We have to expect collisions between Apple CEO Tim Cook and those American politicians, officials and commentators who are worried about the Chinese challenge to American supremacy.
Once Donald Trump launched the US-China trade war in July 2018, Apple was bound to be a target of sharp-eyed China hawks. And last year, as the trade war continued under the Biden administration, the hawks got the sort of evidence they’d been looking for.
On December 7, 2021 – the 80th anniversary of the Japanese attack on Pearl Harbor – a paywalled publication called The Information reported that Tim Cook had made a secret, five-year agreement with the Chinese government back in 2016.
The deal, under which Apple would help China develop its high-tech economy, was said to be worth more than $275 billion. That, for reference, would be more than four times the $68 billion in revenue that Apple generated in China in 2021, and more than the $256 billion generated in the five years to 2021.
This implies a long-term commitment to China.
The Guardian reported on the same day that “Some of Apple’s investment in China would go toward building new retail stores, research and development centers and renewable energy projects” and that, “as part of the agreement, Apple promised to use more components from Chinese suppliers in its devices, sign deals with Chinese software firms, collaborate on technology with Chinese universities and directly invest in Chinese tech companies.”
On April 1 of this year, US Senator Marco Rubio of Florida published a letter to Cook on his website that began as follows:
Dear Mr. Cook,
I write to express serious concern with recent reports that Apple is considering purchasing NAND chips, or other integral technological components, from Chinese chip manufacturer Yangtze Memory Technologies Co. YMTC is a rapidly expanding, state-owned company with extensive links to the Chinese Communist Party’s (CCP) armed wing, the People’s Liberation Army (PLA). It is unacceptable that sales of the next generation of iPhones would end up strengthening the Chinese military and put the lives of American service-members at risk as a result.
And on April 20, Brendan Carr, head of the U.SFederal Communications Commission, wrote:
Dear Mr. Cook,
Last week, you gave a speech in Washington, D.C., in which you spoke eloquently about what you described as Apple’s commitment to operating its App Store in a manner that promotes privacy and human rights. You expressed Apple’s “commitment to protecting people from a data industrial complex built on a foundation of surveillance.” And you spoke out forcefully against a reality in which “technology is exploited to rob humanity of that which is foundational” as “a loss we cannot accept.” I am concerned that your words in Washington founder upon the harsh reality of your actions in China.
Carr complained specifically about “Apple’s decision to remove the Voice of America mobile app from its App Store in China … to appease the Communist Party of China – an authoritarian regime that the State Department has determined is committing genocide and crimes against humanity.”
Against this, it can be said that
- The Voice of America is government-funded and controlled, with a heavy emphasis on promoting US foreign policy;
- Senator Rubio might have better things to do than worry about the start-up YMTC. given that Samsung is the largest NAND flash memory producer in China and Intel is selling its NAND business to SK Hynix, which also has a large presence in China; and
- What Apple reportedly agreed to do in 2016 it probably would have done anyway in the normal course of business.
And never mind that Apple is perhaps the best ambassador America has for its technology, culture and way of doing business.
That having been said, the most recent Apple Supplier List shows 51 of the company’s top 200 suppliers based in China, 48 in Taiwan, 34 in Japan, 32 in the US and 35 in South Korea and elsewhere. Seven of 21 suppliers based in Vietnam are Chinese-owned. According to Apple, that list of 200 suppliers “represents 98 percent of our direct spend for materials, manufacturing, and assembly of our products worldwide for fiscal year 2020.”
Prompted by the recent Covid lockdowns in China, Apple is reportedly stepping up its iPhone, iPad and other assembly operations in Vietnam and India, but it is likely to remain heavily dependent on its supply chain in China for a long time – if not permanently.
That is because, despite its rising wages, China has the world’s most extensive electronics manufacturing infrastructure and the largest pool of talent. Interviewed by Charlie Rose of CBS News’ 60 Minutes in December 2015, Cook explained this way:
Charlie Rose: Apple has one million people manufacturing its products in China. Why doesn’t it bring those jobs home?
Tim Cook: China put an enormous focus on manufacturing, in what you and I would call vocational kind of skills. The US over time began to stop having as many vocational kind of skills. I mean you could take every tool and die maker in the United States and probably put them in the room that we’re currently sitting in. In China you would have to have multiple football fields.
Steve Jobs made essentially the same argument to President Obama in 2011.
