Apple's China Problem 34:23

Silicon Valley Bank is still the SVB you know and trust. The SVB that delivers human-focused, specialized lending and financial solutions to their clients. The SVB that can help take you from startup to scale-up. The SVB that can help your runways lead to liftoff. The only difference? Silicon Valley Bank is now backed by the strength and stability of First Citizens Bank. Yes, SVB. Learn more at svb.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.com.

When you're running a small business, sometimes there are no words. But if you're looking to protect your small business, then there are definitely words that can help. Like a good neighbor, State Farm is there. And just like that, a State Farm agent can be there to help you choose the coverage that fits your needs. Whether your small business is growing or brand new, your State Farm agent is there to help. On the phone or in person. Like a good neighbor, State Farm is there.

Thank you very much. It's an honor to be here. We're seeing the beginning of a very powerful, important plan. Back in 2019, Donald Trump and Tim Cook got together for a photo op. They were celebrating the fact that Apple was making things in America.

Yeah, that's right. You're seeing the president live now with Tim Cook, and they're looking at one of these Mac Pro units at this Flex facility here in Austin, Texas. And the audio is not so good here. What you're seeing here, the product, the Mac Pro, is an example of American design, American manufacturing, and American ingenuity.

So, picking apart this scene, some of it's based in reality, some of it not so much. For starters, that factory wasn't new. It had been operating since 2013. That factory was already there and it had already been making Macs and they just let him take credit for it. Nilay Patel was editor-in-chief of The Verge. Anybody that followed my campaign, I would always talk about Apple and I want to see Apple building plants in the United States.

And that's what's happening. Tim Cook is standing at a factory and allowing Trump to lie about what that factory is and what it does. And just kind of going for the ride. Call it capitalist theater, geopolitical capitalist theater. Because even though it seemed like Cook wasn't doing much there, he was just smiling, really. He was actually accomplishing a lot. He was convincing Donald Trump that Apple was all about making America great again. But he was really protecting Apple's business in China.

And protecting Apple's business in China is crucial for Cook because contrary to that grip and grin, Apple doesn't really manufacture its stuff in America. Yes, it makes some of its Macs in Texas, but it makes almost all of its iPhones. That's Apple's real business in China. And Trump was in a trade war with China. That's a trade war that continues with Joe Biden. And Cook wanted to make sure that Apple didn't get caught in the crossfire. The play acting worked.

Apple ended up dodging a tariff Trump instituted on Chinese-made goods, which was a huge win for Apple's iPhone sales. Tim Cook, it turns out, is very practiced at getting along with people in charge. So he operates an enormous manufacturing concern in China. He has made enormous concessions to the Chinese government. That means, among other things, building a labor system that pays millions of people meager wages for very hard work.

It also means making compromises with an authoritarian regime about privacy and human rights, ideas that Apple and Cook say are core to their values. And it means the company's most crucial infrastructure could one day be threatened by a change in Chinese politics or American-Chinese relationships. I think when we look back on Tim Cook's handling of Apple through what is admittedly an extraordinarily challenging time, the compromises he has made will look worse and worse with every passing year.

So today, that's what we're doing. We're going to examine those compromises and that close relationship between Apple and China. You can call that relationship symbiotic or codependent or worrisome, maybe all of the above. But you can't tell the Apple story without telling the story of Apple and China and wondering what might happen to it in the future. Welcome to Land of the Giants. I'm Peter Kofka.

Today we're talking about Apple and China and how an enormously rich and powerful company and a really rich and powerful government got so closely linked and intertwined. And to do that, we're doing something a little bit different. Today's episode is a joint venture between Recode and The Information, the excellent technology and business publication.

So we're going to bring in Wayne Ma, one of the information's reporters in Hong Kong. He covers China and the tech companies who work there. He's been doing that for more than 10 years. Hi, Wayne. Hi, Peter. Wayne, let's set the table by talking about the scope of Apple's operations in China. Why is China so important to Apple? Well, China's important for Apple for two reasons. One, Chinese consumers account for around 20% of Apple's annual sales. And two, the vast majority of Apple's products are assembled there.

