Did Apple empower China?

Financial Times reporter Patrick McGee argues in his new book 'Apple in China' that China wouldn’t be the China it is today without Apple.

Patrick McGee, author of “Apple in China: The Capture of the World’s Greatest Company.” San Francisco Correspondent at The Financial Times.

Adapted from APPLE IN CHINA: The Capture of the World’s Greatest Company by Patrick McGee. Copyright © 2025 by Patrick McGee. Excerpted with permission of Scribner, a division of Simon & Schuster, Inc.

Part I

MEGHNA CHAKRABARTI: The United States still has the world's largest economy. Its GDP is approximately $30.5 trillion. China is number two with a GDP of $19.5 trillion. Then there's a huge gap, a drop of some $15 trillion before you find Germany, Japan, and India with GDPs between $4 and $5 trillion.

Now, the thing about China is it wasn't even in the top 10, a mere 25 years ago. It's really astonishing. And more remarkable still, some economic forecasts predict China could surpass the United States and become the world's largest economy just 15 years from now, sometime in the 2040s. Now, there are, of course, a lot of reasons for this.

But what if I told you that one of those reasons is how an American company helped build up China. Now this company has a market cap of $3.2 trillion. So if this company were a country, it would have the seventh largest economy in the world. And by 2015, this company was investing $55 billion every year in China. That's almost four times as much as the 2022 CHIPS and Science Act here in the United States.

Which then Commerce Secretary Gina Raimondo called quote:

"A once in a generation investment."

That would, quote:

"Usher in a new era of American leadership and advanced semiconductor manufacturing."

End quote. That was the celebration for this one-time CHIPS Act. Now, this company that we've been talking about has been investing four times as much in China every single year.

This company has also trained some 28 million Chinese workers in high tech and manufacturing. That's more than the entire workforce of the state of California. So, quote, we've trained a whole country and now that country is using it against us. That's from one of the company's engineers. So by now I'm thinking, you probably guessed it, that company is Apple.

And that engineer's quote comes from the new book, Apple in China: The Capture of the World's Greatest Company. It's by Patrick McGee and he joins us now. Patrick, welcome to On Point.

PATRICK McGEE: Thank you. My pleasure.

CHAKRABARTI: So I'm wondering if you could start with an example actually, that you opened the book with, which shows not just how much Apple has influenced China's upward trajectory, but the opposite now, how much China has an influence over Apple's trajectory and that comes in 2013, I believe, was something called Consumer Day in China.

McGEE: Yes. Consumer Day goes back to 1991. It's a segment on CCTV. You could think of that as state-sponsored CNN in China. And the idea is to call out companies that aren't quite living up to the country's socialist ethos. And nothing necessarily nefarious about that. But it was mainly directed against local companies for quite a while.

Foreign companies begin to get called out in the early 2000s, and in 2013 it's Apple. What's really significant about this is that Xi Jinping has entered office a mere 36 hours before, and this is at a time when we don't quite know that Xi Jinping is going to be the authoritarian ruler that he's turned out to be.

I think he's comparable to something like China's Putin, let's say, right? He's an unprecedented third term right now. He's really turned the country in this belligerent and more authoritarian direction. And Apple doesn't know that. Nobody knows that in a certain sense. He actually campaigns, that's probably the wrong word.

That's a Western term, right? Within the Communist party, he had campaigned on being someone that would root out corruption. And so Apple gets attacked on CCTV for warranty differences, of all things. And the allegation is essentially that the Chinese consumer is being treated in an inferior way when it comes to what happens when someone brings an iPhone back.

It's an immensely complicated episode where Apple is actually confused more than they're fearful because they don't really understand Chinese culture, they don't really understand Chinese politics, and they don't understand what's going on.

And so the result of that is actually pretty clear. They issue this press release that more or less says, you've got it wrong. Our policy differences are really quite similar around the world. Nothing to see here, kind of thing. It's like the wrong answer. It basically, there's a three-week digital blitzkrieg where state sponsored social media, other television shows and newspapers including the People's Daily, that has millions of subscribers and puts an editorial on the front-page attacking Apple for their incomparable arrogance, which is the opening chapter.

So Apple's just completely on the back foot and it ends up being this sort of seminal moment in the relationship between Apple and China. Because Apple basically comes up with a new plan to have senior people living in the country for the first time. At this point, they've had a relationship with China for two decades.

But this is a real wake up call. I call it Apple's political awakening.

CHAKRABARTI: Okay. You've also dug into what really happened in that just very short period of time that led to that awakening. We'll talk about that a little later in the show. But Patrick, it's so interesting because I was in reading the book, I actually had to be reminded by your reporting here that Apple and China were not closely intertwined for much of Apple's history. I had actually forgotten that Apple made most of its own computers until what, 1997, '98.

