Jay Newman, a former senior portfolio manager at Elliott Management, wonders what will happen with Apple currently attempting to diversify production and assembly out of CCP-controlled China.
Jay Newman for Financial Times:
The world’s most valuable company makes great products, but it may turn out that the biggest driver of its share price has been the close relationship CEO Tim Cook has cultivated with China.
Entente cordiale with the Chinese Communist party affords Apple a charmed existence when it comes to manufacturing and selling products in China. But scary data points keep popping up.
Just in recent weeks, China has sanctioned Lockheed Martin and Raytheon; begun a probe of Micron; raided the due diligence firm Mintz Group and arrested some of its staff; detained 17 Japanese businessmen including a senior member of Astellas Pharma; levied a record fine against Deloitte, and amended its espionage law to cover ordinary business activities.
Notwithstanding all that, during a recent visit to The Middle Kingdom, Tim Cook praised Apple’s “symbiotic” relationship…
Cook has embedded Apple ever deeper in China over the past 20 years. After inking a secretive 2016 agreement to invest $275bn in China’s economy, workforce, and technological capabilities, the iPhone became a best-seller. In reality, Apple is now as much a Chinese company as it is American.
Almost a fifth of its revenue comes from sales in China, and operating profits in greater China — Hong Kong, Macau, Taiwan, and the mainland — topped $31.2bn in 2022. That’s a hefty chunk of Apple’s earnings (though given the near impossibility of getting large sums out of China, those profits may not even be money good).
Apple provides more than cash and intellectual property. Relations are enhanced by the credibility Apple’s brand bestows on a repressive, autocratic state, and the (cough) flexibility it demonstrates in supporting CCP objectives. When it comes right down to it, Apple just can’t say no…
Cook talks about civil liberties and privacy: laudable sentiments irrelevant in China, where Apple has no choice but to deliver the data of its Chinese customers to the government. Unwillingly, perhaps, Apple has become a facilitator of surveillance and government censorship.
These complexities aren’t lost on management. Apple is tiptoeing — frantically — towards the exit: moving production of iPhones to India, AirPods to Vietnam, Macs to Malaysia and Ireland — and assembling hundreds of employees into “tiger teams” to shift its supply chain.
But these efforts seem futile: Apple likely will never be able to completely exit China. Even small shifts risk retaliation by Chinese overlords who might retaliate by turning Chinese consumers against Apple products. Will China — which has contributed hugely to Apple’s success — allow it to slink away? Why would they? These are problems Apple made: for the foreseeable, Apple has no choice but to do what China wants.
MacDailyNews Take: All of this should sound very familiar to regular readers. Of course, and as usual, you heard it all here first:
• Tim Cook firmly latched Apple onto China’s CCP teat. What’s his plan for weaning it off? – November 2, 2022
• The clock has struck midnight in China for Apple – December 6, 2022
Apple should work to diversify production so as to not be beholden and utterly dependent upon a single country led by autocratic fools intent on tilting at windmills.
That way, a CEO who likes to oh-so bravely speak of human rights whenever and wherever he’s safe, might actually have some leverage to meaningfully affect human rights abuses in places like CCP-controlled China where they are being trampled daily instead of clamming up meekly like the weak hypocrite he is. (A white rose, Tim Cook is not. We call a spade a spade. Not sorry.) As a bonus, he’d also gain the ability to deliver products to customers, delighting them in a timely fashion. – MacDailyNews, April 27, 2022
There exists a dichotomy that screams hypocrisy that is impossible to overlook:
Apple CEO Tim Cook, winner of the Robert F. Kennedy Human Rights’ 2015 Ripple of Hope Award for “his lifelong commitment to human rights,” who subsequently took a place on the board Robert F. Kennedy Human Rights the following year, and winner of Newseum’s 2017 Free Expression Award in the Free Speech category, no less also aids and abets China’s commitment to violating human rights with serial regularity.
Two phrases immediately spring to mind:
• Do as I say, not as I do.
• Talking the talk, but not walking the walk.Accepting awards, plaudits, and board positions for “free speech” and “human rights” while banning publications and protest apps are tough actions to reconcile due to their diametrically opposed nature.
For how long can Tim Cook, and by extension, Apple, get away with positioning themselves as the world’s white knight while kowtowing to every whim of the Chinese authoritarian socialist censors?
This is about leadership, or lack thereof.
Obviously, in recent days, this all seems to be coming to a head, but it’s been building for years.
