By coinnews 
00:00 Speaker A
Apple stock rallying after the US and China agreed to reduce tariffs for 90 days. Our next guest closely follows the interconnection between Apple and China. Joining us now is Patrick McGee, San Francisco correspondent at the Financial Times and author of Apple in China: The Capture of the World’s Greatest Company. Thanks for being here, Patrick. My pleasure. So, it’s a good time to talk to you. It’s a good time for your book to come out because obviously, there’s a lot of focus on Apple and China right now. So, um, there has been talk about the company diversifying its supply chain more, particularly to India.
00:55 Patrick McGee
Yeah. Do you think it, how, how far can that go?
01:01 Patrick McGee
So, it’s basically a message that’s being orchestrated by Apple that lacks substance. So, what’s moving to India is assembly. So if you think there’s a thousand steps in making an iPhone, the final step will now be done in India for phones that are going to US. So congratulations, Apple, you, you will escape the tariffs that are on China. Have you de-risked from China in any sense? Not, not one iota.
01:33 Speaker A
So Apple might push back, Patrick, and they might say, hold on, we are, we’re, we’re supplying from more than 50 different countries. And we’re sourcing products and or components from China and India, but also Malaysia and Thailand and Vietnam. And we just told the street, we can fulfill US iPhone demand from India. It does sound more global, more diversified, no?
02:12 Patrick McGee
No, that’s basically nonsense. All roads lead, lead through China. So if you think of how big, uh, the iPhone assembly is, right? I mean, we’re talking about going from 5 million phones in 2007 to a quarter billion phones by 2015. Nobody in their right mind, running a just-in-time production scheme is going to have parts coming in just in time from 50 countries. So there’s always this misleading graphics that have different suppliers, maybe they’re Korean, maybe they’re Japanese, and it shows the little flag and says like, oh, these components are coming from all these places. Those are mostly multinationals that are set up in China. So yeah, they get the little Korean flag, they get the little American flag, but by and large, those are American or Korean companies that are doing things in China.
03:05 Speaker A
So Patrick, if the, if China has avoided the worst of the tariff rates, if this deal sticks or if there is another deal that lowers the tariff rate, why is it a problem for Apple to be so indexed to China?
03:27 Patrick McGee
Yeah, so my concern is not that of a shareholder, it’s that of a citizen. Should probably know that I’m a Canadian citizen, but nevertheless, the point still stands, right? So the novel argument that I take in my book is that China didn’t offer capabilities and tech competence to Apple. That is not why Apple went there. Um, they offered abundant cheap labor and tailor-made policies to lure in foreign capital. They did this for everybody, but Apple took advantage of what was possible better than anybody else. So they built the tech competence in China by literally sending, um, you know, plane loads of engineers, America’s finest coming out of Caltech, Stanford, MIT for the last 25 years to train, not dozens, hundreds of factories across China, not just Foxconn. We’re talking four tiers down in the supply chain. Okay? Um, so China has become the behemoth in manufacturing that it is because Apple’s influence on the country has been like that of the Marshall Plan.
04:33 Speaker A
But you could argue they couldn’t have done that anywhere else. You could argue that just because of sheer numbers, right?
04:42 Patrick McGee
Well, in 2013, Apple has this political awakening period where Xi Jinping comes in, comes, comes in power and there’s sort of a new sheriff in town, uh, mentality. And Apple sort of learns to, uh, speak the local language and ingratiate itself with provincial and federal officials. It’s also the same year that they decide to start buying back their shares. And as viewers might know, they buy about $100 billion worth of their own shares each year, an absurd amount of money equivalent to the top six or seven street, uh, Wall Street banks in terms of how much they spend on buybacks. If Apple instead decided to build resiliency into their supply chain, and was spending half of that figure on building resiliency in places like India, perhaps in places like Mexico, I mean, you could have had the consolidation that they’re claiming to do now into India 12, 13 years ago. And actually Apple would be in a great position now. So this is where things get a little bit personal because, you know, if Tim Cook is the guy, the buck stops with him for building the world’s most sophisticated supply chain. Great. I give Tim Cook all the credit for that. But if the problem is that he put all his eggs in one basket and then continue to double down as that basket reveals itself to be an authoritarian surveillance state, the buck still stops with Tim Cook.
06:12 Speaker A
If you’re aware of this issue, Patrick, and it was this kind of existential issue, then Cook would be aware of this issue. Um, and I was talking to an Apple analyst and I asked him why he’s still bullish long-term. And he said, you know, I agree there’s these sort of issues, and one of them is supply chain, he brought up. But I said, why are you still bullish then? And he said, because of the install base. And I think they have an install base like no other. They have fans all over the world, billions of devices, and they’re loyal and they’re locked in. His point being that Apple is unique in that sense, in that Cook and Company have time, years as he put it, to figure out some of these issues unlike other rivals and peers. What do you, what do you make of that argument?
07:12 Patrick McGee
So first of all, I agree with all of that. And where this story came from was that as a reporter, I got uncomfortably bullish about Apple in 2022 because I was looking at the sort of steady accretion from Android to iOS. And particularly generationally, like our generation is 50/50 Android to, to, uh, iOS. The next generation in America is nine out of 10 high schoolers have an iPhone, right? And the blue bubble lock-in and everything like that is testament to how the company can continue growing. So in that sense, I’m massively bullish on it.
07:45 Speaker A
Did you work with Apple on this? Did they participate?
07:49 Patrick McGee
No, not at all. I’m, I’m very familiar on a first-name basis with lots of Apple PR people. I would compare them to intelligence agents to a foreign country. They exist to extract information. They are not there to help you. They are there to pretend to help you. And so I couldn’t give them the window that you usually, like, as a reporter, you give Apple 48 hours, you give them 72 hours. You say, here are the claims, no surprise policy. This is what I’m going to do. I submitted this manuscript before, obviously, some revisions, last September. I could not give Apple eight months to get their ducks in a row to respond, to build a smear campaign, whatever it is they’re going to do. That, it was just untenable. And I spoke to other authors who wrote Apple books and they said, you know, Apple stonewalls or not very helpful. And I didn’t really even need to be told that. I already knew that.