APPLE IN CHINA: The Capture of the World's Greatest Company

Apple has more impact on job creation in China than all of China has on America.

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Insights from “APPLE IN CHINA”

· Apple is the biggest corporate investor in China.

· Apple trained 28 million people in China - more than the labor force of California.

· It sent its top product designers and engineers, embedding them into Chinese facilities.

· Apple purchased millions of dollars of machinery and placed it in its suppliers’ factories.

· Western capability in electronics atrophied.

· The relationship Apple enjoys with China could blow up at any time.

One American company pushed top engineering resources into China on a scale that rivalled the Marshall Plan of WW2 - and now may not only be captive of that move, but may have been the foundation for China’s rise to economic power.

Apple in China: The Capture of the World's Greatest Company, by award-winning journalist Patrick McGee, is the result of 200 interviews with former company executives and research on China’s struggles to achieve success. It has been praised as “jaw-dropping”, “ground-breaking”, and “one of the best books about China ever written”.

The drive into China was based on Apple’s desperate situation in the 1990’s. By 1996 Apple had devolved into a has-been, a company making more expensive computers for a dwindling user base upset with being ignored by developers. Its rival IBM launched an open architecture, which drove down costs, spurred competition, and enabled economies of scale. IBM might have been a new player in PCs, but its branding was beyond reproach.

Apple’s combination of poor memory, few apps, a high price tag, and a flawed manufacturing strategy doomed the original Mac.

The company removed Steve Jobs from the top position, and found itself still floundering years later. Jobs, for his part, founded NeXT…but by 1993 it was a conspicuous flop. It did, however, have a sophisticated, brilliant operating system that Tim Berners-Lee used to invent the World Wide Web.

Apple needed a new operating system. It brought Jobs back.

Jobs knew that Apple couldn’t compete with PCs on price and distribution, so instead he’d developed a hardware strategy to cultivate desire through breathtaking design. Apple’s comeback was premised on this single hit product. The success of the resulting iMac gave Apple a problem it hadn’t experienced in years: overwhelming demand. It now sought to pay more attention to the efficiency of its production operations.

Apple responded by doubling down on the outsourcing model. Over a multiyear period, Apple gutted its own factories and commissioned suppliers to mirror the triple-continent strategy it had deployed since the early 1980s.

Apple began to take its own factories out of the equation.

A little-known Taiwanese company called Hon Hai Precision had already reverse-engineered the iMac’s capabilities. The founder of Hon Hai, Terry Gou, had heard of Apple’s struggles and called up Apple with a simple message: “I can fix this.” That phone call would have enormous consequences and reverberate for decades, turning Hon Hai Precision into one of the world’s largest companies by revenue and a household name the world over. Most people would know it by its trade name: Foxconn. “Conn” stands for connectivity; “fox” is just an animal that Terry Gou likes.

No country was more important to Apple than Taiwan in the first five years of Steve Jobs’s comeback. Apple’s entry-level iBook and the PowerBook were already being assembled in Taiwan.

The Taiwanese were learning fast, evolving from taking orders to commanding respect as a genuine partner. Taiwan’s rapid growth led to soaring labor costs and capacity constraints.

Taipei had ended a 38-year ban on traveling to China in 1987, opening the mainland for commerce and trade. Within a decade Taiwanese entrepreneurs were building major factories on the mainland, teaching their apprentices in Mandarin and attracting some of the world’s biggest PC brands.

Western PC companies were shifting to China because of what was available; Apple shifted because of what was possible.

What Apple was realizing was that thousands of laborers cheaply handcrafting Apple hardware on a conveyor-belt production line allowed its designs to be maddeningly intricate, complex, and automation-unfriendly.

The labor force on China’s mainland was unskilled, but they were also hardworking and determined. Taiwanese entrepreneurs like Gou were pouring in capital and resources, importing a managerial class of experienced manufacturing executives to the mainland to train staff and run the production lines. These Taiwanese executives — known as Taishang — played an essential role on the mainland ushering in capitalism. Working with local government officials, they brought into being “the Guangdong Model,” an export-driven template for growth focused on low-cost manufacturing, named after the province where Shenzhen and neighboring cities were given free rein to attract foreign investment and experiment with Western business concepts.