CHAKRABARTI: Yes. I think people forget this all the time, and frankly the younger generation probably doesn't even know.

But the company is founded by two guys named Steve in a garage. And what are they doing? They're tinkering with circuit boards. The first Apple, quote-unquote, computer is actually just a circuit board that's fully assembled, and then you connect it to your own monitor and keyboard. So that's in the DNA of the company. You could say the ethos of the company and if you've read a biography of Steve Jobs or even just know him from a certain number of Hollywood films, you'll know that he's got this maniacal obsessiveness over the control of, not just the operating system but the hardware, right?

That's really important to him. And Steve Jobs and Apple really want to make their own things, and they do so for decades. But the problem is that the Windows world ... the PC boom totally goes in the opposite direction. So starting with IBM PCs in 1981. But then followed by all these clone companies that you know, some of which are still around today, Hewlett-Packard and Dell, they really outsource everything to Asia.

Steve Jobs and Apple really want to make their own things, and they do so for decades. But the problem is that the Windows world ... the PC boom totally goes in the opposite direction.

And in particular to China as time goes on. And Apple is really the last holdout. It's basically like you go to Asia and outsource or you go bankrupt. It's pretty much that clear. And by the early months of 1996, crucially, just after the first Christmas season with Windows 95, Apple loses so much money unexpectedly.

They're literally pricing computers below cost. So they have record revenue in that quarter, but they lose money. And so they're in total crisis. They're near Chapter 11. They're actually trying to sell the company to Sun Microsystems and it doesn't get through. And they have to sell a factory that people have probably forgotten about or never knew about, in Colorado.

And this sort of lets them live another day. They're able to delay some loans, improve their financing a little bit, and of course, a few months later they bring back Steve Jobs in this total Hail Mary pass where the company just doesn't look like it's going to make it at all. And then Steve Jobs very much under hire someone named Tim Cook, who of course is the CEO today.

And they begin this period, which I call Apple's Long March to China. It's a seven year period where they're experimenting with contract manufacturers, right? Companies, third parties that will assemble their products in three different continents. So if people remember the translucent iMac, like that was a computer actually built by LG in South Korea.

And when it becomes wildly successful, they begin building it in Mexico and in Wales. And then when Foxconn comes on board, and I don't mean to fast forward through the narrative too much. Foxconn's Taiwanese, but they build it in China, but also in Czech Republic and also in California. And I'm not even mentioning Taiwan yet, and Taiwan's actually the most important country for Apple in the first five years of Steve Jobs's comeback.

Taiwan's actually the most important country for Apple in the first five years of Steve Jobs's comeback.

So there's all these kind of amazing outsourcing and manufacturing stories that had never really been told before with countries that people never associated with Apple. And it's only until 2003, when everything really begins to consolidate into China, and then we're off to the races for the narrative.

CHAKRABARTI: Yeah, you mentioned the translucent colored iMac. And my mind immediately went back to the blueberry colored one ... back in the day. Now, but okay. So Apple brings back Steve Jobs and of course, like he's got an iconic status in the history of American technology as this big visionary, but as you write, it's really Tim Cook, right? Who catalyzes this move for Apple to move all its production essentially out of the United States.

Particularly when it comes to China, what did Tim Cook see as why it would be the place to essentially utterly transform Apple as a company? Because China's the reason why the iPhone even exists in the hands of billions of people.

McGEE: Yeah, absolutely. There's a couple different answers and one is just to say that I give this wider history of the PC world, in part to get the reader to understand that the competition between those companies I mentioned, Dell, Hewlett-Packard Gateway, et cetera, was really extreme, right?

They're really cutting prices, month after month. People might remember in the '90s you used to get these catalogs in the newspaper and like every month the CPU speeds were getting higher and the prices were falling. And so there's this great competition, and so it's the suppliers themselves to those companies, they're the ones who are moving to China, so it's not really Dell or Compaq driving that move. It's all of their suppliers.

And so Apple is actually late to this when they go over to China, but in the same way that the iPod is maybe late to the MP3 player market, but they just do a better job than everybody else.

The story of Apple supply chain is the same thing, writ large. And what I argue is that Tim Cook and Apple see something in China that other companies just don't see. And it's almost intuitive in hindsight, right? Because I try to ask people, like, what's your favorite Dell computer from the late '90s or early 2000s?

Tim Cook and Apple see something in China that other companies just don't see.

And people would struggle to even think of one. There's no design aesthetic to them. Whereas if we ask the same question about Apple, there's all kinds of things. You just mentioned having the blueberry iMac. I had the tan green, we could probably talk about this for a couple minutes, right?

The iMac G4, that looks like a sunflower. Apple is just absolutely redefining the aesthetics of the computer rather than just relying on Windows and Intel chips and making them in little boxes that were beige. Maybe they were black. That was the extent of the design, right?