• Apple removes Quartz news app from App Store in China over Hong Kong coverage – October 10, 2019
• Apple kowtows to China by censoring Taiwan flag emoji – October 7, 2019
• Apple Music censors songs in China that reference Tiananmen massacre, democracy – April 9, 2019
• Apple removes VPN apps from China App Store – July 29, 2017
• In bid to improve censorship, China to summon Apple execs to discuss stricter App Store oversight – April 20, 2017
• Apple removes New York Times apps from App Store in China at behest of Chinese government – January 4, 2017
China is critical for Apple in every way from sales to product assembly, so Apple continues to kowtow to China. With Apple’s strong stance – in other places of the world – on users’ rights and privacy, it’s a bad look for the company and a tough tightrope that Tim Cook is trying to walk. — MacDailyNews, July 29, 2017
See also:
• Apple CEO Tim Cook signed secret $275+ billion deal with China in 2016 – December 7, 2021
• Tim Cook’s Apple is built in China; now it has to answer to the Chinese Communist Party – May 17, 2021
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Apple and cook are not solving the problem. The most obvious place to diversify production, at least a little of it, say 10%, is to the USA. Instead cook learned nothing and is diversifying mostly to Vietnam (another hostile communist s-hole) and India (actively working against the USA to dislodge the US$ and partnering with russia and china to achieving it—and also being an endless IP thieving state).
Cook should be looking to friendlier countries to diversify and he should be personally liable for his gross negligence in not following the most basic business school teachings of diversifying production. Apple should be producing in the USA, Canada, Mexico, Brazil, Germany, ie, more friendly nations than these hostile evil s-holes.
The problem is apple needs a master chef and all they have is a lousy cook.
“lousy Cook”…indeed! 👍🏻
Many questions regarding the secret China deal investing $275+ Billion in 2016. I’m guessing CCP has not paid Apple for data and services censoring Chinese citizens for years.
How much of $275+ Billion has been paid in and what is the direct benefit to Apple beyond the usual cheap slave labor for past 20 years? Imagine what that amount of money could do investing in the USA.
Moving to other countries as others already noted here is NOT the answer to Apple out of China. Obvious Cook has learned NOTHING and continues down the same path.
Yes, it’s going to take more than a lousy Cook or even a Master Chef. A Supreme Chef that schools the masters is needed and I can only think of one current CEO and one former CEO, that has the will, fury and force of nature to get it done…
Samsung was forced out refusing to play by their rule. Samsung was the top smartphone seller in 2013, but their Chinese market share quickly dropped to less than %1 while the company still maintained #1 in global smartphone sales.
Well, that’s an idea. Force Apple out China, the sooner the better, would force Cook’s hand to FINALLY relocate to the USA and non-communist countries all that much faster… 👍🏻
Actually, Vietnam has become much more free market oriented than communist.
The Heritage Foundation writes about Vietnam: “Capitalizing on its gradual integration into the global trade and investment system, the economy is becoming more market-oriented. Reforms have included partial privatization of state-owned enterprises, liberalization of the trade regime, and increasing recognition of private property rights.”
From the Washington Examiner no less:
Vietnam is now one of the world’s most dynamic countries, with a vibrant economy that creates great opportunities for hardworking people and entrepreneurs. From a country that, before the market reforms began, was unable to produce enough rice to feed its own population, it has become one of the world’s largest rice exporters — and a major electronics exporter.
I also would like Apple to diversify production into the US, but NIMBY. Most Americans don’t want a factory city (we’re talking 100K workers or more) in their backyard, which is the type of production capacity Apple products require.
Actually it’s a communist country.
China is the new “Hotel California.”
You can checkout anytime you want, but you can never leave. That is, not at until they have sucked out of you everything they want, and they no longer view you as having any benefit to them.
Things just get more and more interesting.
It’s too bad we the people of Earth can’t throw out all of our “leaders” and say whoah. WE didn’t sign up for any of this crap.
scalable a.i. robot factories that build products for local markets, China Factory for China market, USA robot factory for USA market.
Congratulations. You’re infinitely better at being a CEO than loser Tim Cook. Excellent idea.
Hey Hey My My, the supply of ignorant people will never die…
More comments from the half baked and keyboard bold as usual.
Apple is running toward India, not away from China. Duh.
China and the U.S. are very much economically interdependent. Neither can disengage from the other without incurring massive economic damage. Get you news somewhere other than this site run by Tucker Carlson’s brother and you will learn quite a bit.
Viet Nam is a communist country. One that we dropped more bombs on than the amount we dropped in the entirety of WW2. Incredibly, the people and government there is friendly and welcoming to U.S. business. This is not like deciding to open a factory in Peoria. There are a lot of challenges they still need to overcome. It is a poor country and it still deals with corruption that complicates opening a facility there. Still that have the will and companies, in time, will find the way. They remember what we did there. When you go on a war history tour, the guides are blunt. They have earned the right to be. What we did there was shameful. That we sent our young people to die there for no real reason was criminal. Touring the Mekong Delta was an incredible experience and the friendliness of the average people in both Hanoi and Ho Chi Minh City was amazing. Future Apple manufacturing, yes, next year, no. Sadly, it is still a better bet to assemble there today than in Mexico, which is the real sleeping giant of potential for many companies.
You pay less for things you buy because you want the lower price. You do not think about whether the pay scales are lower, you act in your own interest. The phrase “slave labor” is too freely tossed about. Work conditions are variable. Pay rates are variable. The workers in China are not chained to the wall when their shift is over. Their work conditions are improving and fewer young Chinese are willing to take factory jobs. They want to be in an office.
