Tim Cook and Apple bet everything on China. Oops.

More people are now asking if Apple CEO Tim Cook has made Apple too dependent by betting everything on China. Cook, since joining Apple more than 20 years ago, is famous for having “transformed Apple’s supply chain, relying on China to manufacture devices with the help of low-cost, skilled labor, and to ship those products around the world,” as Mark Gurman wrote just last week for Bloomberg News. For this, Cook is called an “operations genius” by some.

Tripp Mickle and Yoko Kubota for The Wall Street Journal:

Apple bet everything on China. Image: Apple CEO Tim Cook
Apple CEO Tim Cook
Long before Donald Trump moved into the White House or the coronavirus paralyzed the city of Wuhan, Apple Inc.’s operations team began raising concerns about the technology giant’s dependency on China.

Some operations executives suggested as early as 2015 that the company relocate assembly of at least one product to Vietnam. That would allow Apple to begin the multiyear process of training workers and creating a new cluster of component providers outside the world’s most populous nation, people familiar with the discussions said.

Senior managers rebuffed the idea. For Apple, weaning itself off a stubborn dependency on China, its second-largest consumer market and the place where most of its products are assembled, has been too challenging to undertake.

Apple’s addiction to manufacturing in China has long frustrated staff — and more recently unnerved investors. The coronavirus represents Apple’s third major setback there in as many years, including the fallout from tensions with the U.S. that included tariffs and slower-than-expected iPhone sales in the country.

“No executive will admit in a public forum: We should have thought about” the vulnerability to China, said Burak Kazaz, a Syracuse University supply chain professor and former researcher at International Business Machines Corp. “But from this point on, there are no excuses.”

MacDailyNews Take: Tim Cook’s response to this issue in a recent interview with Fox Business:

The question for us is: Was the resilience there or not? And do we need to make some changes? My perspective sitting here today is that if there are changes, you’re talking about adjusting some knobs, not some sort of wholesale fundamental change. — Apple CEO Tim Cook, Fox Business, February 28, 2020

Denial ain’t just a river in Egypt.

The full WSJ article offers an interesting juxtaposition:

Finding a comparable amount of unskilled and skilled labor is impossible, said Dan Panzica, a former Foxconn executive. The population in China has allowed suppliers to build mega-factories with a capacity for more than 250,000 people. The number of migrant workers in China, who do much of Apple’s production, exceed Vietnam’s total population of 100 million. India is the closest comparison, but its roads, ports and infrastructure lag far behind those in China.

Yet, a few paragraphs later, the WSJ goes on to explain:

After winning the election, Mr. Trump said in Time magazine that he told Mr. Cook that he wanted Apple “to build a great plant, your biggest and your best, even if it’s only a foot bigger than some place in China.” The administration later started levying tariffs on imports of goods made in China.

Mr. Cook managed to avert tariffs on Apple’s bestselling product, the iPhone, telling President Trump it would put the company at a competitive disadvantage to its biggest rival, South Korea’s Samsung Electronics Co. But Apple wasn’t able to avoid tariffs on headphones and other devices.

Samsung isn’t subject to the tariffs because it moved most of its smartphone manufacturing out of China in recent years. It is now assembling its signature phones in Vietnam, India and South Korea.

If Samsung can assemble millions of smartphones outside of China, why can’t Apple?

Has Apple CEO Tim Cook made Apple too dependent on China? Obviously, to just about anyone by now, the answer is yes.

Regardless of how the stock price is doing, in order to responsibly mitigate risk, Apple needs to break its China addiction.

Imagine if Apple had over the past several years invested some of the $400 billion they’ve spent on buybacks on diversifying production, you know, in case of trade issues, natural disasters, health emergencies, foreign government actions, etcetera? The good news is that with Apple so dependent on China, every time China catches a cold, we get a nice irrational discount sale on Apple shares.MacDailyNews, February 27, 2020

36 Comments

  1. Soon China will be the only place you’ll be safe from the virus

    Go look at news, CNN, BBC, Foxnews , CNBC, WHO, the only place where a major outbreak is being wrestled under control is China. Latest news is that they are closing some of their new extra hospitals while other places are scrambling to find enough test kits. The Chinese are now screening people coming IN.

    New York Times:

    “BEIJING/SHANGHAI — The Chinese city at the center of the coronavirus epidemic has closed the first of 16 specially built hospitals, hurriedly put up to treat people with the virus, after it discharged its last recovered patients”

    Foxnews:
    “China closed one of its makeshift hospitals for the first time on Monday as new coronavirus cases dipped in the country but continue to spread worldwide”

    1. Please note I’m not excusing some of the Chinese Wuhan politicians who let the outbreak get out of control in the first place (like arresting the whistle blower doctor). (From what i gather the Chinese themselves want to kill these politicians)

      But we can see from the ‘industrial response’, the speed they build hospitals, medical gear (Foxconn in a few days set up a facility to make a million masks a day for it’s workers) why Apple originally used China as a base.

