How Apple Accidentally Built China's Tech Superpower and Can't Escape with Patrick McGee

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
I quote a study that looked at 84 countries in terms of
internal migration, and India was dead last.
That's not a knock against the culture.
It's just not part of the culture that young women in
particular leave home at 17, go to the other side of the country
and work in the factory. You don't have that.
So what's the phrase culture eats strategy for breakfast?
Apple might have a plan, but like, good luck upending 5000
years of Vivian culture to make it happen.

(00:24):
Welcome to Analyse Asia, the premier podcast dedicated the
dissecting the pulse of business, technology and media
in Asia. I'm Bernard Liu and today we are
exploring how Apple, once the world's most valuable company,
becomes so intertwined with China that the decoupling
between them is almost impossible.
With me today is Patrick McGee, San Francisco correspondent for

(00:45):
the Financial Times and author of the newly released book Apple
in China, the Capture of the World's Greatest Company.
Spanning about 448 pages and on 200 interviews, he unraveled
Apples century defined Faustian bargain, concentrating 90% of
his production in China, investing probably a staggering
of 235 billion or we equated as the Marshall Plan and training

(01:08):
millions, effectively transferring Apples
technological DNA into the heartof Chinas industrial descent.
In doing so, he demonstrates that the story of apples
dependence on Chinas manufacturing and supply chain
is the history of contract manufacturing of East Asia
countries pull through apples lens.
I finished the book over my worktrip in Philippines and I have
to say it was engaging to the point that I was glued to the

(01:30):
book over 3 hours on the plane. So, Patrick, welcome to the
show. Thanks, Bernard.
Great introduction. Thank you.
Yeah, like all stories, I alwaysstart off with my guest origin
story. So how do you start your career?
Well. I studied religion at
university, and I spent four years telling people that no, I
was not going to be a priest. I was an atheist studying
religion. Really, the anthropology, it's

(01:52):
an ecology of religion. I mean, if you're an atheist,
the study of religion is even more fascinating because if you
don't think anything exists, then why does it have such a
force over human action, You know, human history and
everything else. And so it's a fascinating
degree. And I got really involved in it
for my four years in Toronto. I'm Canadian.
The trouble is, nobody cares about your study of religion.

(02:13):
No, no, no job, You know, no lawfirm or, or any corporate entity
is like looking for students who've studied religion for four
years. So it's great for just general
education and the humanities. It's good for cocktail parties.
It is not good for job prospects.
So really what I sort of fell into by happenstance was a job
at a Canadian magazine just because I liked reading, writing
and thinking. And so I sort of fell into it in

(02:35):
that way. And then I happened to find
myself in Washington with a job writing about economics,
macroeconomics, a year before the collapse of Lehman Brothers.
So that sort of just forced me to become a financial
journalist. And then when the Financial
Times hired me to live in Hong Kong, that was sort of an
introduction to Asia and China in particular.
I've been there before, but in terms of a career.

(02:56):
And then I spent three years in Germany covering supply chains
in the automotive industry, a lot of stories about the
Volkswagen scandal. And then I covered Apple for
four years out of California. So if you do the Steve Jobsian
thing of connecting the dots backwards, you get basically
like China supply chains, Apple.And that, I think, is the
quickest origin story of my book.
So I just only have one questionbefore I get to the means of

(03:17):
Jacob. There's a lot to dive in.
So from your career journey, what are the lessons you can
share with my audience? I suppose I just, I feel like I
had a lot of lateral moves in mycareer and a lot of, you know,
things that I didn't love about the earliest jobs I had.
I mean, I was a municipal bond reporter for two or three years.

(03:38):
That's kind of boring in a certain sense, but anything is
interesting if you give it enough attention.
I mean, it's like $4 trillion market and it, it has to do
with, you know, how cities fund themselves in this sort of tax
exempt bond market. And I think you just have to
sort of have a little bit of faith.
Remember, I'm, I'm, I'm an atheist here, but have a little
bit of faith that whatever you're learning is going to

(03:59):
somehow add up to a unique, idiosyncratic worldview.
Because the more you follow somepath in your own way, the more
sort of diverse your own worldview becomes.
And so if you're just sort of embracing each stage, then I
think you end up with something that's unique in the long run.
So in other words, you can oftenthink what, what is there any

(04:19):
point in me reading the same books as everybody else?
But if you have like 3 or 4 different interests that are
wildly different and you're reading books about those or if
doing some travel and experiencing that, you know,
you're probably getting way off the beaten path in, in ways that
you don't even know. So I don't know, so long as
you're sort of putting effort into what's what makes today
interesting or today fulfilling,I think the long term kind of
takes care of itself. So I want to talk to the main

(04:41):
subject of this about your book Apple in China.
I want to start the structure ofthe book begins on the date on
15th of March 2013, a day after President Xi Jinping is
inaugurated, China's new president.
I guess what happened on that day to Apple?
Why is it a defining moment for Apple's history in China?
You know, when I worked out the contours of the story during the

(05:01):
book pitch, it was always clear that this was the day that was
going to open the book. And it's because it's the
beginning of what I call the political awakening.
So it's it's part five of the book, but it's also in the
prologue. And so effectively, like Xi
Jinping has this new sheriff in town impact on Apple
immediately. And so one day after he becomes

(05:22):
president, and we're we're really talking about 12 hours
after his first press release, Apple employees in Shanghai are
confronted by a whole bunch of media, including Western media
like CNN, but also a bunch of Chinese media who have all been
briefed by MOFCOM as to there's going to be a big program
tonight criticizing Apple for its warranty differences.

(05:42):
So this thing is called CCT VS Consumer Day.
And it's every March 15th, I think of every year goes back to
1991, really the days of Deng Xiaoping.
And the idea is that companies are called out for not living up
to the socialist ethos of China.For most of the 90s, I think all
of the 90s, actually, it was local companies.
But you began to have Western companies come under criticism
in the early 2000s. 2012 it was McDonald's.

(06:03):
And in 2013, it's the world's most valuable company.
It's Apple. This is a time when Tim Cook is
only pretty new to to not to Apple, but just being CEO.
Steve Jobs has passed away maybe18 months before.
And Apple doesn't really know what it's dealing with.
They are at the time the most wildly successful, like
production producer, maybe you would say manufacturer in China.

(06:26):
They're also the most successfulretail company that's not
Chinese operating in the country.
And yet nobody senior from Applelives in the country.
They really don't understand theculture.
They really don't understand thepolitics.
And this is the first like, oh, shit moment that they have.
And it's really interesting thatit's so quickly after Xi Jinping
comes into power because he is taking China in a very different

(06:46):
direction. And arguably the first entity to
really understand that, or at least that had the opportunity
to understand it, is Apple. So I could go on.
But I mean, really, it's the origin story of why Apple has to
begin to understand how to speakthe local language.
Before we get to this part 5, I want to walk back all the way to
the beginning of the book. I think what I appreciate in

(07:08):
reading the book is that you tell the story of Apple right
from the beginning of the history of their supply chain,
going back to the moment when Steve Jobs returned to Apple in
1997. Apple's manufacturing supply
chain only spent through across a few countries where I live
with Singapore, Japan and Taiwan.
What was the world like for Apple before going to China in
the supply chain? The thing so I, I hate, I don't

(07:31):
like that you're calling a supply chain just so I feel like
we're losing the reader already.No, no, no, no, no.
It's interesting because it you're telling me from the way I
read the book was that it's likethe history of Asia's
manufacturing total Apple's lens, which I thought is a very
interesting perspective from my point, which just says, I think
Chris Miller's book, what was about the history of
semiconductor from Asia's point of view.