Read a lot and travel to these countries you throw these outsized comments about and then come back to this site and read the comments here based upon wafer thin fact pools and you will see how ignorant many of these people sound.
Could the Chinese attack Taiwan? Yes! Could the U.S. invade Mexico to “get rid of drug cartels who are the real “slavers”? Yes! Are you being manipulated by the right wing in this country to justify making more bombs, guns and ammunition? Yes!
I agree with TheloniusMac – Almost all political leaders in the world are vile, egomaniacal frauds who seek power and could care less if the guy in the street is safe, warm and well fed. Thus it has always been and thus it shall always be.
Get over it and try to be happy that you have a life to live.
Peace.
If you think the right wing are the problem you’re fully baked
No. I think both wings are the problem. As well as uninformed trip spewing zombies.
You don’t think. You’re a talking points puppet.
Dead man hasn’t offered an iota of evidence for his endless criticism. The hypocrite always has an unkind word for others but not a single proposed solution to his problems (real or imagined). Please stay dead.
My, my, my, another condescending Leftist and sanctimonious know it all. 🙄
More and more far left wing mumblings making supporting a clueless CEO and another problematic Communist country.
“Apple is running toward India, not away from China. Duh.”
Duh is correct not GRASPING Apple heading the heat of placing all eggs in one basket, is indeed running out of China at all costs.
“Get you news somewhere other than this site run by Tucker Carlson’s brother”
You have proof of your snide drive by accusation? Of course not. Pitiful attempt to dismiss Tucker’s lifetime achievement record of exemplary journalism exposing the corrupt hypocrisy of Democrats, your fear understood. Exposing Jan. 6 Committee FRAUD a career crowing jewel! 🏆
“This is not like deciding to open a factory in Peoria. There are a lot of challenges they still need to overcome. It is a poor country and it still deals with corruption that complicates opening a facility there. Still that have the will…”
Who doesn’t have the will when billions of dollars are involved, hello? Admitting Third World Communist Country with serious problems is more than enough to relocate to Peoria instead. Your business plan make more corrupt Communists wealthy with honest money and good intentions, China 2.0.
“What we did there was shameful. That we sent our young people to die there for no real reason was criminal.”
Leftist guilt and preachiness, what’s next a lecture on Hiroshima? You failed to mention the MAJOR initiative in the Lyndon Johnson presidency (Democrat) was the ESCALATION of the Vietnam War.
“Sadly, it is still a better bet to assemble there today than in Mexico”
Sadly, your opinion is meaningless. ANYTHING is better than another problematic Communist Country half a world away.
“Are you being manipulated by the right wing in this country to justify making more bombs, guns and ammunition? Yes!”
No more than you are manipulated by the left wing in Big Media to disarm everyday law abiding citizens and cut defense budgets to sacrifice military readiness. Oh, and how many billions of dollars, tanks and bombs the Biden administration sent to Ukraine, hmmm? Hypocrisy Grande!
“Almost all political leaders in the world are vile, egomaniacal frauds who seek power and could care less if the guy in the street is safe, warm and well fed.”
Yes, but in the U.S. particularly Democrat rulers in mostly Blue States and cities and presidency. RECORD NEGLIGENCE and WASTED TRILLIONS crime rates still increasing, cost of living skyrocketing and too many people in poverty.
The far left are a majority of arrogant rulers worldwide. More interested in their power than helping citizens they claim to represent is the TRUE TRAGEDY…
Fifteen years ago it was against the law to sell our best technology to the Communist Red Chinese.
Now they’re manufacturing our best an highest technology products!
The corruption runs deep in our government and in our corporations. And no-one saying or doing anything about it.
We need Donald Trump back to “clean the swamp”.
He had 4 years to implement real legislation that would permanently curb most tech transfer to Chyyyyna. Instead Orange Fuhrer went golfing. His threatened tariffs were temporary at best, and mostly ineffective bluster. The immediate results were shortages of raw materials including microchips, which shut down many US manufacturing plants. Auto prices and availability still haven’t recovered.
But no US company suddenly shut down their Chinese plants, that was just a temporary thing. The right wingers as usual whined about price increases. They are always unable to trace cause to effect.
Apple is just now finally getting around to building out India. This is not so much to reduce manufacturing costs but to access tax incentives that the corrupt Indian regime is dangling to any foreign company they can, in an effort to stem mass unemployment problems there.
If the USA wants to have a growing manufacturing base, it needs to improve its education system, allow in more cheap labor from other countries, and get to work on producing stuff that we need outselves. Infrastructure renewal, raw materials recycling, batteries, EVs, wind turbines, and solar installations are all huge industries in which the USA could lead but instead has barely attempted. These are major job creators that would lead to domestic prosperity. Imported oil … not so much.
When you make it with porn stars, clearly, you are comfortable joining with a swamp.
Sorry. He is unelectable and you will have to move on. No independent voter support = no White House.