Local officials, earning fees from factory growth, were incentivized to work hand in glove with the Taiwanese entrepreneurs. They were empowered to subsidize land and machinery, to build infrastructure to aid logistics, and to facilitate the flow of migrant workers from China’s rural areas.

China had changed from the days of Chairman Mao. Mao might have been proficient as a military commander, but as a national leader he was paranoid and domineering, driven by a bastardized form of Marxism. Before Mao became head of state, the country had just undergone what the Chinese call their “century of humiliation,” a humbling period when the world’s top economy for countless generations suffered repeated military defeats by British, French, and Japanese forces.

By the time Mao died in 1976, China was poorer than sub-Saharan Africa.

China’s economy entered a transformative phase initiated by Mao’s successor, Deng Xiaoping.

The result was a remarkable boom unprecedented in world history: the Middle Kingdom, a country of more than a billion people, opened to the world, modernized at a frenetic pace, and grew some 10 percent a year for three decades.

Foxconn championed being an original equipment manufacturer (OEM), a model widely derided as second class. But unlike a traditional OEM, to Foxconn assembly was just a power grab. It offered a chance to take care of sourcing components, from his own subdivisions and from third parties, which opened further opportunities.

Gou’s approach was a wily bet to lure in Western companies, getting them hooked on the drug of cheap production, and creating a sticky relationship based on Foxconn’s choice of components.

One source said “Foxconn isn’t called ‘Fox-con’ for nothing. Terry Gou was a gambler…and he’s a con artist.”

By having a role in so many areas, across several products and down multiple tiers to the sourcing of raw materials, Foxconn was putting itself in a position to scale much faster than its rivals.

At the time, China’s competitiveness was based on “low wages, low welfare, and low human rights.”

In 2013, Chairman Xi took China in a radically different direction. The years of being a multinational haven were over. Prizing “indigenous innovation,” Xi hardened conditions in the country and twisted the arms of corporations to “give back” to China, part of a goal to turn the country into the unquestioned leader in technology.

By 2012 the value of Apple-owned machinery in the country had soared to $ 7.3 billion — more than Apple’s US buildings and retail stores put together.

Apple was routinely sending its top engineers, designers, procurement specialists, and lawyers from the United States into hundreds of factories across the country, where they’d import machinery, train armies of workers, coordinate the delivery of intermediate goods, and scrutinize suppliers to ensure compliance.

Its particular success in China was totally unforeseen and not the result of some well-thought-out strategy. As one expert said “much of Apple’s growth in China has been a lesson in how to prosper without really trying.”

This isn’t a story about the globalization of electronics, but rather, about its Chinafication.

It’s not merely that Apple has exploited Chinese workers, it’s that Beijing has allowed Apple to exploit its workers, so that China can in turn exploit Apple.

What this book contends is intriguing — that China wouldn’t be China today without Apple.

Apple itself estimates that since 2008 it has trained at least 28 million workers — more people than the entire labor force of California.

In 1999, none of Apple’s products were made in mainland China; by 2009, virtually all were.

Apple’s investments in China reached $55 billion per year by 2015, an astronomical figure that doesn’t include the costs of components in Apple hardware — the so-called Bill of Materials, which would more than double the figure.

The CHIPS and Science Act, which is designed to stimulate computer chip fabrication in America, will cost the US government $52 billion over four years — $ 3 billion shy of what Apple invested annually in China nearly a decade earlier.

Apple’s investments in China, every year for the past decade, are at least quadruple the amount the US commerce secretary considered a once-in-a-generation investment.

Apple alone supports 5 million jobs in China — 3 million in manufacturing and another 1.8 million in app development.

Apple is expected to pull in $414 billion of global revenue in 2025, a company record.

But the ubiquity of the iPhone has allowed Apple to wring huge profit from a new business in the last few years: services. The number of Apple devices in active use surpassed 2.35 billion in 2025, led by 1.4 billion iPhone users who spend more than four hours a day immersed in their glowing screens.

Google pays Apple close to $20 billion a year just to be the default search engine on the iPhone.

All this has one Achilles’ heel: The fate of all the company’s hardware production relies on the good graces of America’s largest rival.

One of the narrative arcs of this book is how Apple, a company that built the world’s most sophisticated supply chain, ended up making the rookie and calamitous mistake of concentrating the vast bulk of its operations in a single area.

