I recently read a terrific book called Apple in China, which tells the gripping tale of how Apple’s decades long investment in China fueled its spectacular success and, in turn, accelerated China’s rise as a technology superpower.
As the world grapples with China’s tech ascendancy and as the U.S. and China duke it out in a protracted trade war, we need to reckon with the role U.S. companies like Apple played in fueling China’s rise. Despite Apple’s amazing success in China, the book is a cautionary tale about Apple “building with blinders on” in China, and an indictment of Washington’s wilful blindness to geopolitical realities. Rather than weakening the Chinese state and ushering in some democratic awakening, trade with America and market forces strengthened and enriched the Communist part.
I loved the book so much, I wrote a review for The New York Post which ran last weekend, which was edited for word count. Here is the full review, for Digital Asset Digest subscribers only.
Enjoy!
Apple in China, by Patrick McGee
Review by Alex Tapscott
This story begins nearly thirty years ago. After returning to Apple in 1997, co-founder Steve Jobs needed a hit product and a way to build it at scale. The iMac was Jobs' comeback product. But it was quirky and tricky to assemble. Apple was able to get the product launched with the help of Korea’s LG, but early production problems and increasing consumer demand had them looking for a second producer.
At the time, China’s completive advantage was its “low wages, low welfare, low human rights” according to Chin scholar Qin Hui.
That began to change in the 1990s. It was Taiwanese entrepreneurs (known as Taishang) such as Terry Gou, or “Uncle Terry” the charismatic and ruthless cost-cutting CEO and founder of Foxconn, who turned China into the high-tech workshop of the world. Gou built the most efficient factories and got the most from his workers, but he was equally adept at convincing local Chinese officials to hand over land, equipment and secure huge amounts of labour. He won the iMac contract from LG, setting the stage for a partnership that would transform Apple’s fortunes. Together they built the iPod, iPhone and the first iPad, lifting Apple from a quirky also-rand to the largest and most profitable company in the world, transforming China into a high-tech workshop capable of awesome feats of production- and eventually innovation.
Apple had seemingly landed on a winning formula: pairing the signature innovation and design personified by the late Steve Jobs, with China’s vast production capacity, overseen by now-CEO Tim Cook, the architect of Apple’s China strategy.
Yet despite Apple and Cook’s extraordinary success in China, Apple in China is ultimately a cautionary tale about how hubris and a lack of foresight bordering on wilful blindness to geopolitical realities can eventually pose huge, existential risks to any company.
Apple’s massive investment in China is beginning to look like a Faustian bargain. As Apple entrenched itself in China, it became beholden to the Communist Party and eventually became the junior partner in China's decades long effort to gain the technology advantage over the United States through the transfer of know-how and best practices.
Whereas most narratives of Apple in China narrowly focus on issues like China’s lax labour laws or environmental standards, Apple in China is far more ambitious and gets at a deeper and more fundamental truth: “China allowed Apple to exploit its workers, so that China can, in turn, exploit Apple” says McGee, parlaying the company’s historic investments into a great technological leap forward for China.
From the start, Apple has embedded its top people and invested significantly in scaling its complex Chinese supply chain. For example, in 2015, Apple committed to spend $275 billion in China over five years, more than double what the U.S. spent on the Marhsall Plan to rebuild Europe, adjusted for inflation. Over the decades, Apple estimates it has trained 28 million workers, more than California’s entire work force. These are nation-building efforts, says McGee.
Apple’s success, fueled in part by its huge success in the Chinese consumer market, began to strain local labour markets, forcing the company and its suppliers to build more operations inland in cities like Chengdu. These investments also pleased The Chinese Communist Party bosses in Beijing and their new leader Xi Jinping, who wanted the interior to share the same prosperity as coastal cities.
Apple was notoriously tough on its suppliers. One executive, Tony Blevins, once forced a contract manufacturer to sign a contract without reading it and was known for making and breaking companies. But the opportunity to work with Apple kept everyone coming back. And it paid off spectacularly for the companies who worked with Apple – and survived.
