Apple in China - Book Summary
The Capture of the World's Greatest Company
Book by Patrick McGee
Summary
Apple's rise to become the world's most valuable company is inseparable from its manufacturing partnership with China, but this relationship has evolved from mutual benefit to dangerous dependency. As Xi Jinping's authoritarian turn threatens global stability, Apple finds itself trapped by its own success—unable to escape a country it helped build into a technological superpower that now views the iPhone maker as both essential partner and strategic rival.
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The Dangerous Dance Of Dependency
Apple's modern success story masks a critical vulnerability: the company that once championed American innovation now depends entirely on a single authoritarian state. What began as a desperate outsourcing strategy to save a bankrupt company in the 1990s evolved into the most concentrated manufacturing operation in business history.
By 2015, Apple was investing $55 billion annually in China—more than the U.S. government's flagship CHIPS Act. This isn't mere outsourcing; it's a complete transfer of manufacturing expertise that has made Apple hostage to Beijing's political whims. The company that created the personal computer revolution has become the architect of its own geopolitical nightmare.
Section: 1, Chapter: 1
The Pioneer Of Manufacturing Services
SCI Systems founder Olin B. King pioneered what would become a half-trillion-dollar industry: electronics manufacturing services. King had built satellites for NASA, but his breakthrough was offering manufacturing as a service rather than a fixed cost.
The economics were irresistible: companies could pay only for what they needed, when they needed it. King could allocate resources more efficiently across multiple clients while absorbing the liabilities of product defects. By the mid-1990s, this strategy had killed off the entire concept of vertically integrated computer companies—except for one stubborn holdout: Apple.
Section: 1, Chapter: 1
We've Trained A Whole Country
'We've trained a whole country, and now that country is using it against us.'
- Former Apple engineer
Section: 1, Chapter: 1
From Garage To Near-Graveyard
In March 1996, Apple announced a staggering $700 million quarterly loss—the biggest in its history. Cash reserves had shrunk to just $500 million while the company owed $150 million in April. With 13,000 employees and warehouses stuffed with nearly $1 billion of unsold inventory, Apple's board explored bankruptcy options.
The crisis forced Apple to abandon its founding principle of controlling its own manufacturing. The company that built computers in California garages was about to surrender its factories to survive. Joe O'Sullivan had to sell Apple's Colorado plant in a fire sale, with his boss warning: if the deal didn't close, none of them would get paid on Thursday.
Section: 1, Chapter: 1
The IBM Lesson Apple Ignored
When IBM launched its PC in 1981, Steve Jobs completely misunderstood what he was seeing. While Jobs dismissed it as 'a piece of junk,' IBM had revolutionized computer manufacturing through radical outsourcing.
The Boca Raton team's breakthrough wasn't technical—it was strategic:
- They commissioned everything from external suppliers rather than building in-house
- They created an open architecture that drove down costs
- They enabled economies of scale through third-party competition
Jobs focused on usability and design while IBM launched an ecosystem. This error haunted Apple for fifteen years as PC makers achieved lower costs and better distribution.
Section: 1, Chapter: 1
Japan Opens The Door To Outsourcing
Apple's first major outsourcing success came from Japan with the LaserWriter. When Apple discovered Canon was working on a low-cost laser copier, they designed a computer board to bolt onto the Canon machine. The result transformed desktop publishing.
Produced entirely by Canon at $7,000, the LaserWriter created Apple's first 'killer app' ecosystem with Adobe's PostScript and PageMaker software. The combination of Mac, LaserWriter, and PageMaker gave Apple ownership of an entire industry vertical. The success came just too late to save Jobs from his 1985 ouster, but it validated outsourcing for complex products.
Section: 1, Chapter: 2
The Genesis Of The Comeback Strategy
Steve Jobs returned to a dying Apple with remarkable clarity about what needed to change. His strategy was brutally simple:
The Two-by-Two Matrix:
- Desktop computers (consumer and professional versions)
- Portable computers (consumer and professional versions)
- Everything else was dead
From forty products in development, Jobs cut the lineup to four. 'It's the products! The products suck!' he declared. His focus wasn't on fixing operations or efficiency—it was on creating products that would make people desire Apple again. The strategy required perfect execution with limited resources and no room for error.
Section: 1, Chapter: 4
Manufacturing The Impossible
The original iMac design was literally unmakeable. Jony Ive's translucent egg-shaped computer featured horizontal grooves that ran perpendicular to the plastic injection molding process—making it impossible to remove from the mold.