(07:52):
Yeah, no, absolutely. And if you don't know, Chris
Miller and I share an agent, a publisher and an editor.
He was the person who said you should turn this into a book.
And I took that very seriously. And we've never met.
And yet I would still consider him a mentor.
I mean, and Tripour's a fantastic book.
So if listeners haven't listenedto it or read it, they
absolutely. Should he was on the show, by
the way? Just to know.
I know, I know, but that doesn'tmean everyone's read it.

(08:14):
Yeah. Fantastic book.
The thing that people need to remember is that Apple
manufactured its own products from the founding of two Steves
in a garage in 1976. Really, up until around 2003
when they close their factories in California, you know,
basically close their factory inIreland and more or less close
their factory in Singapore. And So what that means is that
given like Steve Wozniak, geniusof being able to disassemble a

(08:36):
computer, you know, improve it and then reassemble it and Steve
Jobs, like visionary appeal and marketing prowess.
I mean, that is the origins of the company.
Manufacturing is baked into the DNA of Apple.
The companies that are founded 10 years later that are
replicating what IBM has done inthe PC do not have that same
ethos. Because what's happened in that
interim period is that the IBM PC has come out and then been

(08:58):
cloned and sort of, I would say famously, except that it's
really not all that well known. But this is like the birth of
contracts manufacturing in in inthe West.
I mean, this is Foxconn technically exists, but you
know, this is Western companies like S CI, Jabil, Select on
Celestica. And there's this interesting
thing that happens where everybody's using Windows,
everybody's using Intel. And the way that you get market

(09:19):
share is just through boring stuff about cutting cost and
cutting margin. So it's a really a sort of
boring war over distribution, logistics and manufacturing
efficiencies. And Apple isn't really part of
this battle, and they're certainly not leading it.
They're trying to do everything themselves at a time when IBM
and everyone else is beginning to outsource, first the
manufacturing of the circuit board, but then the assembly of

(09:40):
the entire computer. And as those companies go to war
with each other for market sharebecause it's all low margin, so
it's all about high volume, theyare the ones who shift to Asia.
This is really like the rise of Taiwan as an electronics
powerhouse, and same with Japan.And so Apple is nearly bankrupt
as a result of not playing this game by 1996.
And so they have to sell their own facility in Colorado in

(10:03):
spring 1996. They are literally days away
from bankruptcy. And I had to tell this story
because you need to understand that DNA of Apple is
manufacturing. So when they go into
manufacturing through outsourcers, they are
orchestrating the process in a level of maniacal detail and
without without any tolerance for defects in a way that none

(10:24):
of the other companies are because most of these other
companies never had manufacturing as part of their
DNA. So I don't even think
outsourcing is the right term because Apple takes such control
of its supply chain really down 4 tiers that they're not just
handing over blueprints and saying, here's our design, build
this for us, let us know when it's done.
They are sending plane loads of engineers to those factories and
today hundreds of factories across China to get it all done.

(10:46):
And this is sort of the wild story, the missing topography of
Apple that I don't think anybodyreally understands which.
Comes to the point we often toldabout the successful partnership
between Steve Jobs and Johnny Ice who lead the industrial
designer ID team. The story that is not told is
how that design is being translated into production.
I think in the early days there was this point where the new

(11:07):
iMac was UN manufacturable. I think there is something to
learn from that episode. What did Apple do to correct
itself that issue later on? Because it was very difficult to
manufacture, so they had a lot of conflict between the
industrial design team and the production team.
Yeah, I mean, this is sort of the the secret sauce of Apple,
which is that they have this pyramid structure where ID sits

(11:30):
at the top. That's industrial design.
So Johnny Ivan team, you know, only about two dozen people are
putting together like the look, form factor and feel of, of
products. So, you know, why is the iMac
translucent and Bondi blue? It's because a bunch of guys on
ID all thought that was going tobe the best way to do it.
They send it over the fence, if you will throw it over the fence
to PD product design, which is another level of genius.

(11:50):
But it's a different team. And they have to make sure that
we can actually fit in the electronics and the circuit
board and everything like that. And it really is worth knowing
those guys are geniuses as well.It's just a different level of
genius. They sort of throw it over the
fence to manufacturing design. This is these this is an
instrumental group of people at Apple that has given has
honestly no pink has been sharedon them before.
So MD way back in the time, by the way, they're called supply

(12:12):
base engineers. MD comes later to sort of give
them like the congruence of likemedical doctor is actually part
of it because they're feeling under underappreciated.
And so they're giving this two letter abbreviation just like ID
and PD that's much, much later. But nevertheless, the position
itself already exists. And these are the people who who
go, as I said, by the plane loadto factories at first in places

(12:32):
like LG and Gumi, Korea to really teach all the
manufacturing partners how to how to give a shit.
To quote Steve Jobs, you know, there's a Chinese phrase, I
don't speak Mandarin, but it's just about good enough.
And Apple is never about good enough.
They care about the back of the computer.
They care about the design of the inside of the computer.
And this isn't intuitive. This needed to be taught.

(12:55):
And so Johnny I've and team werereally redefining the aesthetics
of desktop computers, but then later handheld items like the
iPod, and they needed partners that would live up to Apple's
quality. So what's really crazy is that I
think anyone who's read the fullbook gets to an understanding
that actually what I'm saying iskind of commonsensical.
Even though if you just hear a 92nd sound bite of me talking,

(13:16):
it can sound like I'm totally unhinged because the numbers are
just unfathomable. And we'll get to that.
But the reason why it's sort of commonsensical is because there
are Hollywood movies about SteveJobs going on a tirade and, you
know, lifting up all of the people around him in terms of
what they're capable of. And yet we've somehow missed
that. If you take that culture, if you
take that mentality, and then you build 230 million iPhones a

(13:39):
year someplace else, of course that culture has to be
transplanted into another country.
And so unless you think that China had that culture in the
late 90s and early 2000s, and obviously it didn't, then of
course, Apple had this massive impact because there's literally
1700 facilities in the Apple supply chain.
And you needed to inculcate thatculture into all of them to make

(13:59):
things at all, and especially tomake things in the volumes that
they've that they've created. So you know the book is about
China, but it's really just a manufacturing LED history of
Apple, Which sounds boring untilyou realize that it's a
character driven narrative with all sorts of fascinating people,
no? Which also explains why a lot of
people in Asia are reading that book, because it really tells a
very important story of what happened in the last few decades

(14:19):
that lead to the rise of the region.
But can I just? Can I just jump?
I just want to jump in just to say one thing, is that sometimes
the perception of the book, probably because it has a dragon
eating an apple on the cover, that it's anti China.
And it's like, if anything, I'm saying Apple doesn't give China
enough credit. China was, yeah, absolutely
paramount to Apple's success. I totally.
Agree with you on that. I totally agree on you that I

(14:40):
think that the curature of the book was wrongly interpreted.
It's actually telling you a lot.Why is it so difficult to
decouple from China? Not just because Apple is
innovative, but the Chinese are also innovative at the same time
with the manufacturing process one.
Interesting part of this puzzle is Terry Go, the founder of
Foxconn, otherwise known as Uncle Terry in the book.

