Patrick McGee: How Apple joined forces with China’s brutal regime

Terry Gou, founder of Foxconn, the (now notorious) Taiwanese manufacturing company that produces much of Apple’s products, is one of the first people to realise how beneficial this situation can be. Apple has already become notorious for squeezing its contractors as much as possible on pricing – yet Gou accepts this, offering to pay all the upfront manufacturing costs. He “grasped earlier than anyone”, McGee writes, that “the value of Apple wasn’t the profits, it was the learning”. As other companies cotton onto this and adopt the same technique, Apple realises that “its presence in China was enabling technology transfer on an extraordinary scale.”

China welcomes this investment with open arms, subsidising huge amounts of land for new factories, bussing in workers from around the county to supply the labour, and removing roadblocks around new contracts. “They made it so attractive to the outside world,” one engineer recalls. At the same time, it becomes clear that the growing middle-class in China wants to own Apple products too, even if it means spending a month’s wages buying them. When Apple opens a store in Beijing in 2010, it sells $3.7 million of iPads, all in cash, within five hours – a worldwide record.

And yet: the more Apple invests in both training these contracted factory workers and paying for special machinery that could only be used for its products – in 2018 the value of Apple’s “long-lived assets” in China peaked at $13.3 billion – the more it becomes bound to the country. Foxconn hubs, for example, are now surrounded by hundreds of sub-suppliers that cater to Apple’s every whim. “Anything we wanted, we could get it,” one engineer recalls. “Whatever we needed, it would happen.”

Apple is notoriously secretive, but McGee proffers dozens of first-hand accounts of how the company essentially bumbled its way into becoming hooked on China. By the time Apple executives realise that the Chinese president Xi Jinping is ramping up repression at home and taking a more combative stance in international affairs, it’s too late to untangle the relationship: those business ties, McGee writes, are “unbreakable”. In 2016, when the Chinese authorities make it clear that they can remove, whenever they want, the cheap and plentiful labour on which Apple relies, Cook is compelled to make a trip to the Chinese Communist Party headquarters. The company pledges to invest $275 billion in China over the next five years. It does not, unsurprisingly, announce this investment to the Western press.

And the role-reversal hasn’t stopped there. Since 2017, Beijing has made increasing demands of Apple, with state-subsidised Chinese companies winning more manufacturing orders, and greater control being applied over what content is allowed on the iPhone. Apple has started to look to India for more of its manufacturing needs, but 90 per cent of the final assembly of its products still occurs in China.

McGee gives Apple, to my mind, too easy a ride over how it has largely decided to ignore the terrible working conditions in Chinese factories in favour of getting its products made as quickly and cheaply as possible. There is, as well, too much detail on some of the smaller characters who helped build up Apple’s manufacturing power. But as an insight into how this odd couple became so entwined – in Apple’s manufacturing and engineering processes, design secrets, business partnerships and a large chunk of its sales – Apple in China is astonishing. Let’s hope for Apple’s sake that Donald Trump doesn’t read this book.

Patrick McGee is a compelling keynote speaker, bringing over a decade of global journalism experience from the Financial Times and The Wall Street Journal. His award-winning reporting on Apple, electric vehicles, and emerging technologies offers audiences unparalleled insights into the forces shaping our digital future. As the author of Apple in China, he delivers a deeply researched, behind-the-scenes look at how the world’s most valuable company became entwined with America’s biggest rival. With his engaging storytelling and sharp analysis, Patrick provides event attendees with thought-provoking perspectives on technology, business, and global markets. Contact WWSG to host him for a speaking opportunity.