Indeed, Apple’s China strategy spawned a huge ecosystem of technology companies, including brands like electric carmaker BYD, which began as an Apple contractor assembling iPads, and is now building cutting-edge electric cars. “China brilliantly played its long-term interests” – reaching technology parity with America – “against Apple’s short-term needs” – hitting the next product launch or quarterly earnings estimates, says McGee.
Also, around when Xi came to power, Apple started to get serious about government relations in China, bringing in top executives to manage the China operation. Known as “The Gang of Eight,” this team included Doug Guthrie, a China expert, who according to McGee was “the most instrumental character in Apple’s political awakening.”
Guthrie, initially a China bull, eventually realized Xi’s so-called reform program was “meant to lure in capital and Western businesses as a way of learning, so China could reverse-engineer the technology, replicate it and then replace it.”
Despite these risks, China’s authoritarian turn under Xi helped Apple, by squashing the nascent labour movement, allowing the company’s contractors to demand ever more from their workers, boosting margins.
Apple faced a new risk in 2016 with the election of Donald Trump, a China hawk. In McGee’s telling, Tim Cook deftly handles the new president, visiting and calling him frequently. In fact, rather than hurting Apple, Trump’s first-term China policy (which included Tariffs on China) was a boon to the company: Trump imposed harsh sanctions on Huawei, Apple’s main rival in the massive Chinese consumer market, allowing it to recapture market share and reap billions in profits.
In 2020, COVID struck China, and the rest of the world went into lockdown. But within months, Chinese factories have reopened, churning out iPhones and iPads at a record clip. In 2022, after an anti-government protest was violently quashed, Apple finally, belatedly, realized that its China exposure was too great.
McGee reserves some of his most pointed criticism for America’s policy elite. “At the turn of the Millenium, Washington made a bet on China- a bet that free trade would liberalize the country and perhaps catalyze the creation of the world’s biggest democracy,” says McGee.
Apple was just following the trend, with the upshot that today, “the fate of all the company’s hardware production relies on the good graces of America’s largest rival.”
And rather than ushering in democracy, trade with China only enriched and entrenched China’s ruling elite. McGee offers this damning critique: “Xi’s actions made Washington’s hopes from two decades earlier – that it could export democracy through capitalism-look almost willfully naïve.”
Today, Apple is scrambling to diversify its supply chain. In 2022, following the Shanghai lockdowns, Apple greenlit a plan to manufacture more in India, also a huge consumer market. But a full ‘decoupling’ from China would require hundreds of billions of dollars of investment and decades to implement.
Furthermore, India lacks China’s powerful central government which can redirect workers into factories. And it lacks the ecosystem of high tech suppliers (most of whom are still in China). India has far less of the internal migration needed to staff production lines in the busy season. Chinese workers are far more skilled and have access to more technology tools. Plus, in India, there are labour unions!
So where does Apple go from here? Taiwan, and contract manufacturer TSMC, are emerging as new risk. “Today, the main ‘system on a chip’ in every iPhone, iPad, MacBook, desktop Mac, AirPod and Apple Watch is being made on one small island,” which Xi has threatened to annex. A war or even an embargo of Taiwan would completely cripple Apple. Warren Buffet recently sold his $5 billion TSMC position because of China risk, and cut his Apple position by 2/3, McGee believes for the same reason.
There are other risks. Huawei, an Apple competitor that benefited from Apple’s decades long China strategy, is leapfrogging Apple in design and technology. Decoupling from China could cause a backlash from Chinese consumers and Beijing. And then there’s Trump, who wields tariffs like a blunt instrument, which could prove dangerous, like trying to separate conjoined twins with an axe.
McGee ends by asking, how did China do it? How did they grow so quickly? “Some portion of the disquieting answer is that Apple taught them,” he says. There’s Apple DNA everywhere.
May 23, 2025