It's like Henry Ford's line about cars a hundred years earlier. So what I argue is that Apple really saw unconstrained design potential in China. That what you could do with this ubiquitous, abundant, and cheap labor was reconceptualize how to build computers, using millions of people to put them all together in ways that nobody else was thinking about.

Apple really saw unconstrained design potential in China. That what you could do with this ubiquitous, abundant, and cheap labor was reconceptualize how to build computers, using millions of people to put them all together in ways that nobody else was thinking about.

Part II

CHAKRABARTI: Patrick, what you said just before the break was so fascinating to me that Apple and particularly Tim Cook saw China as a place where if you wanted to radically transform a consumer industry, not just make products cheaper, but radically transform the industry, you couldn't do it in the United States. China was the place to do it. And here is a 2017 interview that Tim Cook gave to Fortune Magazine. And Cook elaborated a little bit more about why Apple did go to China.

TIM COOK: The quantity of skill in one location and the type of skill it is, the products we do require really advanced tooling and the precision that you have to have in tooling and working with the materials that we do are state of the art. And the tooling skill is very deep here. In the U.S. 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.

CHAKRABARTI: So the here, I believe Cook is referring to, is China. That's just a very jarring comparison. Patrick, your response to that.

McGEE: Yeah, it's a stunning statement. And the thing that he's missing, or just not really pointing out for the listeners there, is that Apple is like a vocational school.

In other words, like how does Apple, or how does China have so many of those tooling engineers? And it's actually because a team sent my Tim Cook has trained all of them. And just to give the listener like some perspective here. In 2014, and again in 2016, Apple was sending so many engineers from Cupertino over to two different cities in China in particular called Zhengzhou and Hangzhou.

How does China have so many of those tooling engineers? And it's actually because a team sent my Tim Cook has trained all of them.

So Zhengzhou is actually called iPad City for Apple and Hangzhou is an industrial cluster just outside of Shanghai. Apple convinces United Airlines, who does not fly to either of those cities, to begin flying three times a week and says, we will buy so many of the first-class tickets three times a week that even if the rest of the plane is empty, you'll still make a profit.

CHAKRABARTI: Wow. Oh, man. Okay. I'm going to have a lot of those moments in this conversation with you, Patrick. (LAUGHS) I can see. But okay. But I still wanna rewind the clock here, because again the heart of your book, or at least the part that grabbed me the most was this just massive sweeping change that comes with this close relationship between Apple and China.

And while in 2017, Tim Cook was talking about tooling engineers and tooling and the skill that takes and how it's in abundance in China, as you write in the book, in 1999, so actually not all that long ago for those of us who aren't in our twenties, zero of Apple products were made in China, right?

None. And just 10 years later. Just 10 years later, virtually all of them were. Now that did require some things that China could provide that we would never, we don't necessarily want to provide here in the United States, which is low, maybe we do now, but low welfare, low wages and low human rights, and also in abundance, those things.

So it was the same sort of fast and cheap labor that China had that attracted Apple, that had also previously attracted to so many other companies, as you said.

McGEE: Yes, in the earliest years, that really is what China offered, and to give credit here either to the local cadres in places like Shenzhen or to the federal government of China.

They basically did a jiujitsu trick where you use your disadvantage as an advantage. So what's China's disadvantage in the late 1990s? It's that they have hundreds of millions of people that are impoverished, right? And so they allow them to go from the hinterlands of China, where, a typical day would be a 14 hour backbreaking day in the agricultural fields under the hot sun.

And they allow them to move to these capitalist experimentation zones like Shenzhen to work in factories. And they have an industrial policy that very much lures in Western capital. The initial capital that's actually lured in is really Hong Kong and Taiwanese and later Japanese capital.

But eventually it's American capital. To build for American consumers. And the idea is essentially look, we don't have the skills to do this. Following the decades of ruler rule under Mao, China's really quite an impoverished country until Deng Xiaoping becomes leader. And in the early '80s introduces all these policies.

And so the sense is that we are going to get jobs and build factories at a clip that is incomparable to the rest of the world. And in a sense, the blind spot on the part of, let's say the Western, Pax Americana here, is that if you set up a trading paradigm with no particular rights for either labor or wages or human rights, et cetera.

It's like he who has the lowest, he who is on the lowest scale on all those metrics is going to win. And you can say maybe hate the game, not the player. Like China just does an extraordinary job within the paradigm, frankly, that we wrote.

And then Apple just takes advantage of what's available in China better than anybody else. So the missing topography of Apple that I think the book makes a big contribution to is that in the early 2000s, China really isn't offering tech competence to Apple, but it's offering China speed and abundance of labor and Apple goes into build the tech competence.