      I as everybody else understands Apple needs to diversify it’s supply chain, but as Cook has said a lot of manufacturing is done around the world already. (Some analysts are actually more worried about the deteriorating situation in Korea where Samsung etc makes some Apple parts)

      But as Cook has said Apple has weathered Tsunamis, earthquakes , typhoons etc disrupting it’s supply chain.

    2. China has recently redefined the way that Coronavirus cases are defined. It means that comparisons between now and earlier are meaningless. You can only judge trends if the parameters are unchanged.

      It’s possible that cases are coming down, but it’s also possible that they are being reported differently and it merely looks as though cases are reducing.

      1. So they are closing hospitals as a PR stunt?
        Death rates declining is also due to ‘changing parameters’ you know parameters like the ‘definition of Death’?

        Whatever.
        People will keep believing China is uneducated, lying scumbags and every news item out of there is fake (as I keep reading from posters on MDN )

        Regardless of what The best info is including testimony of Cook (who has ears on the ground and answerable to SEC for false statements affecting stock) and experts like an entire team of experts from USA, Canada, Europe, Africa and Asia under Dr Aylward (Canadian) of WHO who spent weeks there checking and concluded cases are dropping.

        1. I didn’t mention anything about death rates.

          Originally China counted clinical diagnosis by a doctor along with diagnosis by testing. Now they only count diagnosis by testing., which means that comparisons based on the headline figures before and after that change are fundamentally flawed.

          Measuring trends in epidemiology depends on consistent definition. Changing that definition means that trends can only be meaningfully interpreted prior to that change or after that change. Data spanning that change is not comparing like with like.

          Those who have followed APPL for many years might recall that Apple changed its accounting methods some time ago. Some people claimed that Apple was fiddling the books because a superficial look at headline figures suggested a sudden change in fortunes, but once the change had been in place for a while, there was enough data to establish trends based on the headline figures once again

          1. Dude I’m saying that the belief of trend successful containment is not just based on counting infected cases (which you argue is affected by changing definition) but ALSO by falling death rate In COVID wards and the closing of hospitals etc.

            Of course people will always argue they are lying (without any proof by the way)

            The also ignore joint USA/EU|World team led by Dr. Aylward of WHO who also came to the same conclusion after spending weeks in China. Go watch Aylward various videos, one of them 2 hours long which he explains the China situation with charts and graphs,, he also discusses the change in definition of cases and says in spite of that trend is clear.

            But of course as I’ve actually debated with some here at MDN they say Canadian Aylward and his USA mix team is lying as Aylward works for WHO (which they say is ‘socialist’ and run by a ‘Black Ethiopian’ Tedros ) and thus is in cahoots with the ‘lying dirty’ Chinese. ( Yes One guy here at MDN actually said you can’t trust WHO because it’s run by a black African guy ). They simply dismiss all the data they’ve collected.

            So whatever. Believe what you want. For myself I’ll just want to stick to the best facts available.

  2. Now you are getting it, MDN editors! About time you start criticizing Tim Cook’s management skills. Where have your anti-Tim Cook editorials been all these past years? Yes, of course this was an example of sarcasm. Maybe not elite sarcasm but, give me a break please. I’m new at this.

      1. The Mac Observer article link you cited is over a year old. A lot has happened since then. And that article failed to take into account the hyper delayed Intel CPU roadmaps which contributed – IMO – to the lack of significant macOS product hardware updates mentioned in that article rather than any “abandonment” of those products in favor of iOS products.

        But here is the thing and the questions you should ask. Has Apple prospered under Tim Cook’s tenure? (quick and indisputable answer – Oh, yeah! Big Time.)

        And two, has Apple survived and prospered with the same and essentially unchanged China’s supply chain operational strategy that Tim Cook initiated “way back in the days when Steve Jobs was still active and alive.” ? (same quick and indisputable answer as before – Oh yeah! Big Time)

        And three, has any legacy products failed because of it? Mac Mini, iMac and iMac Pro, MacBooks (both Pro and not)? Quick answer – No, of course not. Those legacy products did NOT suffer because of Apple’s policy of manufacturing most of those products in China.