So it's a huge market for iPhones, and then all those iPhones are made in China. That's right. And how did we get there? How did Apple come to be so closely linked to China? Well, a lot of this is because of Tim Cook. Cook is the CEO of Apple now, but when he joined Apple in the late 90s, he ran its operations. And he shuttered Apple's factories in Singapore and the U.S., moved a lot of its supply chain to China.

and bet the farm on China being the sole source of Apple's supply chain. And for China, it's not about just assembling the iPhone. All the components are made there, from the screws and the printed circuit boards to the glass screens. A lot of these factories are in close proximity to one another. The entire ecosystem is there, not just the assembly, but all the components. So we often hear about China as sort of a place where you get cheap labor, and Apple disputes that. Is that fair? Well, it's partially true.

There are definitely cheaper places that we could go to Vietnam, India, Indonesia, for example, but still much cheaper to operate in China than the US.

You know, the average factory worker, you know, assembling Apple products makes around $500 a month. In the US, they could make three or four times that amount. Also in China, factory workers working on Apple products can work 60 hours a week, six days a week. Workers in the US wouldn't do that. So when Cook is asked why Apple builds products in China, Cook plays up the fact that China has lots of manufacturing talent and skill that has kind of disappeared over the years in the US. The truth is China stopped being the low labor cost country many years ago.

And that is not the reason to come to China from a supply point of view. The reason is because of the skill and the tooling skill is very deep here. You know, in the US, you could have a meeting of tooling engineers and I'm not sure we could fill the room. In China, you could fill multiple football fields. Wayne, how many people does Apple have to have working in China if it's producing all of its iPhones? There seems like you need an army of employees.

One of the beauties of Apple's supply chain is that it doesn't actually own its own factories or employ people directly. It relies on contract manufacturers. And so it's indirectly responsible for employing anywhere from between one and two million workers at any given time. That's a huge chunk of China's manufacturing workforce. China has maybe only 110 million manufacturing workers. So Apple's employing, not directly employing, but putting to work maybe 2% of China's manufacturing workforce? Yeah, something like that.

So if Apple isn't employing these folks directly, who is? There's companies like Foxconn and Pegatron. You know, they're two of Apple's largest contract manufacturers. You know, Foxconn is...

responsible for assembling the vast majority of iPhones, maybe between 60 and 70 percent of them. In recent weeks, a number of reports have raised serious questions about the workers there, the giant factory. We first started to hear about Foxconn about a decade ago. There were reports of brutal working conditions and a rash of public suicides from Foxconn workers. The long hours, the pressures, the low pay, the life. And a growing number of these workers are either killing themselves or

All this media coverage over the suicides prompted Foxconn to reduce hours, raise wages, and improve their working conditions.

But the conditions are still tough for workers there. Many of these workers are migrant workers. They travel inland from villages in China. They're away from their families for long periods of time. They live in dorms at these facilities, often four to six people a dorm. They're still working 60 hours a week, six days a week. Their work is repetitive. It's boring. It's all done by hand. Many of these workers, they want to quit within two to three months.

We spoke to another journalist, Brian Merchant, who's written an entire book about the way the iPhone is made. It's called The One Device. He says he was able to actually get into Foxconn five or six years ago and observe working conditions firsthand. It's as big as a lot of American cities. It's a number of city blocks with towering skyscraper dorms. It's gray and dismal. Most of the people there were young. You kind of have to be to be able to tolerate these work environments.

And it's not just, you know, low pay and desperation. It is this managerial culture where you're expected to perform at an insanely rapid clip without making any mistakes. And if you do make mistakes, then your manager is liable to stand you up and humiliate you in front of your peers.

For people who had just moved from hundreds of miles away, it's horrifying. You know, you don't have any friends. You don't have a social network. You don't have a support group there. I would ask these workers how many iPhones or pieces of iPhones would come through their stations every day, and it was hundreds. So, Wayne, let's be clear. Are the working conditions here unique to Apple and Foxconn and this supply chain? I mean, most of the stuff in my house is.