(15:03):
And then there is this very famous phone call to an
important executive where he says I can fix this.
Who is this important executive and what it meant for Foxconn to
become an important contract manufacturer for Apple moving
forward, specifically in the Apple development cycle, which
is the pyramid structure you talk about with Johnny I from
the top. OK, so.
To get 15 seconds of context here, LG is so successful

(15:26):
building the translucent iMac out of Korea that Apple
basically decides to take themselves out of the equation
and put all final assembly for the product into LG.
This is the first major product to to be given to an outsourcer
like this. But Apple has, as we talked
about earlier, operations and three continents.
So it basically asks LG to do the same thing.
So LG sets up operations in Mexico and in Wales.

(15:47):
And I sort of feel like I don't care how much you think you know
about Apple, like you don't knowthe details about what happens
in Wales and Mexico. This has just never been written
about before. And short, Long story short,
it's a disaster. It's a great strategy.
It doesn't work out at all. You know, whatever reason the LG
executives just are not able to sort of make this strategy work.
Terry Grow calls up Tim Cook, senior vice president of

(16:08):
operations, and says, I can fix this.
Like give me a chance. The relationship there really
matters. So Tim Cook is mostly known as
an IBM executive, but at the time he was at Compaq and Compaq
in the late 90s was the king of the clones, most successful PC
company on the planet at the time.
And so Foxconn and Compaq actually had this relationship.
So Terry Guo and Tim Cook already know each other.
Why Tim Cook would leave the most successful company for

(16:31):
Apple, which was basically on the verge of bankruptcy, you
know, is a real mystery. And I think Terry Guo, I don't
know this. I think he gets intrigued by
that because Tim Cook I would describe as competence
Incarnate, and the idea that he's going to go to this
fledgling company to make a difference is intriguing to him.
So he senses opportunity. And Terry Guo really understands
more than anybody else that the value of working with Apple is

(16:53):
that they're doing these incredibly different designs.
They're not big in volumes. You're certainly not making much
money from them. They will really negotiate the
hell with really negotiate with you to get the best deal for
them and not for you and yet to understand their designs and to
fulfill their orders. They will train your entire
workforce by having America's best engineers right apples best

(17:15):
engineers come train you. And so Terry Go is brilliant at
this. And I have this funny anecdote
from Tony Fidel, for instance, where, you know, the Apple
engineers would show up one day after training someone for three
months or whatever, and they would find that they don't know
anybody in the room. And it's because Terry Guo had
taken all the engineers who'd done like a semester of training
with Apple and then just moved them on to the Dell line, moved
them on to the compact line where they can use those skills

(17:36):
and actually make money. And they he just like, put a
whole bunch of new students in front of Apple as if a new
semester had started. And Apple just had to like, put
up with him be like, well, I guess we'll train these people
as well. So yeah, No, absolutely.
I mean, look, Terry Guo is the equivalent of Henry Ford a
century ago in America. I mean, it's hard to overstate
his importance on turning Shenzhen from a series of
fishing villages into the megapolis it is today.

(17:59):
But the thing that I'm emphasizing is that, you know,
Apple has been Foxconn's biggestclient since 2000, and it's.
Taiwanese and it's. Taiwanese, and the fact that
it's Taiwanese and the role of the Taishung, the Taiwanese
entrepreneur is building up mainland China is absolutely
instrumental to the rise of China and absolutely
instrumental to the rise of Apple.
The templates which Apple will eventually use in China is to

(18:20):
send their teams in Cupertino toChina where they will share the
knowledge on manufacturing with the local manufacturers and even
Co creating the techniques with the supply chain.
I think Foxconn's education by Apple is probably the most
important stepping stone that's eventually brought to China.
Can you talk about the process in how Foxconn distinguishes
itself against the other contract manufacturers in the

(18:40):
Asian markets, for example, the Korean and the Japanese?
I think that is the real difference when that got moved
to China. The OEM versus ODM, yeah, that's
right. I don't want to lose your
audience because I think it's a little bit wonky, but so my
audience. Is very wonky.
All right if you need to. Fast forward, go through it.
OK, so in the late 1990s, reallywhat the Taiwanese were trying

(19:00):
to do, companies like Asus, the predecessor organization of
Pegatron, companies like Quanta,they're all trying to be Odms
original design manufacturers. The reason why is that, and it's
really low value to just do assembly, but if you can tell a
Western corporation, look, we'reactually going to take over your
design and take over your R&D, we will do that stuff.
And then you can basically pick a computer out of a catalog and

(19:21):
we'll just badge it with your brand name.
And that's higher margin for them.
They can get paid more for that.Terry Guo does something
different, which is that he onlyis interested in being an OEM,
original equipment manufacturer,which means that he's never
going to compete with you. He's just going to take your
designs and move heaven and earth to get it done.
But the significance of this is basically the politics, because
in order to be a successful OEM,you're not just wanting to do

(19:44):
the final assembly, You want to do all the adjacent tasks.
You want to be as vertically integrated as possible, right?
You want to do the metal stamping, the plastic injection
molding, all the tooling, you want to set up the production
line, etcetera, right? So none of that's R&D, none of
that's, none of that's the high end engineering.
And yet it's instrumental for what Apple needs.
And in order to do that, well, you need labor intensity, you

(20:04):
need a lot of people, which means you need a lot of space,
you need a lot of real estate. So Terry Guo isn't just
brilliant at manufacturing, he'sbrilliant at parlaying Apple's
orders into political deals withlocal officials.
To get the land and to get the migrant labour, he begins in the
1980s building dormitories for the migrant labourers to have a
place to stay. Because you have to understand,

(20:25):
like the people that are workingin Shenzhen aren't locals to
Shenzhen, right? They're migrants that are coming
from the West, not really as part of a political program
under Deng Xiaoping. It's really just something like
they're like fleeing to go senseopportunity.
And the communist power almost has to put up with this in a
certain way. I mean, that probably needs to
be more history written on this subject.
So it's kind of fascinating and Apple just able to sort of take
advantage of this situation better than anybody else.

(20:46):
So they are late to China. I mean, that's worth knowing in
the same way that they are late to MP3 players or they are late
to smartphones, but they just dobetter than everybody else.
They are late to outsourcing, they're late to China, but they
do better than everybody else. So the way that I explain it is
that someone like Dell or HP, they see China for its scale and
for its low cost, right? A way of saying they see it for

(21:08):
its margins or maybe even it's just lower customer prices.
Apple sees the same dynamics andunderstands that they've got
unconstrained design potential. That no matter what Johnny, I've
comes up with, if you've got people earning less than $0.50
an hour, hard working people that will work 12 hours a day in
factories the size of football fields with world class

(21:28):
machinery purchased by the Chinese government.
Because Foxconn's Terry Blow is a genius and getting all that
stuff, then you can build anything.
And that's really what gives birth to the iPod and the
iPhone. So the.
Foxconn has managed to use Shenzhen in China as a base and
eventually scale the manufacturing to what we call
China's speed and ability to getthings done in China at a rapid

(21:49):
pace beyond the comprehension ofWestern visitors.
In fact, now China's speed is almost everything, including AI
as well. How?
Yes. Apple eventually transfer all
that manufacturing into China and created the dependency for
themselves. Well, OK, so the standard
narrative would tell you that Tim Cook comes in 1998, He moves
everything to China and closes Apple factories.