        Did “Tim Apple” make a strategic mistake in sucking up to Trump? Well, as far as I know, Apple’s products were not affected by any Chinese trade tariffs? Personally, I’m not a big moral fan of “sucking up” to anyone or anything thing. But Cook’s handling to this political environment seems to be paying dividends.

        Let me ask you a another question – a serious one. Would you have endorsed Jony Ive as Apple’s CEO (as MDN did “way back in the day”) over Tim Cook? If not Jony than who other than Tim Cook – since you certainly give the impression Tim Cook’s policies have certainly a failures.

        Before you answer that, here is why I objected so strongly with this particular MDN editorial opinion. It seemed to me that MDN (and by inference, your comments) recommends a better Apple strategy would be an adoption of a “throw out the baby with he bath water – tear it all down and start over again with something new” manufacturing option rather than Tim Cook’s modification off the current China supply chain policies.

        1. “And two, has Apple survived and prospered with the same and essentially unchanged China’s supply chain operational strategy that Tim Cook initiated “way back in the days when Steve Jobs was still active and alive.” ? (same quick and indisputable answer as before – Oh yeah! Big Time)”

          No, big time the unchanged strategy SJ days are EXACTLY what is taking a bite out of Apple today. Nearly universally everyone agrees you don’t put all your eggs in one basket, Parallel example investing your money 101.

          Because Cook is a one-trick manufacturing pony and rested on his laurels for far too long (read decades) he finds himself and Apple vulnerable to the Corona Virus in China affecting product manufacturing, all supply chain suppliers and every Apple store in China closed.

          MORE PROOF OF COOK INACTION:

          “If Samsung can assemble millions of smartphones outside of China, why can’t Apple?
          Has Apple CEO Tim Cook made Apple too dependent on China? Obviously, to just about anyone by now, the answer is yes.”
          — WSJ
          Absolutely correct.

          “tear it all down and start over again with something new” manufacturing option”

          If Samsung can “tear it down,” bad choice of words. If Samsung can modify and pull out of China to be successful elsewhere, it should be a walk in the park for supply chain Genius Cook with the largest bank account in tech.

          ““rather than Tim Cook’s modification off the current China supply chain policies.”

          What modification? Hand out face masks and testing kits to all China employees. We all know Apple is a guest in a Communist nation and can’t change their culture and politics one iota. Apple operates in China not only for cheap labor, but are left alone by government because they invest and pour billions into Communist coffers…

            1. Really??? Wow!!! Breaking News, whoa! Is that right the variant of common cold will be EVERYWHERE?!?!?
              /s

              Yeah, like the flu that kills far more people every year in every country. This variant virus is tame by comparison, remember SARS? Right, Obama was in office so obviously no over hyping by the media. Protect our KING.

              It is hyped up irresponsibly by the media because it is simply the latest Democrat media attempt to tag Trump and make him look bad, NOTHING MORE!

              Thanks again for proving my point you DEFLECT and you did not dispute my post one atomic particle.

              Pitiful attempt at stupidity mocking your liberal smug highness. 🤣🤣🤣🤣

              Nuff said…

          1. A perfect rebuttal argument, IMO, to both the WSJ’s article, MDNs editorial opinions on the matter and various commentators was printed in today’s Appleinsider titled, “Editorial: No WSJ, Apple isn’t stuck in China” by Daniel Eran Dilger.”

            You should read it – if for no other reason – than to see this issue from a different point of view. Knowledge is a good thing. Grin.

            1. I read more than enough opinion pieces on this topic for decades. WSJ is absolutely correct. I will take a Pulitzer winning newspaper over an Apple FANBOIS site any day…

  3. “The number of migrant workers in China, who do much of Apple’s production, exceed Vietnam’s total population of 100 million.” Terribly written, but I think they mean to say that there are more migrant workers in China (some of whom work for Apple) than the entire population of Vietnam. So what? Apple doesn’t need ten million workers, and if they can’t attract a couple hundred thousand Vietnamese then there’s something wrong with Apple. Change takes time, years in this case, but it needs to happen asap. It may mean a combination of higher prices and lower margins, but you can’t put all your eggs in just one communist basket.

    1. People misunderstand china it’s just cheap labor. This misconception Tim Cook try to disabuse in his video.

      There are over 400,000 Chinese students in the USA alone.

      People misunderstand China just As they missunderstood Japan In the 1960s.

      1. China plays a big part as to why they’re misunderstood. When “re-education camp” is used to describe a place of interment and racial cleansing, misunderstanding and lack of trust by “outsiders” can be expected.

        There are scores of other examples supporting misunderstanding and or, mistrust.