It's probably assembled in China. Is this still standard for the way things are manufactured in China? It is. It's not just Apple, but all the products you buy, consumer electronics at least, are made within these conditions. But I would argue that Apple kind of stands out because of the size and scale of its production. You know, there's no other foreign company that can come close in terms of the number of workers and employees or the number of products it produces.

So we understand that Apple is really big and we get that this is how a lot of work is done in China and that because Apple is such a large employer, it's doing more of this work than anybody else. Does Apple have particular challenges with its workforce? Well, a lot of this relates to Apple's internal production strategy. Internally, it's called the ramp. And what that means is that if the iPhone is released in September, Apple suppliers have to start massively hiring in July and slowly build up hiring until the release date.

And then when January comes around, demand is lower and so they don't need these workers year round. This causes a lot of factories to turn to extraordinary types of workers like student and temp workers, which can be easily exploited. And in some cases, Apple suppliers have been even accused of using forced labor.

Let's address those one by one. What does a student worker do at Apple? A student worker is somebody who can be as young as 16 years old. He or she is doing it as an internship, so they're not paid as much. And technically, they're not supposed to work overtime hours or nights and weekends. They're not supposed to work 60 hours a week like a normal worker. But the problem is that some of these factories do force them to work nights and weekends. And in some cases, their work has nothing to do with their area of study.

So it's not really an internship. It's just a job. And this is in violation of Chinese law and Apple's own supplier code of conduct. If you've heard about this, then Apple's heard about this. When someone says, hey, Apple, you've got 16-year-olds working at this supposed internship, but really it's factory work. What is Apple's response? Student worker violations have happened multiple times at Pegatron. That's one of Apple's largest suppliers and assemblers of the iPhone and iPad. But each time it happens, the reaction by Apple is the same.

You know, Pegatron cops to the problem. It promises to change. Apple threatens to withhold new business from Pegatron. But Pegatron tells Apple they fix things and it's business as usual until the next violation is discovered. So you're describing a recurring problem here. You've also talked about temporary workers. That seems pretty benign, at least in the U.S. What does a temporary worker mean in China? Temporary workers are employed by agencies that are contracted by the factories.

So they're even another layer removed from Apple and have even less oversight than full-time workers. They're more vulnerable than full-time employees, as many of them don't have the same rights and benefits as them. In some cases, temp workers have had their salaries or bonuses withheld until they've completed their work. Many of these temp workers, they can't afford not to be paid. If they don't get their money, they're stuck and immobilized.

China says this works okay, but you can't have too much of it. That's right. China says factories can't employ more than 10% of their workforce as temporary workers. But the reality is that many factories go way above that limit. In some cases, it's 40%, 50%. And Apple has known about this for years and hasn't enforced those limits.

You also brought up the idea of forced labor, which sounds not good. What is that? And is Apple benefiting from it? Yes. There's a number of factories that Apple works with that media outlets like Us, The Information, The Wall Street Journal, and The Washington Post have shown employ forced labor. What is forced labor in China? In China, there's this region called Xinjiang.

where over the last few years, China has been persecuting ethnic minorities there. They've been sending thousands of these ethnic minorities to factories outside of Xinjiang to work. But these ethnic minorities, they are constantly surveilled. They're not allowed to leave the factories. They're forced to undergo political indoctrination while they're at the factories.

And to be clear, there's credible reporting that alleges that the Chinese government is forcing ethnic minorities to go work in these factories? Right, that's correct. And are they getting paid for this work? They are getting paid. But it's not their choice to work there. They are compelled to do so. Yes. And this is crucial. Do we know that Apple suppliers are using this kind of forced labor to make Apple products? We don't. The best we know is that in many cases, the addresses where these workers are are the same addresses that supply Apple with components and products.

They may be working on Apple products. They may be working on something else that Apple has nothing to do with. Yeah, that's right. But regardless, these companies are an Apple supply chain and Apple is working with them. And when you and other journalists ask Apple about this, what does Apple say? Well, they give a variety of answers. In some cases, they've denied it, even though there's been clear evidence and video footage of it at the factories. Sometimes they say they couldn't find evidence of it. Other times they say they couldn't find evidence of it on their production lines.