Since 2017, Beijing has made increasing demands of Apple’s China business, applying greater control over the content on the iPhone, forcing customer data to be housed in Chinese data centers, and pressuring Apple to partner with more local businesses.

Today, Apple works with more than 1,500 suppliers in fifty countries. But all roads lead through China: 90 percent of all production occurs in the country,

Taiwan remains strongest in semiconductors. Every notable Apple product relies on its chips.

The iPhone maker’s relationship with China has become politically untenable, yet the business ties are unbreakable.

Apple’s China Problem is the company’s biggest risk, the most consequential unknown for Tim Cook’s legacy, and an urgent challenge for Washington.

The United States was bureaucratic and already falling well behind Asia in cost and quality. If you decided you wanted to contract companies in Asia or in the US, you would hear back from the Asian companies within a day or two. Then you’d hear back from the US companies two weeks later.

Apple’s penchant for complex designs and intolerance for defects was unique and over-the-top, necessitating a form of intellectual investment shared by none of its rivals.

Tim Cook took over Apple after Jobs’ death; he looked like an IBM executive right out of central casting. He was a small-town Alabama boy, born in 1960 as the second of three sons. Cook had no obviously discernible genius, but he made up for it with an industriousness more suited to characters of fiction. The twelve years Cook spent at IBM were a period of massive strategic shift, when it went from manufacturing virtually everything itself to outsourcing to Asia.

Apple was an absolute mess. Cook could make his mark immediately.

When he came, the Apple staff meetings were typically ninety minutes; sometimes they could stretch beyond two hours. On the day Cook took over, the weekly review went nearly thirteen hours. He insisted on a granular level of understanding and demanded fluency in the intricacies of every project.

He’d arrive each day at six a.m., having already been to the gym. And he’d work so long and so consistently that Apple assigned him two administrative assistants who split the day: one worked from six a.m. to two p.m. ; the other worked from two p.m. until whenever Cook went home.

Foxconn, hoping to play the long game, demonstrated a willingness to do anything to get the order. Terry Gou was relentlessly focused on doing whatever it took to make Apple succeed. Gou grasped earlier than anyone that the value of working with Apple wasn’t the profits, it was the learning. Foxconn’s goal was to absorb these lessons and apply the skills to its other, more lucrative clients.

Jobs had created a design-first organization that had zero tolerance for imperfection from the earliest stages of product creation.

The teams were in constant communication, so operational breakthroughs would feed back into design excellence.

Once Foxconn started to work on building the iMac at scale, Apple engineers were astonished at what became known as “China speed” — an ability to get things done at a rapid pace beyond the comprehension of Western visitors. It started with Terry Gou pledging that he would build the iMac tooling in just twenty-five days. “It was unprecedented. We’re used to twelve weeks for building tooling,” says Apple executive Wayne Miller. “And sure enough, twenty-five days later, everything was there. The quality was amazing. They really impressed the hell out of us.”

The system was designed so that Apple’s inventory was virtually zero — as soon as Foxconn delivered a finished iMac to Apple, it was placed en route to a customer. If there was no order, there was no inventory.

In China, assembly got done at incredible speed and with few complaints. Workers did twelve-hour shifts and lived nearby in dorms.

Steve Jobs had held on to a hope that Apple could play a bigger role in manufacturing. In 2000, more than eighteen months after hiring Tim Cook to run operations, Jobs distributed T-shirts to staff emblazoned with the word Mactories.

Tim Cook gradually persuaded Jobs on the merits of outsourcing — that it was cheaper, faster, nimbler, and most critically of all, could meet Apple’s quality expectations.

At the start of the 2000s, the world’s four largest contract manufacturers were headquartered in the United States; the fifth was Canadian.

But the logic of the low-cost strategy had a natural end: More work would shift to Asia. By 2010, four of the top five contract manufacturers were still based in North America, but the number one spot was taken by Foxconn — and it earned more revenue than the other four combined.

Apple got into the MP3 player market for a simple reason: All other music players sucked.

In January 2001, Apple launched iTunes for the Mac.

But there was no good way to take your music with you.

Apple execs were in Japan and stopped by Toshiba. The Japanese supplier showed them a new hard drive, just 1.8 inches in diameter, with a massive 5 gigabytes of capacity. Toshiba didn’t really know what to do with it, but to Apple, the implications were “obvious” immediately: this thing could hold a thousand MP3s!