When the first engineering team couldn't solve it, Jobs brought in outside consultants. Their verdict: 'You don't have a quality product.' The crisis forced a complete design reset, weeding out engineers who wouldn't attempt the impossible and establishing a new culture where saying 'no' to Industrial Design required exhaustive experimentation to prove something truly couldn't be done.
Section: 2, Chapter: 5
You Have To Drive The Car Off The Cliff To Prove The Brakes Don't Work
'You'd have to drive the car off the cliff to prove the brakes don't work.'
- Common saying at Apple about challenging Industrial Design
Section: 2, Chapter: 5
The Korean Proving Ground
LG's desperate bid to build iMacs during Korea's financial crisis revealed both the potential and pitfalls of Asian manufacturing. The massive 'SURVIVE' banner that workers passed multiple times daily captured the urgency of the moment.
LG offered to pay all upfront tooling costs, but the Welsh factory became known as 'the toaster line' for computers that caught fire. The experience taught Apple that manufacturing partners needed constant supervision and that complex designs required embedded engineering teams. The failure paved the way for Foxconn's entrance with a simple promise: 'I can fix this.'
Section: 2, Chapter: 6
Taiwan's Accidental Role In Apple's Future
Apple's move to Taiwan for laptop manufacturing began almost by accident. When Inventec's CEO felt uncomfortable taking orders because he was already building for Apple rival Compaq, he connected Phil Baker with friend Barry Lam at Quanta.
This chance introduction launched a relationship that would reshape global electronics. Taiwan's suppliers lacked Apple's exacting standards initially—one engineer called their early work 'treachery, ineptitude, sloppy, negligence on every level.' But Apple's willingness to embed engineers and transfer knowledge transformed these partners into world-class manufacturers.
Section: 2, Chapter: 8
The Foxconn Formula For Dominance
Terry Gou built Foxconn's empire using a ten-level mastery system for any electronic product:
- Levels 1-3: Basic components and simple assemblies
- Levels 4-6: Complex subassemblies and circuit boards
- Levels 7-8: Product assembly
- Levels 9-10: Finished goods ready for shipment
The goal was complete vertical integration that made customers dependent. By controlling every level, Foxconn could offer the lowest prices while ensuring clients had nowhere else to go. The strategy was enabled by China's subsidized land, machinery, and suppressed labor costs.
Section: 2, Chapter: 9
Foxconn Isn't Called 'Fox-con' For Nothing
'Foxconn isn't called 'Fox-con' for nothing. Terry Gou was a gambler, and the real name of the company is Hon Hai. That was changed to Foxconn because he's a fox, and he's a con artist.'
- Former Apple engineer
Section: 2, Chapter: 9
China Speed Versus World Standards
When Terry Gou promised to build iMac tooling in just 25 days versus the industry standard of 12 weeks, Apple engineers were skeptical. But Foxconn delivered, introducing Apple to 'China speed'—an ability to execute at incomprehensible pace.
The combination of dense labor, government subsidies, and 24-hour operations created capabilities that simply didn't exist elsewhere. Foxconn could summon thousands of workers overnight, install world-class machinery subsidized by local governments, and operate at scales that dwarfed Western competitors. This speed became Apple's secret weapon—and its greatest vulnerability.
Section: 3, Chapter: 11
The iPod's Accidental China Strategy
Apple's expansion into China wasn't strategic—it was reactive. When Inventec struggled to meet surging iPod demand in Taiwan, they proposed moving production to mainland China for lower costs and unlimited labor.
'We just got pulled in,' Tony Fadell admitted. China offered subsidies, free land, and workers willing to labor around the clock. Once one supplier moved, competitors had to follow or lose their cost advantages. Within years, the entire electronics industry found a new home, fundamentally reshaping global manufacturing forever.
Section: 3, Chapter: 15
The Divorce Avoidance Program
Apple's demanding culture created so much stress that marriages were collapsing. Engineers working 80-hour weeks and constant travel to Asia led to the informal 'Divorce Avoidance Program'—time off to save failing relationships.
As projects intensified, Apple evolved the solution: $10,000 bonuses called 'Danny bucks' for completing China projects, and flying spouses and children to join engineers on trips longer than 30 days. The company even paid for hotel upgrades, acknowledging that pushing employees to burnout was acceptable if properly compensated.
Section: 3, Chapter: 16
The iPhone Changes Everything—Including Apple
The iPhone's January 2007 unveiling wasn't just a product launch—it was a declaration of war against the entire mobile industry. But two weeks later, when keys scratched the plastic screen of Jobs's prototype, he demanded an immediate switch to glass with just months until launch.