We also reached out to Apple for comment. And in a statement, a company spokesperson said that Apple conducted more than 1,000 audits and interviewed more than 57,000 workers over the past year and a half. Quote, we have found no evidence of forced labor anywhere in our supply chain and will continue to ensure workers are treated with dignity and respect everywhere we work.

Wayne, that's what Apple says. What about lawmakers? Washington generally hasn't paid much attention to the tech industry for a long time, but that has changed in the last few years, right? Yeah. In fact, in July 2020, when Tim Cook testified in front of Congress, he was asked about this issue. He said at the time that he wouldn't stand for it. And Mr. Cook? We wouldn't tolerate it. We would terminate a supplier relationship if it were found.

Wayne, we've been hearing about difficult working conditions in China for Apple for more than a decade. What's Apple's response to this scrutiny and criticism? Well, Apple says it's taking the issue seriously, and it has been throwing resources and people at the problem. After the Foxconn suicides, Apple greatly increased the size of the team in charge of monitoring its suppliers. It set new and tighter policies for supply chain conduct, and it also increased the number of audits on the factories it uses.

One of Apple's initiatives was to create this academic advisory board that was filled with researchers familiar with China labor issues to help Apple look at its supply chain and how to solve some of these problems. I was a member of the Apple Academic Advisory Board from 2012 to 2015. One of the people they brought in was Eli Friedman, a sociologist specializing in labor in China. It was a pretty unusual opportunity to be able to be granted access to

to Apple's supply chain. Apple itself is famously not super transparent, and many of the companies that produce goods for Apple are extremely difficult to gain access to. And so the possibility of being able to get inside some of those factories to really talk to workers about their experiences was pretty appealing to me. So one of the issues that Apple wanted the Academic Advisory Board to address was the issue of overtime and turnover.

Many workers were leaving within two or three months. Some of the workers were working way more than 60 hours a week, which was against Apple's rules and the Chinese government's rules at the time. In one case, Friedman actually visited a Pegatron factory in China. What he found was a pretty typical factory environment. It didn't seem like the workers were unhappy.

It's brightly lit, it's well organized. This doesn't appear anyway at first glance to be such a bad job. We got to speak with a couple of workers in kind of focus groups. I didn't find it particularly illuminating.

That being said, the workers had been picked by management and any social scientists will tell you that that produces the potential for bias. So I wasn't putting too much stock into what the handful of workers that we spoke with had to say. Left me

kind of wanting to know more about what might be going on in the facility. He actually proposed an ethnographic study where he would actually spend a few months living with the workers at the factories in their own dorms to try to build rapport with them and to get real insight into what their lives were like. And I put together a proposal and I submitted it to Apple and it was rejected. Why did they reject it? What did they say?

I'm still not really sure. But my sense is that this is just speculation, but my sense is that the supplier was not interested in, you know, having some foreigner kind of poking around in their dormitories and that Apple didn't see it as worth their while to expend political capital pushing for this. But again, that's, you know, that's speculative. I also started to

come to the conclusion that the board was not really going to be able to do the things that I thought it ought to. After his proposal shut down, Friedman also proposes raising wages for some workers to see if it gets them to stay at the factory longer. Apple isn't very responsive to that. Eventually, he feels like he's unable to do a lot of the research that he wanted to do or make any meaningful impact on the matter, and he decides to leave the Academic Advisory Board.

So is the lesson here that Friedman was naive about what he thought he could accomplish as part of an academic advisory board, or is this Apple setting up an academic advisory board and not really wanting to engage with it? I think Apple wanted this board, but they weren't prepared for the types of research that the academics wanted to do. In many cases, you have to get buy-in from the suppliers, and Apple can't force these suppliers to agree to some of these studies if they don't want to. By the way, Friedman says the board actually disbanded a few years ago.

