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For four years, Patrick McGee was the lead Apple reporter at the Financial Times. His new book, Apple in China, argues that the iconic company has not only created an “existential” risk for itself by coming to rely so heavily on China, but also contributed more than any other firm to China’s rise as the United States’ chief technological rival. We spoke recently in New York. Below is a condensed and lightly edited transcript of our conversation.

Q: You were covering Apple at the Financial Times when you had the idea for this book, looking for ways that its success could hit a wall. When did things begin to click that China was that wall? 

A: Around October 2022, I started asking analysts what stops this company from being worth $4-5 trillion, and their answer was antitrust. I just never thought the antitrust argument against Apple was very good, nor is it existential. It hits them at the margins — fat margins, to be clear. It’s a big deal if Apple loses its $20 billion pure profit deal for hosting Google as a search engine on every iPhone in the world. But that’s not existential. That’s an irritant for Apple. It’s existential if something happens in China. If your export license is canceled from China, you don’t have an iPhone for several years. 

I discovered the position “manufacturing design engineer.” By the planeload, these Apple MDs went to Asia, China in particular, to train workers across hundreds of factories. So you’re taking America’s best talent, and you’re sending them to China. It’s not that China lured in Apple with tech competence. It’s that Apple directly teaches them, and they teach them through the division called manufacturing design. Nobody had written about them. Nobody knows who runs MD, who the people are, what their job is, where they go, how instrumental they are to Apple. That is what kicked off everything.

How reliant is Apple’s supply chain on China?

Virtually 100 percent. I keep saying all roads lead through China. What I should be saying is almost all roads are in China. 

Apple’s view is that they work with multinationals from 50 different countries for its supply chain. That’s not untrue, but most of those multinationals’ factories are operating in China. There are 1,700 factories in Apple’s supply chain — quoting some documents I have — and way more than 50 percent are in China. If you were building a million iPhones a day, and there’s 1,000 parts for that iPhone, would you have the pieces coming from 50 different countries, hoping that they arrive all at the same time? Or would you build them all in China and have the multinationals locate there? 

China is expert in nextdoor manufacturing. It’s a hub-and-spoke model, where everything around the final assembly plant is things like the plastic molding, the metal stamping and so on. Not all of those are Chinese, but it’s all happening in China. And if it wasn’t, Apple would change that, because at the volumes at which they are producing, it would make no sense for this stuff to be arriving internationally. 

So even though Chinese labor costs have risen, they have not gone up enough to take away from all of these other efficiencies? 

Yes. I find it almost funny when people say, “they should move to India because the costs are so low.” You get what you pay for. In China, they have robotics and automation at a world-class level. India does not. So sure, you’re getting lower labor costs in India. I would prefer the automation. So would Apple.

As we speak, trade tensions between the U.S. and China are deescalating somewhat, though tariffs remain high. If the relationship improves, why do you think it would be a mistake for Apple to continue to have China be this important in its supply chain?

If you understand what you can do with the skills that Apple is training China with, then you would understand we’re making China into a larger threat than they already are. It’s one thing to invest in China when it’s becoming a democracy. It’s quite another one when they have a dictator for life who wants to annex Taiwan and is promising to do so this generation. You wouldn’t want to arm that country. You wouldn’t sell F-35 jets to China. Why are we sending America’s best engineers [to train Chinese engineers] that could build those jets? That seems like a weird strategy. 

Apple is hardly alone among multinationals in becoming so reliant on China, though.

I would push back. What company has $400 billion of revenue, 80 percent of [which] is hardware, and 90 percent of that is built in China? Find me anyone close.

Look at Microsoft. Only 6 percent of its revenue is hardware. Nvidia is quite a different business model entirely. Digital advertising is what drives Google and Meta. Amazon might buy stuff from China, but they’re not in the factories making the stuff. Samsung builds its phones in six countries around the world, from Argentina to Vietnam — far more diversified than Apple. Nobody comes close to the vulnerability and exposure to China that Apple has. 

Apple is a corporation, and an American one, obviously…

Is that obvious? 

How much should it prioritize maximizing profits for its shareholders versus pursuing a strategy that aligns with its home country’s interests?