(22:10):
I think this is basically dead wrong.
He is not the architect of the move to China, and it's not that
somebody else is the architect. There is no architect.
You have to understand that the contract manufacturers and the
assemblers are in fierce competition with each other, and
they are the ones who are movingto Asia.
And then with what's there in Asia, they are the ones moving
to mainland China, right? In other words, in order to win
orders, in order to win volume and in order to do so at

(22:31):
profitable levels. They are the ones who quote, UN
quote, discover China, especially after China has
entered the World Trade Organization and has these
bonded zones, right, these tax exempt areas where, you know,
you maybe you can import things without tariffs and you can
export things without duties andsuch.
So it's state directed from the get go because to get migrant
laborers to your factories, it'soften the state that's literally

(22:51):
going out to these villages in like state sponsored buses and
then bringing people to the factories.
Tim Cook's not the architect. Yeah.
It's just that everything in China begins to look more
efficient, more price competitive and so forth.
And so if you have as Apple did,I mean in 2000, Apple is
building products in Singapore, California, Wales, Czech

(23:13):
Republic, Korea, you know, like two other places.
But China is just beginning to look like the place for every
single product. And so there's no grand
strategy. It's just that like everything
you're building, whether it's a laptop or a, or the iPod or a
desktop, every decision is just leading you to China.
And so what's really interestinghere is I think you have the
dynamic where the West Company thinks, wow, we're powerful

(23:35):
suppliers are doing anything to win these orders.
And I think it's 2020 hindsight that it's like, no, we're
witnessing the emergence of a superpower, the siren call of an
emerging superpower luring in these companies because they
understand from the get go and they've got, you know, joint
venture models going back to the1980s that if Western companies

(23:55):
are here, if they're operating here, there is just an implicit
transfer of knowledge where our workers learn these skills and
then we can thrive on our own. And so that's the story of many
a company, you know, many an industry, high speed rail or
what have you in China. And that's the story over a
longer period with Apple. I mean, Apple's sort of like the
the king of all companies have ever sort of quote, UN quote

(24:17):
like conquered the Chinese market but then found itself in
competition with the very suppliers that it built up.
So one. Colorful character from this
story that you're telling is this guy called Tony Belvins and
how he negotiates. The other thing that I also like
about the book is I call the phenomenal Apple squeeze on
Apple's suppliers. With this mantra, we won't pay
you much, but the experience will be invaluable.

(24:39):
Can you talk about Tony's negotiating style and the famous
Apple squeeze? And I think what is really funny
is the irony on how the Chinese government used it back on Apple
later in the relationship. Yeah, okay, remind me of the
second-half of that question in a minute.
So, yeah, it's funny, I haven't been asked about Tony Blevins in
a in an interview, and he's justan amazing character.
I mean, he's someone who grows up in a really impoverished zip

(25:01):
code in America, in North Carolina.
And he's just clearly very talented.
He's very smart, but he's not book smart.
I don't know that he reads much really at all, but he's got real
St. smarts. And his father has a side hustle
selling used cars. And he and his brother have like
a competition every month when they're teenagers.
And the competition is who can sell the shittiest car for the

(25:21):
most money, right? And so he sort of has this
mentality of I won't have a penny wasted in negotiation.
And he's just absolutely ruthless.
And he would argue as he does. And you could find this on
YouTube, for instance, that, youknow, you either had to be
ruthless or you weren't in the game at all.
I mean, I quote somebody who says, you know, looking back 20
years, the only companies that can negotiate with Apple were

(25:44):
themselves assholes. And if they weren't assholes,
they don't exist anymore. I mean, that's the nature of the
game. And so he sort of embodies this
temperament. And my opening scene with him is
that, you know, he goes to theselawyers for Inventec when
they're when in Taiwan, when they're wanting to build the
first iPod, which is built in Taiwan, not China as most people
think. And he basically says, you know,
here's the contract. We don't have time for you to
read the contract. You just need to sign it now

(26:05):
and, and we'll give the deal. And of course, they're aghast.
They're thinking, you know, like, well, multiple lawyers
need to read the contract and weneed we need to go through it
with a fine tooth, Cole and all that.
And he gets them to sign it without even without even doing.
I only use that as one anecdote when I was trying to Fact Check
that, I talked to somebody that was pretty senior and they were
like, Oh my God, Tony did that all the time, right?
That's the kind of power he had.I mean, he just knew how hungry

(26:27):
the contract manufacturers were for Apple orders and so that
ends up being instrumental to their success.
Yeah, the Apple squeeze is my coinage and I'm not trying to
boast about it. I'm trying to distinguish it
from some reviewers who think that it's the term used within
Cupertino and it's not. Or if it is, it's quite a
coincidence cuz I made that myself.
The Apple squeeze is basically, well, to give it a bit of

(26:49):
context, in 2013, when Xi Jinping, as we discussed, goes
after Apple, he goes after them because it looks like this
exploitative company, because the more a company like Foxconn
works with Apple, the lower their margins are.
I mean, Apple makes less money in pure dollars than Foxconn for
the first four years of their partnership from 2000 to 2003,
right? Foxconn makes more money and has

(27:11):
higher margin. I mean, that's incredible.
But by 2012, Foxconn's margins have collapsed by about 2/3, and
Apples have gone up by 25 times from 1% to 25%.
So there's all kinds of reason why you would look at that and
say Apple's an exploitative power.
They're not in China for China. They don't seem to be helping
indigenous innovation. And Apple flips this on its head

(27:32):
by explaining what I call the Apple squeeze to top Chinese
officials in May 2016, when Tim Cook himself goes to
Zhangdanghai and speaks to the high powers of the CCP
leadership at their citadel of communist power.
So the Apple squeeze is my coinage for how Apple would say
to their suppliers, look, you are not going to make a lot of
money from us. You might even lose money at

(27:52):
times. You're going to earn 1%.
Maybe things are really efficient.
You'll earn 2%. But we are going to train the
hell out of your whole team. And what you do with those
skills afterwards is sort of up to you.
So it's kind of this amazing thing where they're having to
tell Chinese officials you have no idea what sort of impact
we're having on your country. And the numbers they come up

(28:14):
with themselves internally are insane.
And so the numbers that I keep using on the speaker circuit
here is that by Apple's own estimate, they have trained 28
million people, so greater than the labor force of California.
What's the population of Singapore?
Well, 5:00 OK, so way way biggerthan the entire population of
Singapore. I mean just consider like if

(28:34):
everyone in Singapore had been trained by Apple, like that
would be significant. And it's 6 times that I would.
Rather, they have that actually OK.
But it's really hard to get yourmind about that.
And then Apple does its own internal study and realizes that
they're investing $55 billion a year into Chinese factories,
which is such a large figure that I couldn't find any
corporate equivalent. So I had to go to government

(28:54):
efforts. And the comparisons I use, I
think use 4. But the two that people like are
I wanted to compare it to the Marshall Plan just because it
seemed like a nation building effort in terms of the impact
they were having. That's what I was getting.
Like anecdotally, I didn't thinkthe numbers would actually
match. So when I went to go look at how
much the Marshall Plan was and converted it to 2015 dollars, I
expected it to be quite a lot, quite a bit larger than what