The decision created the most complex supply chain ever attempted. Apple had to co-develop revolutionary touchscreen technology with Chinese suppliers, embed thousands of engineers in factories, and create new manufacturing processes that didn't exist. The iPhone didn't just require China—it required Apple to teach China everything it knew.
Section: 3, Chapter: 18
You Can't Just Send Blueprints To China
Apple discovered that China's role went far beyond simple assembly. The company had to co-create cutting-edge processes that didn't exist:
- Rigid-to-rigid lamination for bonding LCD displays
- Pattern etching on both sides of glass simultaneously
- Custom robotics for clean-room manufacturing
- Revolutionary antenna integration techniques
'There is no supplier out there where we could just send a package of drawings and get what we wanted without lots of work on our side,' explained one engineer. Apple wasn't outsourcing—it was teaching the world how to make the impossible.
Section: 3, Chapter: 18
The Great Forecasting Disaster
Predicting iPhone demand in China proved impossible using traditional metrics. One Apple executive estimated room full of cash worth 'a billion dollars' backing the gray market resellers. Post office workers spent 30% of their annual salary on iPhones for status.
Traditional economic models broke down completely. Apple's analysts would double their projections annually, cross their fingers, then discover they'd still been far too conservative. 'It was pulling numbers out of your ass—no matter what you did,' admitted one forecaster. The unpredictability wasn't a bug—it was a feature of China's rapid transformation.
Section: 4, Chapter: 22
The Politicization Of Apple
Xi Jinping's ascent marked the end of Apple's political innocence in China. The 2013 Consumer Day attack wasn't about warranty policies—it was about power. Beijing had decided foreign corporations would operate on Chinese terms or not at all.
Apple's apology and enhanced warranty policy for China signaled a new reality: the world's most valuable company would bend to authoritarian demands. The incident established a pattern of Apple prioritizing Chinese market access over its stated principles, from removing VPN apps to restricting AirDrop during protests.
Section: 5, Chapter: 26
The Gang Of Eight Strategy
Apple's response to Chinese political pressure was the Gang of Eight—a team spanning operations, retail, government affairs, and education. Their mission: transform Apple from an exploitative trading company into China's greatest benefactor.
The strategy had three pillars:
1. Demonstrate massive job creation and investment
2. Build political relationships through local partnerships
3. Market Apple's technology transfer as indigenous innovation
Led by operations chief Rory Sexton, the team successfully reframed Apple's presence from extraction to investment, buying critical political protection.
Section: 5, Chapter: 27
The Dragon In A Three-Piece Suit
Doug Guthrie's expertise in Chinese economic sociology proved crucial for Apple's political awakening. His key insight: China wasn't becoming Western despite appearances—it was mimicking Western practices while maintaining authoritarian control.
Western academics assumed economic reforms would lead to political liberalization. Guthrie recognized China's system was maturing into something novel—a hybrid that could outcompete capitalist rivals while maintaining Communist Party supremacy. His warning that 'voluntary is the new mandatory' captured how Xi weaponized regulation to control foreign corporations.
Section: 5, Chapter: 28
Voluntary Is The New Mandatory
China's labor dispatch law exemplified Xi Jinping's new approach to controlling foreign corporations. The law limited temporary workers to 10% of a factory's workforce—impossible for Apple's seasonal production that required ramping from 900,000 to 1.7 million workers.
The law wasn't meant to be enforced but to extract concessions. As Doug Guthrie explained to confused Apple lawyers: 'You're supposed to be out of compliance. Because you're supposed to go figure out what the mayor of Zhengzhou wants from you.' Beijing had weaponized regulation, making compliance optional but cooperation mandatory.
Section: 5, Chapter: 29
The World's Most Expensive Business School
Chinese suppliers agreed to work for Apple at razor-thin margins because the real value wasn't profit—it was education. Apple engineers sleeping on factory floors and working 18-hour days were providing the equivalent of an elite engineering education.
Key lessons suppliers gained:
- World-class quality control and zero-defect manufacturing
- Advanced automation and precision machining techniques
- Supply chain optimization and inventory management
- How to scale luxury products to mass-market volumes
The knowledge was then applied to other clients at much higher margins. Apple inadvertently created the most effective technology transfer program in history.
Section: 5, Chapter: 30
The Apple Squeeze Explained
Apple's competitive advantage stemmed from a unique deal with Chinese suppliers called 'The Apple Squeeze':
The Exchange:
- Apple provides world-class engineering training and expensive machinery
- Suppliers work for 'soul-crushingly low margins'
- Suppliers gain skills to charge other clients much higher rates
While iPhone margins reached 33%, Chinese competitors earned 7%, 6%, and 2% respectively. Apple didn't pay suppliers much, but the experience was invaluable. This model enabled Apple to maintain industry-leading profits while suppliers built capabilities that transformed China's electronics sector.