        1. Your talking about Uighurs?

          So the West approach to Islamic radicalism containment’s with 20 year blood-soaked war across the middle east with hundreds of thousands dead, entire societies ripped apart, millions of refugees is better then trying to re-educate radicals like China? Some argue that even China taping the talks given by radical Imams is ‘infringing on their rights’ while they don’t blink at drone strikes killing the same types in the middle east.

          BTW the USA ran giant re education camps in Iraq for years the size of small cities holding tens of thousands of what they called ‘radicals’. It was in one of those camps that ISIS was born. (Go Check it out if you don’t believe me)

          The E.U currently finances camps that holds nearly 500k to a Million African migrants by force in North African camps run by Libyan warlords.

          TIME MAGAZINE:

          “The Libyan Coast Guard — supported with funds and resources from the E.U. and more specifically, Italy — has cracked down on boats smuggling refugees and migrants to Europe. With estimates of 400,000 to almost one million people now bottled up Libya, detention centers are overrun and there are mounting reports of robbery, rape, and murder among migrants, according to a September report by the U.N. human rights agency. Conditions in the centers have been described as “horrific,” and among other abuses, migrants are vulnerable to being sold off as laborers in slave auctions.”

          ( )

          I’m NOT saying Chinese Government so great. I’ll rather live in Canada where I am now but I just find it weird of how bias people are to China and ignore faults elsewhere.

          Never been to mainland China before but visited Hong Kong, Taiwan, Singapore (Chinese), Cambodia, Japan etc. My brother was tech manager in China though for years and I’ve worked in Asia for Over 10 years when younger So I’ve got sone knowledge of situation there.

          1. Here save you some time : ISIS born in Camp Bucca run by USA as detection and re-education centre, birth of ISIS.

            Wikipedia:
            “On 31 October 2007, it was announced that Camp Bucca would be expanded once again to increase its capacity from 20,000 to 30,000 detainees.”

            The Independent:

            “Mahmoud’s assessment of Camp Bucca, which funneled 100,000 detainees through its barracks and closed months later, would prove prescient. The camp now represents an opening chapter in the history of Islamic State — many of its leaders, including Abu Bakr al-Baghdadi, were incarcerated and likely met there. ”

            Baghdadi founded ISIS.

            If people argue the camp there is OK as ‘that’s War’ and not what China is doing, ask yourself what was the West doing in Iraq when it didn’t take part in 9/11 or have WMD?

            ?w968

          2. I don’t believe the Chinese are “just” trying re-educate radicals. Yes, the Uyghurs—who they’d like to remove anything Muslim, but recent reports include the Han as well, though it doesn’t seem to be as rigorous.

            Two wrongs don’t make a right and I do believe there’s a difference when a nation would like to vaporize a people and the Uyghurs fit into that category.

            1. ‘vaporize’ a people.

              “there’s a difference”

              Man,I didn’t want to get into this, but you seem to be implying Chinese doing re education radicals is ‘worse’ than what the West is doing in Middle East.

              the USA ATTACKED iraq which didn’t fire a shot at USA, didn’t take part in 9/11, and the USA invaded it killing thousands, resulting in war that has killed hundreds of thousands and millions of refugees. The war is still on today.

              The Chinese is worse than that?

              ()
              AS FOR UIGHUR situation, here some BACKGROUND:

              No it’s not from President Xi but Wikipedia:

              Wikipedia:
              “In July 2009, riots broke out in Xinjiang in response to a violent dispute between Uyghur and Han Chinese workers in a factory and result in over one hundred deaths.[71][72] Following the riots, Uyghur patriots killed dozens of Han Chinese in coordinated attacks from 2009 to 2016.[73][74] These included the August 2009 syringe attacks,[75] the 2011 bomb-and-knife attack in Hotan,[76] the March 2014 knife attack in the Kunming railway station,[77] the April 2014 bomb-and-knife attack in the Ürümqi railway station,[78] and the May 2014 car-and-bomb attack in an Ürümqi street market[79] Several of the attacks were orchestrated by the Turkistan Islamic Party (formerly the East Turkestan Islamic Movement) which has been designated a terrorist organization by several countries including Russia,[80] Turkey,[81][82] the United Kingdom,[83] and the United States,[84] in addition to the United Nations.[85]”

              Does that look like the idyllic, peaceful , you know Sound of Music villages, you guys keeps imagining about?
              YOU OK WITH RADICALS BOMBING AND KNIFING?

              Xinjiang is part o China.
              What do you think the USA military would have done if they ran the place ?

              While the world and USA criticizes China over Hong Kong where the police killed ZERO the USA backed iraqi security in same time in IRAQ killed 600 protestors.

              China Hong Kong ZERO police killing of protestors, iraq same time frame : 600 protestors killed !