(29:16):
Apple was spending in China. And in fact, Apple was spending
double the annual expenditure ofthe Marshall Plan.
If readers don't know, Marshall Plan is like, you know, the
American LED effort to help revitalize 16 countries after
World War 2. So for for a single corporation
to be spending double that amount in a single country with
the ruthless efficiencies that Apple has and in the targeted

(29:36):
area of high tech electronics, which is XI Jinping's most
desirable thing to for China to be good at.
I mean, that's just incredible. And that's where it's very much
like chip war in the same way that Chris Miller tells the
story of an industry, but it gets geopolitical because of the
nature of of how the the manufacturing gets diffused
around the world. My history becomes geopolitical
because Apple is just such a major presence and they end up

(29:59):
having in this enormous influence, not really on China,
the entire country, but on four major industrial clusters where
by Tim Cook's estimate, you know, they they have 3 million
people working on Apple productswithin any given 12 month
period. So just enormous influence and
somehow the story hadn't been told.
So I'm going to. Get to the interview.
So what is the one thing you know about Apple in China that

(30:20):
very few do? Well, it's going to be different
now that the book is published. Would have had a much better
answer 5 weeks ago probably. But if, let's say you were to
rewind back to the five weeks, what would you think?
Oh, I. Mean it would just be what I
just said essentially. I mean, sorry to give you a
disappointing answer, but the idea that Apple had a nation
building like influence on Chinais I think a narrative that

(30:43):
unless you have the context, sounds just insane.
But I haven't come across a single person that has read
through the whole book and then says, I think you're overstating
your case or I think you're wrong.
I had a whole bunch of people that worked at Apple who I never
had any contact with, including people that I tried to reach out
to who just never responded, have in the past month read the

(31:03):
book and said, like, you nailed it.
Like you got this right. That is the influence we had.
Or I've had people say, I alwaysthought we had the power.
I didn't know that there was a longer term strategy sort of
being used against us. But nobody has said you're doing
the math wrong or something likethat, which is maybe what my
biggest worry was that I was somehow missing something.
Because it is a ludicrous thing to conclude.

(31:24):
Yeah, I find. It very surprisingly that the
critics of the book keep disputing that number.
It's not important. It's actually the kind of
expertise that Apple has broughtto trade China.
So I want to get to the second-half of the story.
Yeah, Just to round out that point, Yeah, the numbers are the
easiest thing to convince you that we're in the ballpark of
being correct. But it's actually the anecdotes
and the sort of efficiency on the other things like that I

(31:47):
think are actually more important.
The numbers actually aren't thatimportant.
They're just indicative that we're in the right ballpark.
Yeah, this. Is the right narrative to to
place I want to get to the next half of the story so after the
2013 moment, what are the steps that Apple takes to resolve
those issues that is brought up by the Chinese government?
I think you talk about they started a proper way of
messaging to the Chinese government.

(32:08):
That was the first step, so it's.
Worth knowing that in 20/13/2014, I mean Apple is
seeing a bunch of problems in China.
I mean laws are being introducedthat are like existential to how
Apple does its operations. So, for instance, Apple often
relies on temporary workers, youknow, what's called the the
dispatch labor system in China. And this is migrant labor that
you know, is larger than 300 million people in the country.

(32:29):
So it's just a larger labor force than the United States.
They're hard to hard to grapple.Get your head around that.
But the laws exist federally, but the enforcement is local.
And so Apple begins to understand the way out of this
isn't to upend our operations and not rely on temp labor.
It's to do wink, wink arrangements with the mayor of

(32:50):
the city where we're developing things because it's not supposed
to be enforced. That is not the point of the
law. The point of the law is for
apples to be put in a bind wherethe the the use of the law could
be used against them. But it won't be if you just act
the right way and you demonstrate the way that you're
helping the local cadres. So that's kind of fascinating.
So, you know, it's worth knowingjust like other companies are

(33:13):
really being put in a buy in tier.
So I rely on a Reuters report that for instance, 30 different
companies were all in a room together.
Like, you know, the representatives and some Chinese
officials said like we're issuing anti trying
investigations against all of you.
Effectively, if you put up a fight will double or triple your
fines. And the example that I go into
is Qualcomm, which has a three-year antitrust battle with

(33:34):
China and eventually signs up for a joint venture.
OK, so it gives Beijing what it wants and pays $1,000,000.
And the quote I have from somebody is something like they
stole our intellectual property and made us pay them a billion
dollars, but at least we didn't lose our business.
And you know, shit hits the fans.
So much for Qualcomm that they actually refused to send people
to China because they worry they're going to be kidnapped.

(33:54):
I mean, this is the climate thatApple finds itself in.
And so they hire or name eight people who call themselves the
Gang of eight, very senior, these are the first senior
people living in the country. And it's because they worry
their products are going to be blacklisted.
And so for the first time ever, they have people running, you
know, from within the country, government relations, Apple
University procurement operations, third party channel

(34:16):
sales, Apple retail, etcetera. And you have like 2 vice
presidents in the group and, anda number of, you know, senior
directors of some sort. And they're supposed to be the
eyes and ears of Cupertino on the ground.
And they're the ones who basically come up with what I've
called the Apple squeeze, where they basically recommend that
that Apple sort of get outside of its own worldview, which is

(34:37):
very secretive, and instead singfrom the hilltops if necessary,
so that every official in China realizes we are having a
dramatic influence on what Beijing calls indigenous
innovation. And this is my wording, of
course. But Apple realizes in the course
of their own study, we are the biggest supporter of made in
China 2025, which is an enormousclaim because made in China 2025

(34:59):
when it was when it came out 10 years ago, it was considered
immediately by Congress and by Washington writ large this anti
Western plan where China was going to sever itself, sever its
reliance from the West to be self-sufficient in robotics and
automation and everything. The idea that Western companies
are helping it at all is a big claim.
The idea that Apple more than any other edge deal on the globe

(35:20):
is the biggest supporter, the biggest cheerleader made in
China 2025. It's hard to overstate what I'm
alleging there. So. 1 key member from the gang
of 8 is a person by the name of Doug Guthrie.
I think. Doug Guthrie, yes.
Yes. What did the Apple executives
get right and wrong about China before he joined?
And I think one of the most interesting part is how did he
educate the Apple executives in Cupertino, which is in the

(35:42):
headquarters on China? So we all know that Foxconn is
sort of the main assembly partner to Apple.
I think what people don't know, and what I certainly didn't know
as an Apple reporter, is that before 2013, before Consumer
Day, Foxconn is also the companythat Apple has outsourced its
government politicking to. In other words, Foxconn, because

(36:04):
it's the final assembly group, it's sort of the center of the
industrial cluster. And then what you have around it
is the companies, some of them Foxconn subsidiaries, but some
sometimes not, that are doing things like the glass, you know,
I don't know the memory, the, anything you can think of in the
phone, right? There's the chassis, the plastic
injection molding, et cetera. And so they have all sorts of

(36:25):
enormous influence. I've got this great anecdote
from 2010, for instance, when Terry Guo is meeting Tim Cook
and they're discussing 2 breakthrough products, the first
iPad and the iPhone 4. And Terry Guo is essentially
more bullish about both of theseproducts than Tim Cook is.
I mean, Tim Cook's a smart guy, but he, he, he hates inventory.