Section: 5, Chapter: 30
A Marshall Plan For Modern China
Apple's secret 2016 pledge to invest $275 billion in China over five years dwarfed history's greatest aid programs. The investment exceeded the Marshall Plan's inflation-adjusted value by more than double—and this was for one country, not sixteen.
The message to Beijing was clear: Apple wasn't just creating jobs, it was facilitating the largest technology transfer in human history. Through 1,600 suppliers, Apple was embedding MIT and Stanford graduates into Chinese factories, teaching cutting-edge processes that China could never have developed independently. It was economic statecraft disguised as business strategy.
Section: 5, Chapter: 31
The Catfish Effect In Action
China's approach to foreign investment follows the 'catfish effect'—introducing a single predator to make the entire ecosystem stronger. Tesla's Shanghai factory served this purpose for electric vehicles, just as Apple did for smartphones.
Tesla's impact was immediate:
- Chinese EV market share grew from under 5% to 38% in four years
- Local brands gained access to Tesla-trained suppliers
- Manufacturing quality improved across the industry
The pattern: One American company gets to win while all Chinese companies benefit. China doesn't mind foreign success if it serves the larger goal of indigenous capability building.
Section: 5, Chapter: 32
The Death Of Apple's Conscience
Jacky Haynes joined Apple's Supplier Responsibility team as a 'passion project,' determined to improve working conditions across the supply chain. She expanded audits, formed advisory councils with independent scholars, and published monthly working hours reports for transparency.
But Apple's demanding culture made compliance impossible. Suppliers could choose profits or working conditions—never both. When Haynes's reports began showing deteriorating rather than improving conditions, Apple quietly discontinued them. She was 'disappeared' from her role as Xi Jinping's crackdown on labor advocates eliminated external pressure for reform.
Section: 6, Chapter: 33
The Rich Man's Offering
'Apple is the rich man. All these people gave their gifts out of their wealth; but she out of her poverty put in all she had to live on.'
- Li Qiang, founder of China Labor Watch, comparing Apple to the biblical parable
Section: 6, Chapter: 33
The Figurehead Problem
Isabel Mahe's appointment as Managing Director of Greater China revealed Apple's shallow approach to Chinese politics. Despite being born in China, she'd left at 16 and lacked cultural knowledge or operational experience.
The role existed purely for political optics in a company that doesn't have general managers. Court documents revealed Mahe wasn't copied on key emails, didn't attend executive meetings, and wasn't involved in critical decisions. She became a ceremonial position—'wheeled out as the China face' for official events while real power remained in Cupertino.
Section: 6, Chapter: 34
The Rise Of China's Red Supply Chain
Grace Wang's masterstroke was getting Tim Cook to visit her Luxshare factory and pose for photos on the assembly line. She agreed to assemble AirPods at zero margin for this single concession—the prestige was worth more than profit.
The visit elevated Luxshare from supplier to partner in Chinese minds. Within years, companies like Luxshare, BYD, and Goertek displaced Taiwanese manufacturers through aggressive recruitment, government subsidies, and strategic acquisitions. Apple's supplier list shifted from 100% Taiwanese assembly in 2012 to less than 50% by 2021—a geopolitical earthquake disguised as business evolution.
Section: 6, Chapter: 35
The Numbers That Revealed The Crisis
Internal Apple emails revealed the panic when iPhone XR sales collapsed in October 2018. Finance VP Saori Casey warned of 'an extreme problem' while Tim Cook called it 'obviously a disaster.' The holiday quarter faced a $7.5 billion revenue shortfall.
What Apple didn't tell investors was that Chinese consumers were choosing Huawei over iPhones. Internal reports showed Huawei's aggressive pricing and superior features were 'overshadowing' iPhone launches. For the first time since 2007, Apple faced a Chinese competitor that didn't just copy—it innovated.
Section: 6, Chapter: 36
Trump's Accidental Gift To Apple
Donald Trump's sanctions against Huawei in 2019 inadvertently saved Apple from its greatest competitive threat. Huawei had been outselling Apple globally and dominated China's premium market with superior features and aggressive pricing.
The sanctions crippled Huawei's access to Google services and 5G chips, causing its smartphone business to collapse. Apple suddenly became the only premium 5G option, with its China market share nearly doubling from 9% to 17%. The Washington-Beijing trade war morphed from threat to boon, though it highlighted Apple's dangerous dependence on geopolitical winds.