Big picture, you've laid out convincingly that Apple has problems in its supply chain, that some of the working conditions are bad. And Apple says they want to root some of these problems out. How much work is Apple willing to put into fixing supply chain problems and fixing labor conditions? And how much unpleasantness in that supply chain is Apple willing to tolerate? Well, former Apple employees tell me that Apple will fix problems in its supply chain if it's easy, but it won't if it's hard.

especially if it's going to disrupt production or impact the supply of products like the iPhone. Apple has very strict policies when it comes to supplier violations. It gives suppliers up to 90 days to improve or fix their problems. If the suppliers don't seem willing to change, Apple says it'll cut them off. But over the last decade, Apple has removed only about two dozen supplier facilities for violations. But it works with more than a thousand facilities in its supply chain.

Apple's the most valuable company in the world. It built this system. The vendors it employs are dependent on Apple for the bulk of their revenue. Can't Apple just make them make significant permanent changes?

Not really. And that's because a lot of the components are custom made. And so there's only a few suppliers that can make them. And it takes years to develop these suppliers to certify them and build them up. So Apple can't just leave one and go across the street and get those components from like another company. One example of this is the companies that make the glass screens for the iPhone. Apple is dependent largely on two suppliers. One is called Beale Crystal. The other is called Lens Technology. Both of them have come under fire by labor rights activists and researchers for problems in the supply chain.

Bill Kristol has been under fire in the past for having workers operating under hazardous conditions. Lens recently has been accused of using forced labor from Xinjiang. But in both cases, Apple continues to use both those suppliers because without them, the iPhone wouldn't get made. So why can't Apple just pay its suppliers to adopt better labor practices? The vendors are willing to improve if Apple pays them more.

But former Apple employees tell me that Apple is reluctant to do so. Apple wants the vendors to pay for the improvements themselves. The vendors don't want to spend the money or increase their costs. But Apple also doesn't want to pay more because it wants to keep its costs low and margins high.

A lot of people believe Apple is successful because it designs great products that people want to buy. But a lot of its success comes from how it manages its supply chain, which is world leading. The company has two to three suppliers for every single component it makes. Apple pits these suppliers against each other to drive costs down. They care about every penny.

and they squeeze their suppliers super hard. People working at Apple suppliers, they've told me that they've had to show Apple all their costs. You know, from the price of electricity that they spend to the cost of their rent. Apple buys a lot of the equipment used by the suppliers so that suppliers can't pad their bills even more. So this system works incredibly well for Apple. It's made them enormously profitable.

There's a statistics out there that says Apple represents about 20% of smartphone sales every year, but it captures 90% of the profit in the industry. This complex layered system Tim Cook built in China is a tremendous success for Apple, but it is a two way street. It's not just Apple getting stuff from China. Next up, what China gets from Apple.

Support for Land of the Giants comes from Quince. The summer is not quite over yet, but shifting your wardrobe to the colder months could start now, little by little. You can update your closet without breaking the bank with Quince. They offer a variety of timeless, high-quality items. Quince has cashmere sweaters from $50, pants for every occasion, and washable silk tops.

And it's not just clothes. They have premium luggage options and high-quality bedding, too. Quince's luxury essentials are all priced 50 to 80 percent less than similar brands. I've checked out Quince for myself, picking up a hand-woven Italian leather clutch for my mom. As soon as she saw it, she commented on how soft and pretty the leather was and told me it was the perfect size for everything she needs to carry out on a quick shopping trip.

Make switching seasons a breeze with Quince's high-quality closet essentials. Go to quince.com slash giants for free shipping on your order and 365-day returns. That's Q-U-I-N-C-E dot com slash giants to get free shipping and 365-day returns. quince.com slash giants

On September 28th, the Global Citizen Festival will gather thousands of people who took action to end extreme poverty. Watch Post Malone, Doja Cat, Lisa, Jelly Roll, and Raul Alejandro as they take the stage with world leaders and activists to defeat poverty, defend the planet, and demand equity. Download the Global Citizen app to watch live. Learn more at globalcitizen.org.

