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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The post Apple is a Chinese company. Will China really allow Apple to slink away? appeared first on MacDailyNews.