(36:45):
He doesn't want to over produce these things.
And Terry Go basically makes a bet with him on the spot and
says I think you're way off withyour estimates.
I think the volume of these products is going to go
exponentially larger than you think.
And here's what I propose. I'm going to build 2 entire
campuses for you, one in Chengdutoday known as iPad City and one

(37:06):
in Jiangzhou named iPhone City. And if I'm right about the
orders, like we win the orders like no going to Pegatron, no
going to anybody else. If we get this right, we get the
products and it's a historic beton the part of Terry Guo, and he
does it. And going back to Foxconn's
politicking, the reason why he'swanting to move to these inland
cities is because Beijing has these five year plans, right?

(37:28):
And one of them, especially after the global financial
crisis, is that they're really worried about the sort of like
incredibly hot growth of the coastal cities like Shenzhen,
Shanghai, and what a dichotomy there is between that and the
rather poor growth inland in thecountry.
And Foxconn has its own selfish reasons, right?
Which is that, you know, this isafter the issue with the
suicides, for instance, right, where people had jumped to their

(37:50):
death off the roofs of Foxconn buildings.
Terrible PR for Foxconn. I mean, even today, and this was
15 years ago, right? It's like the one thing people
know about Foxconn, or rather two things, right?
They'll say, A, they assemble iPhones, B, they had some
suicide problem at some point. That's what people know about
Foxconn, which is unfortunate. It's a really stunning company
in some respects, in really all respects, I should say.
So he is able to sort of direct Foxconn business toward the

(38:12):
inland because he understands that people want to be closer to
their villages that they've comefrom.
They don't want to have to take a 20 hour train journey to
Suzhou or to Shenzhen. And so he's sort of brilliant
doing it for his own purposes. But he's also understanding,
like the way the winds blow at the highest level of politics,
and especially the local level of politics, because China is a

(38:32):
lot more decentralized than Westerners understand, which is.
Actually, one of the big things I don't think the West really
understand, they're very decentralized to the cities.
Yeah, it's because you call the country communist.
And so a Westerner lazily thinks, oh, it's a top down
system just like Moscow, and it really isn't.
And I describe this through I think, the lens of Duck Guthrie

(38:53):
because he's this China expert who gets hired by Apple.
And I describe it as federalism on steroids, where the local
cadres are incentivized to, you know, get growth in their areas
at the expense of another regionin China.
And so they act more like a venture capitalist does to sort
of sit on the board, draw in orders and drive growth.

(39:13):
Really. So Foxconn's Terry Goal really
understands the politics. And by understanding the
politics, he's able to gear Apples manufacturing in certain
directions and Apple, and he does such a good job effectively
that Apple doesn't feel the needto have people on the ground and
it doesn't feel the need to really, you know, I don't know,
contradict them or do anything themselves.

(39:34):
And this is actually understandable if you realize
how small the apple business is in China in 2008.
But then it absolutely explodes.I think it goes up by around
2800% the Greater China revenuesbetween 2008 and 2012, if I'm
getting that. Right.
And that was the surprise as well that Greater China becomes
so such a big mark and essentially became the second

(39:54):
largest market I think after yesand.
It's my favorite part of the narrative and we probably don't
have to go into it, but let's just say for the listener, it
involves organized crime. It involves all sorts of crazy
narratives within China that really it's, it's, I mean,
those, that chapter that's part 4, really.
So four or five chapters, that'sprobably the chapter that's most
educational for me as the writer, but educational for the

(40:15):
reader in understanding various aspects of how China works and
what the culture of China is. And so forth.
I mean, so it's like, so it's a fascinating lens into China just
through the lens of of Apple andand the growth years of the
iPhone, I think. Yeah.
I think eventually Apple did succumb to the power of the
Chinese government, and eventually they conform towards
what the government wanted and of course, now led to this

(40:36):
pretty untenable situation. Yeah, I think let's reflect a
little bit. So I think Apple's has helped
the Chinese supply chain to develop capabilities in
smartphone manufacturing. They eventually gave China a
competitive edge. Do you think Huawei, Xiaomi and
Oppo are the beneficiaries of these competencies and also
explains that why Apple is now being challenged by them?

(40:58):
Yeah, I don't even think you could.
What would be the counter argument?
Would you mean? The same story happened to Tesla
as well. I mean, it's already happened
anyway. I don't, I don't think, I think
Elon doesn't realize that that'sa good.
Question. Let's stick with Apple and then
we come back to Tesla in a second.
But Tesla is a section in the book just for listeners who
don't know what Bernard is referring to.
It's because Tesla effectively adopts the Apple model and
convinces public officials that they'll do for EVs what Apple

(41:20):
did for smartphones. It's only a few pages, but I
think they're very profound, those pages, and it's quite the
lesson. It has a very.
Good connection to what Tesla's going to face very soon.
Yeah, absolutely. I mean, look, the basic stats
are that Huawei, OPPO, Xiaomi, Vivo with a couple other brands
have more than 55% market share globally in smartphones.
Smartphones are the most iconic device of the 21st century.

(41:42):
The reason why they're so good at making smartphones is that
Apple taught all of their suppliers.
I don't know what the counter narrative would be.
I mean, those companies in in terms of their electronics
prowess in making smartphones, Imean they basically don't exist
without Apple's operational paradigm operating in China.
You know, the cultural transplant of Cupertino, that
sort of DNA, if you will, of going to these four major

(42:04):
industrial clusters is just instrumental to the rise of
China, but not as a manufacturing powerhouse, but in
particular as a advanced electronics powerhouse.
I mean, I don't think any company comes close to China
going from made in China feelinglike synonymous with cheap
quality to made in China being world leading.
And I think China's so damn goodat advanced manufacturing today

(42:25):
that experts fathom to even and comprehend just how many
industrial robots they have, just how complex and efficient
the topography of Chinese manufacturing is and so forth.
I would argue I don't even thinkApple fully understands it.
In other words, Apple people aregoing in and out of these
factories all the time. But I think they attribute so
much of China's success to theirown merit that they think they

(42:46):
can go replicate this in India. And I like, I hope I'm wrong
about this, but I don't think they can.
You know, I think China did so much because it wasn't just the
factories, right? It was the eight lane highways
between the factories. It was the high speed rail train
that does the freight. It's like the 20, some port that
China has so that, you know, if there's a rainstorm in one
place, you just ship it from another one.
I mean, that's not true in Vietnam.
If you have a rainstorm in Vietnam, it's like the whole

(43:07):
country's covered in rain, you know, like it's just too small
of a country. China doesn't have that problem.
I'm going off on tangents, but Ihope.
Yeah. Yeah.
But. Then then the question is, how
does that now go to Tesla, right?
I mean, you see what what Apple has gotten.
Actually, I've seen this I thinkabout probably a decade ago when
I had the conversation with Horace.
Did you? But I think now, which we also
mentioned in your book, Yeah. He's been on my shock at least

(43:29):
six times. So.
Wow. Yeah.
He's a very astute analyst, yeah.
And I think that essentially, well, what do you see?
Do you think the story will playout with Tesla as well?
I think it's already playing outnow.
Look, to sort of contradict myself first, I would say I
don't know that it's so meaningful that BYD sells more
cars than Tesla. What I mean by that is that

(43:51):
Apple was panicking is maybe toostrong a word.
But in 2010, Apple didn't realize what we would take as
common sense today, which is that they own the richest
quintile of users in on the planet.
So 2010 is the year that Androidovertakes iPhone, I believe 20%
market share, 10% market share. And so Apple is, I mean, this is

(44:13):
when they're suing Samsung whereI mean they're panicking that
the designs that they've createdare going to be replicated and
take it over by somebody else. And instead history to some
extent is very kind to Apple, which is that Apple basically
just is able to sort of develop a Moat by having iOS and some
other key features. And you know, for the iPhone 4,
the quote from that I used from someone from manufacturing
design is that we are going to make the iPhone 4 so damn

(44:35):
difficult to replicate that companies trying to rival us
will either go broke or go nuts trying to do it.
And so Apple is able to sort of establish itself as the premium
leader, right? So what I'm drawing from this is
that in retrospect, it didn't matter that Android takes over
the market, right? Android is 80% of the market
today. Apple is 20%.
And yet the margins are flipped,right?