It became the core of the iPod, which had big consequences, not only for Apple but also for China. With critical assembly and supply chain teams scattered across six countries, manufacturing had been inefficient, time-consuming, and costly. Apple urged partners from Singapore to Japan to set up operations in China, taking advantage of what seemed to be limitless pools of cheap labor in fast-forming bonded zones created for exports — areas within China featuring special trade terms and tax exemptions.

At the same time Apple opened the iPod to Windows apps in late 2003; the third-generation iPod became a sensational hit. The iTunes-for-PC move was “the single biggest strategic decision that has enabled the company to be what it is today.”

Foxconn really demonstrated its ambition and capabilities for a product Apple hadn’t even commissioned it to build. Gary Hsieh, a general manager at Foxconn whom one industry colleague describes as “a completely rogue entrepreneur,” led a meeting with Apple. He unveiled a third-generation iPod — only, it wasn’t made by Apple. It was a replica, made in-house. The Apple people passed it among themselves, marveling at Foxconn’s ability to reverse-engineer the iconic music player.

Unbidden, Foxconn had orchestrated its own job interview and demonstrated a willingness to start that day.

Gou even deployed a clever tactic to rotate his workers on Apple projects, to maximize the learning. “We trained all of them. Then they’d go to work on other projects, using their new skills in areas that were more lucrative.”

Then Apple would be forced to teach a new cohort of people, as if a new semester had started.

Foxconn’s replica paid off. It won the contract for the iPod Mini, an all-aluminum unit starting at $249 and available in five colors. Apple released it in February 2004, and it quickly became Apple’s bestselling product ever.

The success of the iPod Mini all but assured Foxconn was getting the contract for the next iteration: the iPod Nano.

In 2000, Jobs had clamored for Apple’s own factories to take on more production. But by 2005, Jobs grasped that there was no going back. That year, a subordinate suggested that a certain project be done in the United States, and Jobs responded curtly. “I tried it. It didn’t work.”

Nobody at Apple had really architected the move to China; but in one opportunity after another, Apple operations were lured into the country. “We just got pulled in,” he says. “ \I was always like, ‘We’re gonna get exposed. This is too much China exposure.’” But the direction was set.

Further and further down the supply chain, the electronics industry had found a new home. It flipped quickly because China was subsidizing so much. Giving people a free land, free everything … They made it so attractive to the outside world.

Apple was secretive about each of its cutting-edge methods. One result of this is that outsiders failed to grasp the advancements taking place in China for the iPhone. In the Western press it was common to misrepresent China’s role as being all about low-value assembly. But Apple’s spectacular investments in China were also about the machinery and processes that made the products.

It’s true that Chinese wages per iPhone were a small percentage of the wholesale cost; however, this wasn’t reflective of their insignificance but, counterintuitively, a sign of the China-based factories’ importance. The low cost per unit reflected their efficiency.

As The New York Times would famously recount later, once Apple worked out how to make the glass screens, a foreman roused 8,000 workers inside the Foxconn dormitories, gave each employee “a biscuit and a cup of tea, guided [them] to a workstation and within half an hour [they] started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.”

The iPhone was such a watershed device that success in the decade following its launch was determined by how brazenly competitors copied it.

Years before Uber would become the largest taxi provider without owning a single vehicle or Airbnb would grow into the largest accommodation provider without owning any real estate, Apple was discovering how to be the world’s largest manufacturer without owning any factories.

China’s currency was kept artificially low, boosting the value of exports while making imports expensive. It allowed manufacturers to work in bonded zones — areas designed to stimulate production by exempting them from paying certain trade taxes. And it encouraged tens of millions of migrant workers from the rural hinterlands to work on the coast, where they earned depressed wages and were treated as second-class citizens.

Curiously, the nuances of Apple’s strategy in China — what it was doing differently from everyone else — had been largely absent from media narratives, investor reports, and earnings calls.

The first major report was in the UK’s Daily Mail, published in August 2006. It described workers at Foxconn’s Longhua factory living in high-security dorms “100 to a room, arriving with a few possessions and a bucket to wash their clothes.”

The article went viral, and after conducting an audit, Apple acknowledged that more than a third of workers exceeded its maximum workweek of sixty hours. Within a month Cupertino established a Supplier Responsibility team, vowing to improve conditions and hold vendors to account.

