Apple’s Hotel California trap: It can check out but not leave China
The iPhone maker may shift some more of its gadget production to India and Vietnam, as a book by Patrick McGee argues, but it can’t really quit China. While Trump wants Apple to onshore output, CEO Tim Cook can’t afford to anger Beijing.
During US President Donald Trump’s first term, he famously toured a Texas factory and claimed credit for bringing Apple production back to America. Except the plant had been running long before he took office. And it was an ‘unmitigated fiasco.’ Workers in China had to be flown in to help fix the mounting manufacturing problems encountered in the US heartland.
This telling anecdote from Apple in China, a gripping read by former Financial Times journalist Patrick McGee, shows how the tech giant became beholden to America’s biggest geopolitical adversary. Up until this point, the book recounts how Apple flew engineers from California to China to train and collaborate with local workers to manufacture its most iconic products.
Now, it seems, the tables have irreversibly turned.
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McGee argues that the technology transfer facilitated by Apple to China, via small decisions compounding over decades, ultimately made it the biggest corporate investor in ‘Made in China 2025,’ President Xi Jinping’s bold plan to end reliance on Western technology. “Here was America’s most famous tech giant volunteering to play the role of Prometheus, handing the Chinese the gift of fire," McGee writes.
Yet, the overarching argument of the book—that the US company made China into the tech behemoth it is today—begs the question of why Apple didn’t make the same kind of investments in the US. And amid Trump’s second term, when he has repeatedly threatened tariffs on the company if it doesn’t onshore manufacturing, this query has new urgency.
But the reality is that Trump’s nagging will never be able to re-create the ecosystem that local governments in China, with the help of Taiwanese suppliers such as Hon Hai (better known as Foxconn) created to lure Apple. A simplistic answer from a scholar early in the book is that China was a “low wages, low welfare and low human rights" nation. Suppliers could exploit a massive underclass of migrant workers and local authorities could quickly suppress any labour unrest or media reports of it.
But if there’s a lesson for Trump or American consumers here, it is that electronics manufacturing jobs can come at a high cost for workers. It’s unlikely that these are the kinds of positions Trump’s base is hoping for, in an area where automation would be welcome.
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China is hardly a low-wage manufacturer anymore. Apple CEO Tim Cook has acknowledged this before, saying that his company makes products in the country not because of labour costs, but because of its legions of skilled workers.
McGee argues that this upskilling is now being used to fuel innovation at homegrown tech giants such as Huawei—and a direct result of Apple’s investments. While the iPhone maker was chasing short-term profits, savvy suppliers in Asia were playing the long game.
We have all heard about the legendary union between founder Steve Jobs and designer Jony Ive that made the iPhone a unique product. But the partnership that made it a revolutionary one, owned by more than a billion people, was between Cook and ‘Uncle Terry,’ McGee argues. Terry Gou, the founder of Foxconn, was the hyper-efficient manufacturing genius who brought the iPhone to the masses.
Gou was described as obsessed with cutting costs—even if that meant diluting hand soap in factories with increasing amounts of water. But Gou recognized the value of working with Apple wasn’t just profits: It was the tacit knowledge that he and his team would receive from the engineers shipped over from California to help set up and run the factories. This learning was invaluable, Gou understood, and made even losing money to get Apple orders worth it.
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An ecosystem for high-tech manufacturing took China decades to build and its path was marked not just by local factories producing Apple’s iconic goods, but by the creation of sub-suppliers nearby and an army of skilled engineers.
It will be nearly impossible for Trump to try to re-create this during his four-year term. The US could start by focusing investments in vocational education and engineering, but policymakers should recognize that catching up now requires a strategic long game.
And all the years it took to develop a reliance on China means it’s not Trump’s tariff threats that pose the biggest existential threat to Apple. It’s Beijing. Uncoupling too fast risks angering local authorities, but not doing so quickly enough makes it even harder for it to inevitably be done. As this book convincingly argues, Apple can inch towards India and Vietnam, but it can’t leave China anytime soon. ©Bloomberg
The author is a Bloomberg Opinion columnist covering Asia tech.
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