(44:56):
Apple has 20% market share and 80% of the industry profits.
I mean, again, pause the podcastand try to think about that.
Find me another industry anywhere remotely close to it.
So it is possible that Tesla is able to be a premium car maker
that makes far more profit than BYD in the long run and has a
brand image that's associated with, you know, all sorts of
various strengths or whatever that that others don't come up

(45:17):
with. On the other hand, as far as I
can tell from some experts I know in the field of self
driving, it's the Chinese who are doing far better with self
driving than even Tesla. And Tesla's sort of renowned for
its self driving capabilities. So I guess what I'm trying to
say is I don't know that historyis set.
I don't know that Tesla is goingto be out competed by all of its

(45:37):
Chinese rivals, but the best EVsin the world certainly in terms
of value are all made in China right now.
And I do think Tesla played a pretty instrumental role
catalyzing that by training a bunch of their suppliers, which
which we're going through shortly here, but it's in the
book in a little bit more detailand I.
Totally, just if you ever come to Southeast Asia, you just see
how much the Byds have just swamthe entire market in like

(45:59):
China's feet over the last two years.
I barely I used to see at least one Tesla.
Now I'm it's one Tesla's with five BYD is running on the road.
Yeah, but. But this is where you're
grappling with the differences in state LED capitalism because
BYD just cut the prices of of ofit's cars by something of an
average $8000 or something. And that is so difficult for a

(46:19):
company like Tesla to contend with because they prioritize
shareholder returns and, you know, reinvesting the dividends
of what they're able to make. And the Chinese competitors are
just so large that they have theimpact of deindustrializing
rival nations. So unless I'm mistaken in this,
I believe Chinese automakers in the aggregate can produce 60
million cars a year. That is 2 out of 3 for the whole

(46:41):
planet. So that's why even someone like
Joe Biden had to put 100% tariffs on EVs.
I mean, that's panicking Westernnations, that's panicking
countries like Germany, and that's really hard to grapple
with, so. There was just two more things I
want to get to, which I hope to get in the next couple of
minutes. But of course, the story of how
Apple worked with TSMC also camethrough our good friend Uncle

(47:03):
Terry as well. How do you see the current
situation of Taiwan, where 90% of the semiconductor
manufacturing is also concentrated there?
And I think it's actually presented what I call a double
whammy for Apple as an existential risk.
Yeah, I don't know. That I have to say much more
than what you just said. I mean, I quote Nicholas Kristof
saying TSMC is the first companyin the world where if they were

(47:23):
to stop producing, the consequence would be a global
recession. It is hard to overstate the
importance of TSMC for the modern world.
Just for what you just said. 90%of of advanced chips are made on
this small island by this large company.
Small island. Taiwan is, of course, not a
geopolitical threat. It is a fantastic ally.
The trouble is that Xi Jinping has said we want to annex
Taiwan. It's part of our country and

(47:45):
we're not going to leave this for the next generation.
So in terms of Apple's business,if that happens, it's the
equivalent of a meteor strike. I mean, if that sounds too
hyperbolic, let me just point out that Warren Buffett invested
around $5 billion in TSMC and then divested all of it within a
matter of months and basically said I love the company, I don't
like its location. So I had to reconsider my

(48:07):
investment. Warren Buffett is the single
biggest investor of Apple. And while I was writing the
book, he divested 2/3 of his investment in Apple.
And he hasn't explained why, butI believe the logic that he had
for divesting from TSMC applies 100% to Apple.
Without TSMC, there is no iPhone.
I mean, as simple as that. For multiple years.

(48:29):
So yeah, a double whammy is the saying.
In the lightest way possible, yeah.
And that comes to this question then now, of course, to recently
to navigate the current tensionsbetween China and the US, Apple
is going to move their supply chain to India.
I think based on my understanding of the Indian
supply chain, the manufacturing costs are actually it's going to
be 5 to 8% higher than in China,which actually is a surprise to

(48:52):
me. And then the difference rising
to something about 10%. I quote this number from Reuters
actually. So we're not even talking about
the supplier and components sourcing in the transfer of
engineering capabilities from China to India.
I think you kind of alluded to it, but I just want to get your
point of view again from your perspective, can Apple make it
work in India? I would love to be wrong, but

(49:13):
no, here's the short answer. If it can happen, it's a 15 year
effort. But before we even involve what
China would do if Apple was making that move, let's just
talk about India in particular. The similarities that people
point to between China and Indiaare really superficial.
In other words, with 1.4 billionpeople.
So it's like, oh great, well that's perfect.

(49:33):
The differences between the cultures are profound and
something as simple as you don'thave migrant labor going from,
you know, one side of the country to another in India.
I quote a study that looked at 84 countries in terms of
internal migration and India wasdead last.
That's not a knock against the culture.
It's just not part of the culture that young women in
particular sort of leave home at17, go to the other side of the

(49:54):
country and work in the factory.You don't have that.
So what's the phrase? Culture eats strategy for
breakfast. So Apple might have a plan, but
like, good luck upending 5000 years of Indian culture to to
make it happen. There's so many reasons that
can't happen. One of them is that India is a
democracy. I hate to say it 'cause I'm pro
democracy, but the way that Beijing comes up with a five
year plan and everybody clicks their heels and tries to do it

(50:16):
in some way or shape or fashion,I mean that it is a sort of
decentralized model in how they go about it.
But there's no questioning the plan in India.
There's all sorts of questioningof the plan.
I mean, there is no top down method for getting every
province to compete against one another to get this all done.
There's no incentivizing of the local cadres down the line to
build factories and everything. So sometimes people hear the

(50:39):
latest announcements and they think it's a big deal.
Like Foxconn a few weeks ago announced a $1.5 billion
investment in India with 30,000 employees that are going to be
working at a factory. 30,000 employees is 1% of the number of
people in the Chinese supply chain.
So you can have two things in your mind at the same time,
right? Which 30,000 is a lot of people
and versus the Chinese supply chain, it's almost nothing.