Media forays into what Apple was up to overlooked wider questions of company strategy, business development, and the management of product cycles.

Kevin O’Marah vividly remembers his confusion when Apple vaulted from out of nowhere into the number two spot on the Supply Chain Top 25, an annual ranking of the world’s best-run corporate production and distribution systems. “Everyone was shocked.” When it came to a supply chain metric called “inventory turns” — a measure of goods sold versus inventories — Apple was in a league of its own. Apple had 2.5 times better inventory turns than Nokia

O’Marah might be the first person outside of Cupertino to really grasp that Apple was not outsourcing as the word was commonly understood. Instead, it was sending its top product designers and manufacturing design engineers from California and embedding them into suppliers’ facilities for weeks or months at a time. There they’d whip local suppliers into shape, co-invent new production processes, and stay until the operations were up and running. “The thing that really stood out was not just that it’s all in China, but that it’s the most vertically integrated manufacturing system in the world and yet they don’t theoretically own anything.”

Instead of selecting components off the shelf, Apple was designing custom parts, crafting the manufacturing behind them, and orchestrating their assembly into enormously complex systems at such scale and flexibility that it could respond to fluctuating customer demand with precision.

The main thing that had changed, remarkably, was Apple’s presence itself. So many of its engineers were going into the factories to train workers that the suppliers were developing new forms of practical know-how.

“All the tech competence China has now is not the product of Chinese tech leadership drawing in Apple,” O’Marah says. “It’s the product of Apple going in there and building the tech competence.”

Apple did something totally novel. It purchased hundreds of millions of dollars of machinery, placed it in the factories of its supply partners, and “ tagged ” it for Apple use only. “They were doing more capital equipment buying than anybody I could see in the world, and yet they were not owning it themselves — they were putting it in other people’s plants.”

Not only did Apple forbid the supplier from using the equipment on rival products, but at any point Apple could drive a truck to the vendor and reclaim the machinery.

The combination of big spending and a design-first culture enabled Apple to come up with production techniques that others couldn’t afford or even imagine. In October 2008, Apple launched a “unibody” MacBook Pro made from a single block of aluminum rather than multiple parts, a feat of industrial engineering that offered “a level of precision that is completely unheard of in this industry.”

This was accomplished using a CNC machine, which allows designers to conjure into reality a 3D image file of complex parts.

Apple dumbfounded the industry when it purchased more than 10,000 CNC machines in a single year. Apple even made a deal with FANUC, an automation group, to purchase its entire pipeline of CNC machines for years to come — shutting out all its competitors from access.

This is the least understood part of what makes Apple successful. It wasn’t that its artists designed great products and then employed capable factories in China to produce them at scale. Apple’s engineers were deep in the weeds building, and even inventing, those capabilities.

Apple understood manufacturing better than the manufacturers themselves.

It had one major flaw.

Apple’s strategy required it to become ever more wedded to the industrial clusters forming around its production.

Apple was growing dependent on the very capabilities it had created.

The closed architecture of the iPhone was driving a different trend: the Chinafication of the electronics industry.

As O’Marah says “it’s this totally engineered stack of process and product, engineering and production, and it’s all synced up in one place…They’re going to have a helluva time getting out of there.”

In 2008, Apple had categorized China as a “third priority” consumer market, one step below “priority two” countries such as Argentina and Uruguay. Its urban wages were around RMB 2,500 a month ($370) — not enough for a big market to take hold. Or so it seemed.

When massive crowds of people began to form outside of the Apple Store in Sanlitun on September 17, 2010, employees were confounded.

Hundreds of people showed up in the wee hours for the chance to buy an iPad, a tablet that hit US shelves in early April and was only now coming to China.

To compare the crowd’s enthusiasm to religious fervor might understate the scene. The first buyer had camped out for sixty hours and sported a custom-printed T-shirt that read “I BUY IPAD NO.1.” His friends hoisted him in the air as he exited the store, a tablet in each hand like Moses descending from Mount Sinai.

Within five hours, inventory at Sanlitun was exhausted. The store had sold more than $3.7 million of iPads, all in cash, a worldwide record.

But among the buyers were men who wore gold chains around their necks. In Chinese these quasi-gangsters were known by the slang term ‘yellow cows’, referring to organized scalpers who find market inefficiencies and exploit them for profit.