Two things need to be clarified here:
- The jobs cannot be brought “home” because they were never in America in the first place; and
- Cook’s statement applies to tool-and-die makers in the electronics industry, not the auto, machinery and other industries where American companies have a significant presence. But their skills are not transferable to an electronics production infrastructure than doesn’t exist.
Investopedia also points out that
In addition, logistically, China makes the most sense to ship a product around the world as the country has seven of the world’s largest 10 ports. If Apple were to build the iPhone in the US, it would only be able to build a small [quantity] a year, at a significantly higher cost.
China is one of Apple’s larger markets, but it is not even close to being Apple’s largest market. In 2021, Apple generated 19% of its total revenues in China, compared with 42% in the U.S., 24% in Europe and 8% in Japan, which has less than one-tenth the population of China.
But an estimated 90% of Apple products are assembled in China by Hon Hai Precision Industry (Foxconn) of Taiwan and other contract manufacturers. In their most recent fiscal years, Apple generated an operating margin of 29.8%, Hon Hai 2.5% and – to take one example of a precision component supplier – Japanese touch sensor maker Nissha 9.1%.
Clearly, the largest share of value added is going to the American company. The statement embossed on your iPhone or iPad – “Designed by Apple in California Assembled in China” – also means high profit margin to Apple, low profit margin to China.
But what about jobs?
The fact is that most of the employment opportunities created by Apple are not in China.
These include about 80% of 30 million iOS developers, employees of the nearly 75% of key suppliers not based in China, most of the 150,000 people working directly for Apple, and many more working in retail and other related service businesses outside China.
On its website, Apple states that,
In 2021, thousands of small-business and new app creators joined the App Store from all around the world. Of this set of new developers, approximately 24 percent came from Europe, 23 percent from China, 14 percent from the US, 4.3 percent from Japan, and 34 percent from other regions including Korea, India, and Brazil.
In the United States alone, the company claims to have about 9,000 suppliers and notes that it “is responsible for creating and supporting 2.4 million US jobs across all 50 states.“
But this is not what matters to those whose primary interest is the battle for global supremacy.
As Evan Anderson, CEO of the American intellectual property consultancy INVNT/IP, put it to Asia Times in an email:
Any company that receives a large amount of revenue from operations in China is beholden to the Chinese government. In fact, such companies exist or profit only as long as they continue to please the Politburo, and Xi Jinping. Apple is a perfect example of such a company. Tim Cook’s recent comments only add flavor to the captive situation he finds himself in. He should stop.
Unfortunately, given the level of control the CCP and the PRC government now exert over any business within their borders, any dollar, yen, euro or pound of commerce that flows to shores of mainland China is a dollar that helps support the system of theft, debt-trap diplomacy, aggression, and massive human rights abuses the leadership there has wrought. This does not need to be the story of China writ large, but it is most certainly the story of Xi Jinping’s rise and the current leadership that aids him. As long as that is the case, that financial support should be halted as much as possible.
We must disengage, and soon.
INVNT/IP describes itself as “a private consortium of leaders in technology, security and government dedicated to combatting nation-sponsored intellectual property theft and the perpetration of economic warfare by hostile states.”
Anderson’s view –- that Apple has compromised itself and that China under its current regime is an implacable enemy – is shared by a substantial number of influential Americans. It is not completely shared by the Biden administration, which talks about a mix of competition and cooperation.
Secretary of State Antony Blinken has said, “China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power to do it.”(Politico, May 24, 2022)
But Nicholas Burns, US ambassador to China, recently stated that “We are in a largely competitive mode here, and we’ve made no secret of that in our government. But there are areas where we ought to be engaged with each other and that’s one of my jobs, along with a lot of my colleagues in Washington, is to find those areas and try to push them forward.”
It remains to be seen to what degree Apple will be entangled in China-related politics in the run-up to the November elections, and the next presidential election in 2024. But we may have gotten a hint from Cook’s most recent remarks.
Cook has once again praised Chinese contributors to his company’s products and innovation. Speaking with Chinese media at this month’s Apple Worldwide Developers Conference, he said:“Chinese developers have always been at the cutting edge, and I think that will continue to grow. I cannot wait to see what you are going to do next.”
Interviewed by China Daily, Cook also said, “Today the iOS [Apple mobile operating system] developer community is 30 million strong. We are so proud of that. And with more than 5 million Chinese developers and counting, there’s no question that China has one of the most vibrant developer communities in the entire world. Whenever I meet with developers, I’m so impressed by your creativity and your passion for using technology to enrich people’s lives.”
Tim Cook is not backing down.
Follow Scott Foster on Twitter @ScottFo83517667