(51:02):
So it's really hard to understand just how large the
Chinese supply chain is and how world competitive it is.
So just on the pure merits of can India replicate what China
did? Unfortunately, I'm very
pessimistic. On top of that, China doesn't
want to let it happen. China wants technology transfer
to be one way gate, which means the technology information comes
in but doesn't leave. And so they're really in a prime

(51:26):
position to basically have the lights go out, have the
electricity go out at certain factories.
If they need to show Apple that they don't like the latest press
release, they don't like the latest Tim Cook comments about
India because Apple is so weddedto China and their very success
in China is their vulnerability.So we've already seen this in
the last couple of months where,you know, India needs a whole

(51:46):
bunch of people with that are from China that have the
experience or know how. And Beijing is just blocking
their visas of going to India. Apple needs a bunch of Chinese
made machinery to to go to the Indian production lines.
And Beijing's just said, yeah, well, we're not sending it.
That's a really difficult conundrum to get past, and we're
only talking about Beijing. There's also the problem that
Apple has a $70 billion businessfrom Chinese consumers and they

(52:10):
rightly see the iPhone as an indigenous product, right?
If Apple becomes the poster boy for decoupling from China, de
risking from China, those peoplestart buying Xiaomi and Huawei
phones and much, much bigger numbers.
So Apple has to do this very, very slow movement where if
there's, you know, it's like they can't go too fast.

(52:31):
I'm quoting someone in the book here, Jay Goldberg.
If they go too fast, they risk the ire of Beijing and Chinese
consumers. If they go too slow, they remain
stuck. So they have to find this
perfect pace, a light jog, if you will, to get to India.
And there's no guarantee it'll work at all.
And China can put up roadblocks whenever it sees fit.
So I wish it wasn't the case, but I yeah, yeah.
I'm like a you know, I'd like tojoke that I'm like a friendly

(52:53):
Canadian golden retriever, but on this issue, I'm really be
pessimistic. I don't see a way out.
This is why they're captured. So what is the one question that
you wish more people would ask you about your book?
It might. Be about the characters.
I mean, nobody has ever asked meabout Jackie Haynes ever.
So I sort of have a mini tragedywithin the book, which is the

(53:14):
story of Jackie Haynes. I say tragedy because so she's
someone that worked with Tim Cook at three different
companies going back to the early 1980s at IBM.
And after Foxconn has these suicides and stuff, she comes
out of retirement after working with Apple for about 8 years to
lead supplier responsibility. And Apple really has an effort
like we are going to improve thelives of our workers.
Jackie refers to Foxconn workersand others as her clients.

(53:37):
And she's really there to make things better.
I mean, Apple wants to be a shining light for others to
follow. Tim Cook says as much in an
interview in 2013. It doesn't go as planned is the
short answer. She runs up against two major
problems. 1 is the operational demands of Apple's culture.
So when suppliers are trying to respond to Apple, they're just
not able to prioritize worker rights the way that they would

(53:59):
like to. Because Apple.
And the chapter is called cognitive dissonance is
basically demanding one thing and asking for another at the
same time. And they're at directly opposed
to each other. And the suppliers are always
going to prioritize meeting Apple's demands rather than, you
know, making sure that and I don't want to come up with a bad
analogy, but making, making surethat the conditions are ripe.

(54:20):
The other thing probably just asconsequential is that this
coincides with sort of the end of XI Jinping's first term and
the beginning of his second term, where he's really going
after civil society groups in China, really flexing his
muscles and making it difficult for people protesting in the
streets, demanding worker rights, demanding reforms and
saying, like, we're Marxists, like, this is what you taught us

(54:41):
in school. And we demand better lives and
better conditions in Chinese factories, in Xi Jinping
basically just makes that impossible.
So the things that Jackie Haynesis trying to do basically are
not able to be possible because of both Apple and Beijing.
And she basically has to move onto other products.
And then she dies a few years later sort of totally having,

(55:03):
you know, failed at this project.
So yeah, I guess I would want totalk more about that.
I'd want to talk more about Isabel Mahi, the supposed head
of Apple for the last seven years.
So. That comes to my traditional
closing question. What would be the key takeaways
you want the readers to gain from your such that is a success
to you I guess? What what I told Jon Stewart is
that I want the book to be a Trojan horse, wherein I think

(55:24):
more people need to understand the fragility and resilience of
supply chains. They need to understand more the
US China tech rivalry and why that will determine hegemony in
the 21st century. And they just need to know more
about Chinese history because Chinese history is fascinating
and it's consequential. And it's tough for the layperson
to read books that are going to get them up to speed on those

(55:46):
subjects because they're often alittle bit dry, they're a little
bit dull. And we all live busy lives.
So it's it's just not a common thing to see just someone on the
train just reading the latest history of China.
I wanted to package all those important themes into a book
about the sexy product that you stare at for four hours a day.
And so the sort of sex appeal ofthe book was Apple's products
and characters like Johnny Ive. But I'm tricking you in a way

(56:09):
that actually what you're learning about is, yes, it's
Apple history, but it's all these other things.
But if I said, Bernard, I've gota great book about supply chain,
like you wouldn't have me on theshow.
I would have. You on my show because he's
talking about exactly what is happening in Asia.
OK, OK, well, most people wouldn't read it.
I mean, there's a reason why thesubtitle is not why Supply
Chains matter or something like that.
I mean, nobody would read that. So I, I hope I've answered your

(56:32):
question, but I mean, that's thetake away that I want people to
be more conversant on these issues.
And I really, the goal was selfish and I wanted to be more
conversant on these issues. But the way they do it was
through Apple, was through Tesla, etc.
So Patrick many. Thanks for coming on the show.
Just two quick things. Any recommendations which have
inspired you recently? Recommendations or just both
recommendations? And your recommendations?

(56:54):
Anything. The two best books I've read in
the last five years are both by the same author.
He's Chilean and his name is Benjamin Lapitut.
I'm probably getting the pronunciation wrong.
There's a decent chance of Benjamin rather than Benjamin,
but it's LABATUT. One of them is called When We
Cease to Understand the World. It's sort of on the birth of
quantum mechanics and on the hisbook is really about like the

(57:19):
best thinkers in the world and how like the height of knowledge
blurs into madness. And so it's really freely A
gripping read. And he uses the tools of a
novelist to tell non fiction stories.
The other one's called the Maniac.
I didn't love the title until I realized that MANIAC was an

(57:40):
acronym for a computer. It's kind of a biography of John
von Neumann, who he basically says is the most like
interesting and consequential mind of the 20th century, which
is quite a big claim. But the final third is actually
about the birth of AI, John von Neumann, sort of the godfather
of AI. But the final third of the book
is actually about alpha go, the deep mind project to take on the
biggest players and go. So it's actually like a great

(58:02):
and gripping introduction to artificial intelligence in a
historical sense. But again, he's telling
biography, but like he's doing so through the the lens of of
fiction. So he tells the biography of
John von Neumann through the voice of his wife, his daughter,
his colleagues and so forth. So it is just a gripping read.
I wish I had had half the writing skill that he has.

(58:22):
He's just amazing. How did my?
Audience find you then. You know, appleinchina.com
couldn't believe that domain wasavailable, but it was.
That's probably the best place to go.
Yeah, that was actually how I also look for it as well.
I just only have one little acknowledgement to me.
I want to thank Lionel Barber, author of Gambling Man.
That helped me to connect to you, and I didn't realize
there's so many connections in between.

(58:43):
So Patrick Mann, thanks for having the show and I look
forward to speak to you again. Thanks.
Bernard, I hope I'm in Singaporesoon and I'd love to see you in
person.

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