The yellow cows took initiative and launched Apple’s unofficial distribution arm to serve a billion customers. One took an Apple exec to a room roughly 2,000 square feet in size, lacking furniture or anything else. Piles of cash in neat stacks were at the ready to hand out to migrant workers so they could buy iPhones in the tens of thousands. He estimated he was staring at a billion dollars.

The opportunity was vast. America had only four cities with a population over two million; China had at least forty.

What emerged was a gig economy. The yellow cows paid hundreds of people to line up at China’s four Apple Stores hours before they opened.

Demand for the iPhone in China stunned executives in Cupertino. After revenues in Greater China shot up by four times to $ 2.6 billion in the holiday quarter of 2010, Tim Cook called the growth “absolutely staggering.”

Annual iPhone shipments nearly quadrupled to 93 million between 2009 and 2011, while the first iPad was so successful some pundits wondered if it would eventually outsell the iPhone.

The production of Apple’s two most important products was now even more firmly fastened in China.

With them, Apple had captured the richest consumers around the world, and developers knew that iPhone owners spent more money not just on the phone, but on their apps.

Apple iOS operating system users were spending, on average, four times as much as Android buyers. Apple’s ecosystem was being wildly underestimated.

Xi Jinping had plenty of reason to be upset with Apple. Global revenues at the tech giant had soared from $ 6 billion in 2003 to $157 billion in 2012, and though Apple’s success had much to do with product conception and design, its ability to build and distribute its hardware couldn’t be accomplished without operations in China.

Then there was Apple’s signature line: “Designed by Apple in California. Assembled in China.” For some, the statement diminished the importance of China’s contributions.

The ideal template for a Western company, from Beijing’s perspective, was a joint venture — a partnership with a local company in which the multinational gets access to a billion customers but the local partner learns the ins and outs of operating the business so it can eventually flourish on its own.

The coordinated attack of Chinese media exposed that Apple’s supply chain — the envy of the tech world — contained something close to an existential risk as the country turned inward and belligerent.

Apple assembled a team to counter that persective. They called themselves the Gang of Eight.

China wasn’t just catching up to the West; its system was maturing into something novel.

“One of the great ironies of our time,” author Doug Guthrie told students, “is that the largest Communist society in the world is also the most dynamic capitalist economy in the world.”

Xi Jinping was deviating from the script Washington had written two decades earlier when China was going to be the next great democracy. In the autumn of 2013, Xi announced the Belt and Road Initiative, establishing a new model in which China could lead, not just fit within an existing consensus.

Apple did not have a deep understanding of China at all. The Consumer Day attack on Apple was a signal that Apple was in trouble.

Guthrie began to fret that Apple’s enormous operations and retail presence in China were at great risk. His opinions were validated after — as he predicted — Apple received a terrible result in China’s study of corporate social responsibility (CSR). Apple received a rating of 22.5 out of 100, the lowest of any large multinational.

In the list of some forty companies, Apple was the only foreign corporation missing a label to indicate “joint venture.” Apple had no formal joint ventures, did not engage in tech transfer, and operated in the shadows.

The challenges kept coming. Apple engineers found that rules limiting their stay in the country were suddenly being enforced.

In 2013, Reuters reported on a meeting in which a senior Chinese official had threatened thirty foreign companies with antitrust fines and recommended they write “self - criticisms” about their behavior.

The most insane statistic about Apple’s business is this: The iPhone accounts for fewer than 20 percent of smartphones sold around the world, yet it routinely boasts more than 80 percent of industry profits.

What Apple was doing was akin to making 10 million Ferraris a year.

The risk of this approach is that it that gives too much power to the supplier.

Apple gave China something more valuable than profits. Chinese workers got engineering help from Apple’s best — tuition-free, on-the-ground training — for multiple hours a day, day after day, for weeks and months leading up to a product launch. The reason Apple gets Chinese suppliers to work for them, for zero profits, is because the Apple ops engineer, following Tim Cook’s orders, is sleeping on a mat in their factory.

Apple also spent hundreds of millions of dollars on machinery to put in its suppliers’ factories. By 2018, the value of that machinery specifically for China — known as China “long-lived assets” in the company’s annual reports — had grown to $ 13.3 billion.

