point, the most successful retailer within China and the most successful operator. So the idea that it's going to have a problem in China, both in terms of manufacturing and selling, becomes something close to an existential crisis, and Apple has to figure out what to do. In figuring out what to do, there's this gang of characters called the Gang of Eight, sort of the eyes and ears of Cupertino on the ground, senior people living in China for the first time ever, despite having a presence there for 20 years at that point. And, um, they and the government affairs team essentially do a supply chain audit, a supply chain study and recognize that what they're investing into Chinese factories is $55 billion per year. To be clear, this does not count the components. I'm not talking about aluminum chassis or anything like that. If you were to count that, it would double or triple the figure. This is just counting the machinery that Apple is purchasing and putting on suppliers' production lines. And crucially, it was the wages of up to 3 million people per year in the Apple supply chain, principally concentrated in China of course. And so this is not a figure that's been updated. And I don't think Apple internally tallies it. But effectively what happens is this study goes to Tim Cook. And in May 2016, he and his operating chief Jeff Williams, um, go to Zhongnanhai. That's like the citadel of communist power, the equivalent of the White House, if you will. And they promised to quintuple that figure over five years. So they promised to invest $275 billion into Chinese factories. The reason why this is important is because at the time, Xi Jinping, um, his chief policy was called Made in China 2025. Right. In effect, the idea was we're going to make the world dependent on China, and we're going to be less dependent on the world. So it's a play to indigenous innovation, right? Indigenous production in the country. And Apple basically realizes this is, of course, my wording, not theirs. We are the biggest contributor of Made in China 2025. And the reason why Beijing is upset with us is they have no idea how much we are doing to up train the engineering, upskill and train engineering forces across the country. So this figure is enormous, and it's so big that I couldn't find another example of a corporation investing that much in another country. So I had to go to nation-building efforts. Right. And so if you take the Marshall Plan, which was America and some allies investing in 16 countries to a devastated Europe after World War Two, in $2015, that was $131 billion invested in four years. So the Cook Plan, if you will, was double the amount in a similar time period. And where is the Marshall Plan, if you remember from your high school textbooks? Is effectively an investment to ward off the threat of communism from the Soviet Union? Sort of like making hay. Uh, you know, it's becoming more popular in places like France or Eastern Europe. The idea is to ward off communism. The Cook Plan is the opposite. It's a way to ingratiate Apple with the communist rulers in Beijing so that they can continue to have shareholder success there. So it's quite a remarkable comparison.