Section: 6, Chapter: 37
When The Student Becomes The Master
By 2019, Huawei achieved what seemed impossible just years earlier—it outsold Apple globally and dominated China's premium market with phones that matched or exceeded iPhone features. Chinese brands collectively commanded 79% market share in China and Russia, 73% in Indonesia, and 66% in India.
Apple had taught China too well. The supply chain Apple built to manufacture iPhones became the foundation for Chinese competitors. Companies like Xiaomi, Vivo, and Oppo used Apple-trained suppliers and Apple-developed processes to create phones that were 90% as good at 50% of the price. The teacher had created its own replacement.
Section: 6, Chapter: 37
Silence Is The Ultimate Consent
'If you see something going on that's not right, the most powerful form of consent is to say nothing. And I think that's not acceptable to your company, to the team that works so hard for your company, for your customers, or for your country.'
- Tim Cook in 2017, before ignoring questions about Chinese human rights
Section: 6, Chapter: 39
The Zhengzhou Nightmare
COVID-19 chaos at Foxconn's iPhone City in November 2022 exposed Apple's concentration risk in devastating fashion. When 200,000 workers were confined in 'closed-loop' systems, hundreds fled by scaling barbed-wire fences and walking 60 miles home.
The incident triggered Apple's third revenue warning in four years—each caused by China problems. Riot police beat protesting workers with batons while the facility that makes Apple's most profitable product descended into chaos. For the first time since Jobs's return, Apple's China-centric strategy looked fundamentally broken.
Section: 6, Chapter: 39
The Welch Warning For Cook
Jack Welch's transformation of General Electric from $14 billion manufacturer to $600 billion conglomerate earned him the title 'manager of the century.' But his legacy crumbled when GE's China-dependent strategy proved unsustainable during crises.
Welch pioneered shareholder-first capitalism that ignored national interests. His offshore strategy helped create America's Rust Belt while enriching shareholders short-term. When the 2008 financial crisis hit, GE lost 85% of its value. Tim Cook's China strategy faces similar risks—spectacular success built on foundations that could collapse overnight.
Section: 6, Chapter: 40
India—The Impossible Replacement
Apple's pivot to India represents the biggest supply chain challenge in corporate history. While India offers 1.4 billion people and $195 monthly wages versus China's $1,139, replicating China's capabilities requires more than cheap labor.
The fundamental problem: Apple is doing it 'ass-backwards.' Unlike Japan, Taiwan, and China—which started with component manufacturing before assembly—Apple began with final assembly in India while components still come from China. Building the supplier ecosystem that took China 20 years to develop would require massive coordination between Apple, Indian suppliers, and government policy.
Section: 6, Chapter: 40
The Five Threats To Apple's Future
Five converging risks threaten Apple's dominance:
- Huawei's resurrection with trifold phones and HarmonyOS that exceeds iPhone capabilities
- Chinese consumer backlash as 'Made in India' iPhones signal Western 'decoupling'
- Services expansion constraints requiring self-censorship and Chinese AI partnerships
- AI limitations from inability to deploy ChatGPT or discuss sensitive topics in China
- Trump's return threatening tariffs and anti-China policies
Each threat compounds the others. Apple's China strategy worked when the country was opening; it becomes catastrophic as China closes.
Section: 6, Chapter: 40
The Ultimate Irony
Apple's 1984 Super Bowl ad portrayed the company as a freedom fighter smashing Big Brother's totalitarian screen. Today, the world's most valuable company bends to an authoritarian regime, removing VPN apps and restricting communication tools during protests.
The company that once championed 'think different' now practices 'think compliant.' When Tim Cook ignored questions about Chinese human rights on Capitol Hill, his silence embodied his own earlier words: 'Silence is the ultimate consent.' Apple's quest for Chinese market access has transformed it from rebel to enabler of the very conformity it once opposed.
Section: 6, Chapter: 40
The TSMC Single Point Of Failure
Apple's shift to custom silicon created an extraordinary vulnerability: every iPhone, iPad, Mac, and Apple Watch depends on chips made by a single company on one earthquake-prone island that China threatens to invade.
TSMC produces 80% of the world's most advanced chips and sits on 'the world's greatest earthquake belt.' Warren Buffett sold his TSMC stake citing geopolitical risks, then slashed his Apple holdings by two-thirds. In war games involving Taiwan, semiconductor production stops on day one. Even a naval blockade would bring Apple operations 'to a halt.'
Section: 6, Chapter: 41