Cook’s team grew to understand that the innovations it came up with would be mimicked in China, usually within a year. This was simply the cost of doing business there.

Apple understood that the overall effect of mimicry was that competitors were always one step behind. They were trying to copy what Apple was shipping versus what Apple’s going to ship.

Overdependence on Apple could create trouble, because Cupertino had a propensity to shift directions.

Apple even encouraged its China-based suppliers to feed the Android market. As a result, Apple gave birth to the Chinese smartphone industry.

The iPhone didn’t kill Nokia; Chinese imitators of the iPhone did.

Apple, in other words, set in motion a series of events that helped Chinese suppliers win more orders and advance their understanding of cutting-edge manufacturing. At the same time, Western manufacturing of electronics atrophied.

As Apple’s engineers spent thousands of hours codeveloping processes with local suppliers, they were modeling a domineering attention to detail and teaching problem-solving techniques with specialized machinery and different materials.

Worse, Apple was allowing Foxconn to take credit for all manner of investments.

Apple contributed greatly, creating millions of jobs and supporting a sophisticated supply chain that ricocheted well beyond its own needs. But its contributions were unknown because of Apple’s secretive, insular culture. Cook advocated something radical: Get the message out to everyone. By 2015, Apple’s investments in China had totaled $55 billion per year. Apple was in the top - tier of corporate spending,

The figure looked at investments that remained in China, not overall spend — a much higher figure that would include the cost of components in its devices, known as the BOM, or bill of materials.

iPhones selling in 2015 are above $200 per device. Multiplied by the 231 million devices Apple made in China that year, the iPhone BOM would alone be around $50 billion.

Apple was the world’s biggest corporate investor in China, a mass enabler of “indigenous innovation.”

At the time, Donald Trump was campaigning for president on his “America First” platform, threatening 45 percent tariffs on Chinese imports and promising, “We’re going to get Apple to build their damn computers and things in this country!” One of his top advisors, Peter Navarro, had cowritten a book called Death by China.

Cook reportedly made a $275 billion pledge to invest in China – a number so large that other corporate investments pale in comparison. Apple was promising that it alone would invest more in China, for the coming five years, than all Canadian and American private investment into Mexico from the signing of NAFTA in 1993 through 2020. That was music to the ears of China.

The technology transfer that Apple facilitated made it the biggest corporate supporter of ‘Made in China 2025’, Beijing’s ambitious, anti-Western plan to sever its reliance on foreign technology.

The paradigm shift Apple initiated was so consequential that it left Chinese officials convinced that its JV model was broken. In 2018, officials in Shanghai allowed Tesla to become the first foreign automaker to establish a manufacturing plant in the country without a local partner.

Tesla works intimately with and improves its third-party vendors, who then supply the local EV brands such as BYD. Tesla’s investment in China has worked out brilliantly for China’s EV sector. But not as much for Tesla.

Apple announced a $1-billion investment in the ride-hailing start–up Didi Chuxing. The investment stunned tech observers. “The deal seems like a calculated move by Apple to curry favor in China.” It surely hadn’t escaped Cook’s notice that his new partner was the daughter of Liu Chuanzhi, among the most politically connected tech entrepreneurs in China.

Apple was launching its first R&D lab in the country. In October, Cook told the mayor of Shenzhen that Apple would open a second R&D hub in the vibrant city.

In March 2017, Apple announced two more R&D centers, in Shanghai and Suzhou.

Apple risked having its image remade, too. In late December 2016, Apple pulled The New York Times from its China App Store, following a demand from local authorities. When Beijing asked for The New York Times to be removed, it requested that the app be removed from the global App Store, not just China’s. Apple didn’t accede to the demand.

But a few months later, when Beijing called for virtual private networks to be removed from the China App Store, Apple complied, and 674 VPN apps were deleted.

This was a massive concession, placing all iPhone users in the country in a splintered-off version of the internet.

The increasing presence of the Red Supply Chain raises troubling questions about Apple’s future.

Chinese companies exist in a different framework, one in which bringing glory to the Chinese state and upholding the party’s principles is paramount.

These goals aren’t necessarily in conflict with Apple’s priorities, but they introduce risks that are difficult to understand or predict.

In the past decade, Apple hasn’t experienced any growth in iPhone shipments, but it has managed to please investors with higher-priced units.