I’ll offer an analogy. Free speech is a brilliant American value, but it gets exploited by actors like Russia running bots on the internet to get people riled up against each other. We have this great value, and we have an enemy actor that is exploiting the weakness of that value. And I think China is doing the same thing for shareholder-first capitalism. 

American corporations want to go where it is cheapest. They think in quarterly, maybe annual terms. China famously thinks long-term, and realized a way to exploit Apple to get technological transfer. And to be fair, that’s directed at all Western companies. 

I don’t think they ever foresaw that a single corporation would end up benefiting their plans [this much]. China is astonished when Apple comes to them in May 2016 and explains how they’re operating in the country and how much the Chinese are benefiting. I quote someone saying it was “music to the ears of Chinese leadership.”

Apple benefited as well, though. 

If you’re a shareholder, it’s probably worth it. If you’re Apple, you did tremendously well. This is a story of negative externalities. It works really well for Apple, works really well for China. But if you think China is a belligerent threat, it’s deeply problematic that our greatest corporation is training them to such an extent on advanced electronics and automation, which have a dual-use, where they can be used for drone warfare and other military weaponry. 

Apple theoretically insulated its intellectual property more than companies that signed on to JVs with Chinese firms. What could they have done differently?

Theoretically is the operative word there. When Apple was setting up their supply chain in the early 2000s, the American consensus view was that we were helping to inculcate liberal values in China. I don’t think anyone should blame Apple for going into China at that stage. If anything, they were late. Everybody was doing it. But when Apple entered those markets, they just did a better job than anybody else. 

Apple’s not going to exit China. Even if it were theoretically possible to just move their supply chain someplace else, would you give up a $70 billion business? That’s not going to happen. I don’t think you’re gonna untie the knot that Tim Cook has tied with China. 

When Beijing attacks Apple in 2013, that is a wake-up moment for Apple. But the way they respond is by saying “we need to understand this country. We need to understand the culture so that we can placate local officials, make nice and make sure that they don’t put up obstacles to our production, and make sure that we can continue selling a multi-billion dollar business in the country.” That’s where the strategic error was.

Around the same time they launched a share buyback program. Instead of giving so much money to shareholders, they could have said “we need to be building up resiliency in our supply chain, because we’re facing an existential threat here by having all of our eggs in one basket, and the basket is now a surveillance state.” 

You’re talking about an event that happened on a day called Consumer Day. Tell us a little bit more about that and why alarm bells should have started blaring then.

March 15 is something called Consumer Day every year in China. It goes back to 1991, and it’s when companies are called out on national television for not living up to the socialist ethos of the country. In the 90s, it was local companies. In the 2000s you began to have a spattering of Western names involved. In 2012, it was McDonald’s. And in 2013, it was Apple.

The criticism starts 36 hours after Xi Jinping has become president. There’s no question in my mind that CCTV [China’s state broadcaster] could not go after Apple without Xi’s explicit approval. You don’t go after the most successful company on the planet in state-sponsored media without the highest echelons of Communist power approving. 

Apple is confused as hell when this happens. The attack was about warranty differences, of all things. Apple knows its warranties, they’re not different in China. So what is going on here? They don’t know. They issue a banal press release that says, essentially, there seems to be some confusion here. Our warranties are the same everywhere. There’s then a three week state-backed coordinated attack on the company that I call the digital blitzkrieg, where the People’s Daily says on its front page, ‘strike down Apple’s incomparable arrogance.’ This is a massive threat against the company, and Apple knows they have to respond. 

Yet even after that, Apple continued to double down on China.

They triple down on China. It’s true that there are some things that go to Vietnam, but it’s not because they’re de-risking from China. It’s because they’re beginning to experience, for the first time, labor shortages, and so they move peripheral products, like keyboards, mice, etc, to Vietnam. The wages are lower. The complexity of those products is lower, and they can just do it cheaper there. 

Vietnam, in terms of manufacturing purposes, is a colony of China. You’re not de-risking from China if you go there. The reason Vietnam is good is that its proximity to China means everything’s coming from China, and they’re mostly just doing the assembly.

You talked to a former senior Apple executive, and he told you that no one was thinking about geopolitics at Apple in the 2000s. If Apple wasn’t thinking about geopolitics then, it almost certainly is now. Are you seeing any changes as a result of that?