So this is one of the reasons why we don't operate Facebook, Instagram or our other services in China. I wanted our services in China because I believe in connecting the whole world and I thought maybe we could help create a more open society. This is something that I worked hard on for a long time but we could never come to agreement on what it would take for us to operate there and they never let us in.

Lots of big tech companies have been trying to get into China for a long time, and a lot of them have had no success at all. Google was there for a while and had to leave. Facebook spent years trying to figure out a China strategy. You even saw Mark Zuckerberg trying to learn the language. Netflix at one point said they were going to get into China and never got in there. The distinction here seems to be that companies that are in the content and information business really aren't getting any access to China at all. China just doesn't want them there.

Companies that make physical products in China, that's another story. And Apple is in the physical products business. They make their products in China. But they still have to make big trade-offs to do business there. Go for it, guys! See you later, man! Go for it! See you later, man!

In 2019, during pro-democracy protests in Hong Kong, Apple removed a mapping app that had been widely used by protesters from its app store. Apple removed the app a day after Chinese state media warned that Apple would suffer consequences for its, quote, unwise and reckless decision to approve the, quote, poisonous map app, which, quote, obviously helps rioters. It's worth noting that this is the kind of concession that tech companies make around the world all the time. In fact, it's not just the tech companies.

Apple and Google just did something similar in Russia where they were forced to take down a pro-democracy app in that country's app store. And whether it's Apple or anybody else, when they're confronted with this kind of concession, they always have the same answer, which is we must comply with local laws and guidelines. But Apple and China are so deeply intertwined at this point, there may be no separating the two. There's a huge financial benefit to being in China. This is Doug Guthrie. He's a longtime China academic and business professor at Arizona State University.

He says this financial benefit for companies like Apple also comes with a question. You know, they have to ask themselves, like, how important are some of these other issues? Guthrie was actually brought in by Apple between 2014 and 2019 to advise on the company's business operations in China. He wouldn't speak specifically to us about Apple, but said that for foreign companies in China, they have to play ball with the Chinese government.

The most important aspect of doing business in China today is partnership, particularly in the current era. If China feels foreign companies are there just because they can have a cheap labor source and they can exploit the supply chain, you know, that's not enough. You know, the ones that are still doing well in China are the ones that have really built relationships. Partnership is important, and you need to figure out as a foreign company how to give back

Wayne, we know what Apple is getting from China. What is Apple giving to China? Well, in addition to the more than a million people it indirectly employs and the billions of dollars it's invested in the country over the years, Apple has single-handedly built up China's smartphone manufacturing industry. It's developed and nurtured all these suppliers, all these Chinese factories, and those factories are now used in turn by other big Chinese smartphone brands like Huawei and Xiaomi to develop their own smartphones.

They've not only given them the playbook, they've helped them build the resources to make this possible. Right. So it's not only that these Chinese companies know now how to assemble or build components for smartphones, but a lot of the investments that Apple has made in them, those factors are now being used by other Chinese companies to build their own smartphones. And in addition to spending, what does Apple have to give up in order to do business in China? Apple in the last few years has been on this kick about its focus on privacy. But in China, there is no privacy.

And one of the things Apple did in 2018 was that it moved all Chinese consumer iCloud data to a Chinese-operated data center to comply with Chinese laws. By moving that data to a Chinese-operated facility, it puts it under the purview of the Chinese government, under the Chinese legal system, and it makes it easier for Chinese authorities to access. You know, that's a lot different than the U.S., where your data is only accessible through law enforcement subpoenas, and there can be much more resistance to that.

It's a little weird, right? You know, when I watch TV, I frequently see Apple ads playing up Apple's commitment to privacy. And because I'm a tech reporter, I know that some of that is about criticizing Facebook and Google, but it is a pitch they're making to consumers in America. Does privacy not matter in China? Absolutely.