              “AMNESTY INTERNATIONAL 23 Jan 2020 :

              “Chilling eyewitness testimonies and verified video analysis by Amnesty International confirm that security forces have resumed their campaign of deadly violence against largely peaceful protesters in Baghdad and cities in southern Iraq, the organization warned today

              Death toll exceeds 600 since October with 12 reported killings this week alone
              Verified resumed use of live ammunition and deadly ‘smoker’ grenades to kill protesters
              Ongoing wave of intimidation, arrests and torture”

              ( )

              Also why don’t people get agitated like the do over Uighurs with like the Indians oppression and fights with muslims in Kashmir and Nepal ? (Go google it).

              One More time: I’m NOT saying China government is wonderful , it can be terrible. And I believe that there are bad things with Uighurs but the crazed vilification of the situation versus OTHERS which I’ve described indulging E.U funded camps in Africa housing as Time magazine says (above post) 400k -1 million prisoners, where Africans in chains are sold as slaves for 300-400 dollars (you can see the videos) which people basically IGNORE.

              If you guys show the SAME indignation over all these other things it’ll be easier to swallow the constant ‘hate’ of China (and Apple’s role there) from people.

            2. Completely glossing over the fact that for decades the Chinese have been forcibly displacing the Uyghur, actively discouraging the practice of the religion and discriminating against those who do, in contravention of their own commitment to “self-determination” in that region.

  4. The media is over playing it per usual, Every health threat in the past 20 years, West Nile, Sars, Bird Flu, Swine Flu, Ebola, Zika, of course did damage, but nothing near what the media played them up to be…. its like the boy who cried wolf, one of these days, Something serious might actually come along and no one will react because its been done too many times..

    1. When a new virus emerges, NO ONE knows anything about how it will spread or how lethal it will be. Most public health professionals suggest that the public has a right and a need to know the information about these new threats as they emerge and evolve. As more is learned, information about the rate of infection and lethality can be determined. I hope that most people would like to stay as informed as possible, seeing it as prudent to be overly cautions until we find out we don’t need to be, rather than not bothering with precautions until we learn that the danger is worse than we first thought.

      I’m not sure how you quantify “damage.” Ebola has killed thousands of people and is generally considered by kill an average of about 50% of those infected. Based on what I could find out today, it appears that about 3,000 have died from COVID-19. That number will surely climb. Whether this virus will run a course like zika, or will become a more prevalent presence, like the influenza virus, is unknown. When there is an unknown threat, it is a natural human reaction to be cautious, if not afraid. You are free to ignore “the media,” but I don’t know where you will get your information about the evolving threat of COVID-19, whatever it may be, if you do.

    1. Excellent point!

      Where are all the liberals that supported a boycott of the best chicken sandwich in the USA, Chic-fil-a?

      SILENT! Because Apple is a liberal company and it’s OK for them to give billions to Communist regimes that kill their own citizens and have quotas on how many children Chinese women can have and also has the WORST air pollution in the world.

      But in the LIBTARD mindset CFA is much WORSE because they are closed on Sundays faithfully following religious beliefs. OMG!!! 🙏🏻

      The HYPOCRISY OF THE LEFT knows no bounds, no common sense and dumb as a box of rocks…

  5. Astute readers and non-panickers will remember that Pegatron committed $1B last year to move assembly of some Apple products to Indonesia after a comparative study with a Vietnamese operation was conducted.
    Indian production of iPhones is already under way, which will built upon as the skill levels and numbers are built up.
    Just as Tim didn’t move everything to China in one hit, moving it away from China will not be done quickly, nor should it be. It would drive up costs, create uncertainty and disrupt the relationship that Apple has with the Chinese government to support its operations.

      1. Totally IRRELEVANT. Decades ago and decades of BILLION dollar gains for Apple coffers it all became possible because of cheap labor.

        A FACT! No SJW or Apple fanbois can CHANGE…

        1. The fact (!) is that Chinese labor was never all that cheap. In any case, the labor cost for final assembly has never amounted to more than a few percent of the price of the finished device. The attraction of contracting Chinese labor was, and is, that it is possible in China to staff a factory with hundreds of thousands of disciplined and highly trained workers who are willing to relocate for work. That is impossible to visualize with American workers at any cost, and difficult to imagine in most other countries.

          Apple moved manufacturing to China out of necessity, not out of greed.

          1. You can’t be serious!

            Beancounter Cook moved manufacturing to China for one reason and one reason only — HIGH PROFITS!

            Your DISHONEST pitiful defense of fanboy SJW Cook is PATHETIC…

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