Almost all hype and very little substance. Tim Cook has a problem with Trump, who is a bigger threat to Apple than Xi Jinping. That might sound like an outlandish statement, and when someone senior at Apple told it to me, I thought it was. Yet it makes perfect sense. As soon as you give it some thought, Xi Jinping wants everything in China. He’s willing to do lots of things for Apple to have high-margin, low-cost, highly automated assembly, because he knows how much he benefits from Apple generating technology transfer in the country. Donald Trump doesn’t want any of that. 

Beijing has Apple over a barrel. If Apple makes quick and aggressive and big investment moves in India, they risk the immediate ire of Beijing. Beijing can take any number of actions to prevent that from happening. Maybe a couple factories lose electricity for a few hours. They don’t need to call anybody. They just need to orchestrate a few mishaps. They could wipe a trillion dollars off the value of the company at any given time if they felt like it. And Apple knows the political language in China these days to understand what’s happening.

So you don’t expect Apple to be able to move a meaningful amount of production to India in the near term.

They’re moving assembly just to avoid tariffs. They’re not moving the depth and breadth of the supply chain. And even if they were, you’d be mad to think that that’s going to happen in the next 18 months. China’s been doing this for four decades. 

I expect Apple to be making more investments. I expect headlines about new iPhone facilities, for assembly, for all sorts of production in India for the next 10, 15, 20 years. I mean, I absolutely think that’s happening. I don’t think it’s happening at the pace it needs to happen at, but if you went at the pace that I’m advocating for, you would risk more problems with Beijing. 

What makes India a place where this type of manufacturing just doesn’t work in the same way that it did in China?

The way I put it in the book is that Apple’s been making iPhones in India since 2017. They go from zero to about 30 million between 2017 and 2024. Go back a decade in China, you go from zero in 2007 to almost a quarter-billion by 2015. So at best, made-in-India iPhones are happening at one-tenth the rate it happened in China. And even that vastly overstates what’s taking place.

In China, you were inventing everything. Multi-touch glass literally doesn’t exist [without China], let alone having an antenna that’s in the chassis of the phone, rather than a component beside the battery. There’s all sorts of complicated engineering processes that are behind the creation of the iPhone, and that was all being invented and then scaled at great pace. The invention and the scale isn’t happening in India. The idea that India is about to rival China is ludicrous. 

You mentioned earlier that Apple has learned to deploy its political capital in China. How much of that do you attribute to Tim Cook or to some of the other executives that Apple ended up placing in China?

Tim Cook is instrumental. There’s a reason why he goes to China three times a year — at least, the trips we know about. 

The narrative in the book is what I call the ‘Apple squeeze.’ If you’re in the Chinese leadership in Beijing in 2013, it’s understandable why you’re upset with Apple. Revenues in Greater China for Apple go up by about 2,000 percent in a three- or four-year period. Apple wouldn’t be shipping literally hundreds of millions of devices around the world without Chinese production facilities. If you’re looking at public data, all you see is that the suppliers make that happen aren’t making much money, and they’re even making less margin the more they ingratiate themselves with Apple. 

In May 2016, Tim Cook is photographed outside of Zhongnanhai. I’m paraphrasing, but he says “We are giving these hundreds of suppliers the Ivy League equivalent of hardware engineering training. We’re giving them tuition-free training.” They completely flipped the narrative on its head to say, we have hundreds of relationships that are far more intimate than any joint venture you can find, and the fruits of that relationship are already being borne out, because Vivo, Oppo, Xiaomi, and Huawei are all becoming successful smartphone companies.

A decade later, some of those companies have become world leading EV companies. Apple’s influence has spread across the advanced electronics sector, the most important thing Xi Jinping cares about, according to Barry Naughton, speaking to The Wire. So Apple unwittingly, and this is not how they would put it, realizes, “We are the biggest supporter of Made in China 2025. We need to tell Beijing that, because they will remove the obstacles to our development if they understand how much it matters, if they want to support indigenous innovation, to have Apple locate their operations in their country.”

When you talk about the ‘Apple squeeze,’ that suggests the company is even more vulnerable to tariffs at whatever rate that they might come in, because they can’t squeeze their suppliers further to absorb the added duties. Do you agree with that?