Apple says privacy is a fundamental and human right, but it also conflicts with its need to follow the laws of every country it operates in, especially in China, where lots of residents don't have expectations of privacy. So Apple has compromised on privacy in China. What else? The other big issue is censorship. There

There are tens of thousands of apps that are missing from the China App Store that are accessible by other people around the world. A lot of those apps relate to VPNs, which allowed people to access the full internet beyond the Great Chinese Firewall, LGBT apps, even media apps like the New York Times have been removed at the request of the Chinese government, or Apple has actively self-censored them. Wayne, we're describing this deeply intricate relationship that China and Apple have with some problems, but it also seems to work really well for Apple and China.

Right now, both sides are getting stuff out of this. But is this a tenable relationship? Is this sustainable? Well, there is this trade war that's been brewing for the last few years, and it's impacted lots of companies, both in China and the U.S. And by the way, this is still going on in the Biden administration. And so there could be this reality where Apple might get kicked out of China, which is similar to how the U.S. has tried to kick out Huawei and TikTok. So if we get to that doomsday scenario, at least doomsday for Apple, where they're actually forced out of China, I

What are their alternatives? They've built up this giant infrastructure in China. Can they port that somewhere else? Not really. They can assemble products in other countries like Vietnam and India, but those countries have their own problems. Vietnam doesn't have enough workers. India doesn't have the infrastructure. And besides that, all the components are still made in China. They can't move that entire ecosystem to those countries, nor could they assemble products in the U.S. given the high costs. It's very difficult for Apple to replace China, but what about the Chinese side of the equation?

What happens to the Chinese economy if Apple disappeared? And how do Chinese consumers react if they can't buy iPhones? Well, if Apple couldn't make their products in China, 2 million jobs overnight would disappear. Lots of manufacturers that rely on Apple would lose a ton of money. And also, Chinese consumers love their iPhones. They're considered status symbols in the country. If Apple couldn't sell their products in China...

there would be a huge backlash. That's something we heard from another China expert as well. I've lived in China for six years. Chinese people love Apple products. This is Meg Rittmeier. She's a professor at Harvard Business School, studies the way American companies work in China. If for some reason Chinese people were not able to buy Apple products, I don't really see how that would be a big win, right, for Beijing to say nobody gets access to Apple anymore.

So in my mind, this sounds like a classic codependent relationship. Both sides might have problems with it, but they're also going to stick there because they don't have a better option. Yeah, but it works for Apple in China. China gets investment jobs and lots of manufacturing know-how.

Apple gets access to cheap and plentiful manufacturing labor. When you think about a company like Apple that's that embedded in China, you know, their interests are complex, just like the Chinese Communist Party's interests with Apple are complex. So it's not just a one-way power. I mean, that's a silly way of looking at things. Power is kind of going in both directions.

Let's talk about power then, because Apple looks like they're locked into China for the long haul. And that entails a lot. That's working with suppliers who could be violating their workers' human rights, deleting apps at the behest of an authoritarian government and making it easier for that government to get its hands on citizens' users' data. These are all things Apple says it's against. So who's got the power to hold Apple to account? Well, consumers could boycott, but it's unlikely they'll do so. There could be legislation or enforcement, but so far we haven't actually seen that.

There just doesn't seem to be any pressure coming from any side, really, on Apple. And the relationship between Apple and China has just become more lucrative over time. This is a relationship that works for both sides. Thanks, Wayne. Thanks for having me. Next on Land of the Giants, how Apple took over the music business and then got stopped at Hollywood's front door. We hope you liked this special episode. It was a joint venture with The Information. Thanks again to Wayne Ma, as well as Jessica Lesson and Amir Afradi at The Information.

Thank you.

If you're lucky, you'll get to work with a team this good. Zach Mack is the show's senior producer. Our producer is Matt Frassica. Jolie Myers is our editor. Serena Solon is our fact checker. Brandon McFarlane composed the show's theme and engineered this episode. Sam Altman is Recode's editor-in-chief. Art Chung is our showrunner. Nishat Kerwa is our executive producer. I'm Peter Kofka. If you like this episode, leave us a rating and review on Apple Podcasts or wherever you listen to podcasts. And tell a friend and subscribe to hear our next episode when it drops.

Quick disclosure, Vox Media creates content for and does business with Apple. None of the people creatively involved with this season of Land of the Giants are involved with those projects.