But local consumers began comparing the features of the latest iPhones to what was on offer from Huawei, China’s “national champion.” Chinese consumers were choosing to buy phones from Huawei. It competed with Apple in the top tier. Huawei’s latest Mate phone was awfully good, outshining Apple in features rather than just price. The Mate 20 Pro featured a larger screen with better resolution, three back cameras instead of one, double the memory, a bigger battery, and a faster recharging time. In early 2020. It began outselling the iPhone three to one in China, particularly threatening because it was taking a bite out of Apple’s luxury dominance.

But in 2019 the Chinese brand overtook Apple sales globally.

The student, as they say, had become the master.

Donald Trump had ascended to the US presidency threatening Apple; instead, he saved it.

In May 2019 the Trump administration alleged Huawei was a security threat.

He imposed unprecedented sanctions, depriving Huawei of Google services, including the Play Store, Gmail, YouTube, and other Android tools — a crippling blow for Huawei phones distributed outside of China.

When the sanctions hit, Huawei’s smartphone business collapsed.

Apple began to shift its global focus. As of late 2024, Apple’s India operations are only in the early stages of building up capacity for “new product introduction,” a much wider effort involving a greater depth and breadth of operations to source components, build prototypes and test them, and ramp to mass production.

Cupertino now has major ambitions to orchestrate “next - door” suppliers in India — industrial clusters comprising operations from a diverse set of vendors close to final assembly.

One current Apple operations engineer, having just returned from both countries, estimates that India will account for a stunning 60 percent of Apple’s manufacturing by 2030 — meaning that more Apple products will be made in India than in China.

This would significantly de-risk Apple’s operations.

The two major arguments supporting India’s potential are its enormous workforce and its cheap labor. In 2023, its population of 1.43 billion overtook that of China. Apple needs to make the shift, and it has basically told Foxconn: if you want to hold on to your iPhone work, you need to expand in India.

This is no longer just about Tim Cook’s legacy. This is about Indian Prime Minister Narendra Modi’s legacy.

But Apple’s most advanced chips are designed in-house and exclusively manufactured in Taiwan by TSMC. Today the main “system on a chip” in every iPhone, iPad, MacBook, desktop Mac, AirPod, and Apple Watch is being made on one small island.

And no foreign government can control TSMC by force.

Warren Buffett, Apple’s biggest single investor, is nervous. In early 2023 he sold his stake in TSMC, worth nearly $ 5 billion, citing geopolitical risks. Buffett slashed his stake in Apple from $178 billion to $69.9 billion, a reduction of nearly two-thirds.

There are five reasons to predict Apple’s relationship with China will face major risks this decade.

1) The Chinese company that poses the biggest threat to Apple, Huawei, is back with a vengeance.

2) The more Apple de-risks iPhone assembly and other operations from China to India, the more it could face a backlash from Chinese consumers and Beijing.

3) Then there is Apple’s push into “services,” the company’s fastest-growing and, on a margin basis, most lucrative division. Services becoming part and parcel of Apple products have varying consequences. When in 2019 the company rolled out Apple TV +, its Netflix - style streaming service, software and services head Eddy Cue issued just two directives to Apple’s content partners: no hard - core nudity and “avoid portraying China in a poor light.”

4) Apple’s push into artificial intelligence represents another unknown. With the launch of the iPhone 16 in late 2024, Apple revenues stand to be supercharged by Apple Intelligence. Apple has a monopoly on mining data from the iPhone owner’s emails, texts, and photos to produce more personal answers.

5) The comeback of Donald Trump all but ensures that trade wars, tariffs, and the threat of China as a high-tech rival will be consistent themes until 2030 and beyond. The “secret sauce” of how Apple trains America’s biggest rival with cutting-edge expertise could very well be in jeopardy. That Tim Cook personally donated $1 million to Trump’s inauguration suggests he’s well aware of the threat.

Apple taught China. Year in, year out, Apple took the most cutting-edge designs, processes, and technical understandings from around the world and scaled them in China.

The relationship Apple enjoys with China “could blow up at any time,” a former Apple senior director says. The company’s executives have tried to demonstrate to Apple’s board of directors that the firm isn’t overly dependent on China, but a person familiar with the presentation calls it a “con job.” They add: “There’s no way that they could diversify from China in any meaningful way within the next five years. It’s just impossible.”

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