There absolutely are not a lot of fat cats making 30 percent margins supplying Apple in China. So if Apple were hit with big tariffs, and Apple was adamant that its prices and margins remain stable, it’s likely you’d see an acceleration of the ‘red supply chain.’ They’re the ones who can get access to free land, free capital. If you have access to that, you can operate at lower margins. 

How much do you think Apple is worried about Huawei and its other Chinese competitors? 

In 2018, Huawei was offering its phones with far better specs than the iPhone XR. Huawei was selling a better phone at a lower price, and Apple was panicking. Tim Cook’s direct quote, that I have in an email, is “this is a disaster.” For a three-week period from early October to November 1, Cupertino is panicking that the iPhone XR is a dud. And it’s a dud specifically in China, because the Chinese are preferring to buy the latest Huawei phones. 

And yet by the time November 1 comes around, Tim Cook emails the board of directors to say that things are looking pretty good. Meanwhile, internally, Apple has downgraded its forecast from plus 4 percent in China to minus one percent. It’s not that revenues are growing more slowly in China — they are shrinking. They have known this for weeks. The operations team understands the trajectories enough to slash the next five months of production. And still, within 24 hours, Tim Cook tells investors that things are looking good. It was pretty brazen obfuscation: eight weeks later, Apple issued its first revenue warning in 16 years. 

If that’s how they responded five years ago, that gives you a very good inkling as to how they’re responding now: Panic.

If Apple is a product of this era of globalization where it didn’t have to consider geopolitical risks as much, do you think that it can survive an era in which those geopolitical risks matter a lot more?

Apple’s not going to exit China. Even if it were theoretically possible to just move their supply chain someplace else, would you give up a $70 billion business? That’s not going to happen. I don’t think you’re gonna untie the knot that Tim Cook has tied with China. Maybe you can re-tie another knot and have a bifurcated supply chain. Volkswagen has a German supply chain for its cars. It has a Chinese supply chain for its Chinese cars and EVs. They’re not separate companies, but they operate pretty independently. I think it’d be great if Apple could pull that off.

Have you heard anything from Apple since the book came out?

The short answer is no. I’m a journalist who likes having the “no surprise” policy, meaning you give a company 48 or 72 hours to respond, and you include their response in the text. I couldn’t do that for a book of this sensitivity. Apple could have found ways to block me from talking to people — people who went to China, who lived in China. And even if I completed the manuscript and I sent bullet points to them, I couldn’t give them six months to stack up their own counter narrative. So they were not given a manuscript. They weren’t given any questions. They were given nothing before the book was published.

My goal was that the book was a bit of a Trojan horse. I’m selling you on the sex appeal of really cool, sophisticated products and fun characters like Steve Jobs and Jony Ive, but actually you’re learning the three things I just mentioned. If I told you I’ve got a great book on the supply chain, I’ve already lost you. If I tell you I’ve got a great book on Apple, you might actually read it.

On the day that it was published, when they clearly hadn’t read it, they called it “untrue and full of inaccuracies,” and I haven’t had any contact with them since. But I’m happy to go give a talk to Cupertino anytime they’d like.

Do you think you’ll be popular there? 

No, I don’t think I’ll ever be invited to an Apple event the rest of my life. The reason so many people spoke to me for the book is not that I found 200 disgruntled employees. I found people who did their life’s best work at Apple, who are really proud of what they did at Apple, but are very uncomfortable with how Apple consolidated into China. 

Are you hoping to see anything big change as a result of your reporting in this book? 

That’s a great question. I think my answer might be no, strange as that is. I’m not an activist. I’m not hoping that people protest Cupertino and start buying Samsung instead of iPhone. I’m only beginning to think about this question because I keep getting asked.

Insofar as I hope it has an impact, it’s that China is really important. I thought people need to be more sophisticated with how they view China, with how they view the U.S.-China relationship, and how they view the U.S.-China tech relationship. My goal was that the book was a bit of a Trojan horse. I’m selling you on the sex appeal of really cool, sophisticated products and fun characters like Steve Jobs and Jony Ive, but actually you’re learning the three things I just mentioned. If I told you I’ve got a great book on the supply chain, I’ve already lost you. If I tell you I’ve got a great book on Apple, you might actually read it.

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