China just does an extraordinary job within the paradigm, frankly, that we wrote. And then Apple just takes advantage of what's available in China better than anybody else.

So there's hundreds of suppliers that Apple now relies on. It's not a matter of those companies offering things to Apple that they could actually perform at Apple's level. But Apple brings in the people to help them perform at that level.

And then irony of ironies like just 20, 25 years later, like it's the only place to do it. Because they only made this quarter century of investment in one massive country.

CHAKRABARTI: Okay. So in terms of the tech competence and how Apple grew that in China, I'll get to that in a second.

But the actual people whose hands are making these products that don't want to leave that just yet, because as you write in the book, it's not just that there is a lot of available low wage labor in China. You write that the Chinese State, Chinese government itself facilitated the movement of a quote, floating population of workers, some 220 million adult workers.

It's a number that boggles the mind. And then, and the Chinese government would actually go to rural towns and villages and drive buses to bring them into the manufacturing facilities that were being built by Western companies, including Apple.

McGEE: Yes, this is very much the secret sauce of how Apple functions so well.

So, you know, if you are manufacturing your own things, the value of moving to a contract manufacturing model is that it moves off balance sheet. In other words, if you have your own workers running your hardware and production lines, the problem there is that it's not very efficient. Because something like the iPhone, let's say, is built in a massive burst between September and maybe February, but the rest of the year, the volumes aren't really all that big.

And so how do you hire the correct number of people without, like you need to be able to meet volume when it's there, but you need to be able to not pay people when work is idle. And so a contract manufacturer simply takes care of that by having multiple clients, right? So Apple wouldn't be the only client for any number of suppliers, but let's just say Foxconn.

And so they're able to like allocate resources more efficiently. And China is able to do this sort of better than anybody else because as you say, yeah, there's at least 220 million people that are able to go from factory to factory. What's really tough about this, A, we don't have the population to compete with that.

Just for starters, right? But B, there is a dual citizenship structure within China. So if you're born in a rural area, you can't access the local welfare benefits of an urban zone like Shanghai or Zhengzhou. And so what that means is that you can't raise your children there because they can't go to the local school.

And so this population's called floating because they tend to go from one city to another or at least one factory to another for temporary periods. And Apple relies on this temp work to a stunning degree, and Tim Cook's own estimate or own number for how many people assemble Apple products in any given year in China is 3 million.

Tim Cook's own estimate or own number for how many people assemble Apple products in any given year in China is 3 million.

And so the floating population plays just an absolutely instrumental role in how Apple can be so efficient and cost effective.

CHAKRABARTI: There's this incredible story about the launch of the iPhone, right? I think this comes from a time where President Obama had asked Apple executives like, why can't the iPhone be made in the United States?

And there was a story about how like just what a day or so before the launch of the iPhone or before the iPhone was about to ship in 2007, Steve Jobs was like complaining about scratches on the glass. And you know this story, right?

McGEE: Yeah. It's not, I wouldn't, so there is, I know what you mean when you say a day.

So picture this if you can remember, it's probably the best tech announcement in history, right? January, 2007, Steve Jobs announces the iPhone. The phone he is holding has a plastic screen. The phone you purchased six months later had a glass screen. So in that period Steve Jobs had realized that the keys in his pocket were absolutely scratching up the screen, and he thought, we can't ship this.

And so Apple had to completely retool the production line and actually invent a way of doing a glass interface because they still had multi-touch, of course. It was still going to be the iPhone, but having glass from Corning is their American supplier that's able to make it, wasn't something that had ever really been done before, and so I think it's probably one of the best well-known stories of Apple supply chain.

But there's a few parts of it that aren't quite known. So they work with this Shenzhen company called Lens, for instance. Which is worth billions and billions of dollars now and, basically, does this for everybody else. But actually, you know what, this is a good little stepping off point.

So let's just say this. To get it done, Apple manufacturing design engineers are sleeping in the Shenzhen Lens factory, for weeks on end to come up with this new method of doing touchscreen glass, and this is really like a paradigmatic example of what happens. Where Apple engineers are in the factories, they're co-inventing new processes, right?

Not just the parts, but the production behind the parts and in particular how do you maintain that quality even as you scale to, at this stage, tens of thousands of day and then fast forward to today, up to a million a day, and so they end up having this enormous influence on these companies.

And this is just one example. Essentially what happens is they don't want a company like Lens to be overly dependent on Apple. Remember that they go from 5 million iPhones in 2007 to 230 million iPhones in 2015. So in the days when Johnny Ive was running things. And you were obviating the need for certain components, let's say, because you were redesigning the iPhone.

The problem would be that if someone got on the ground floor with you as a supplier, and then two or three years later you had to make all these capital investments and get all the state sponsored labor, and then you turned directions and didn't need them anymore. They would go bankrupt, right?

This was massive problem. And Apple had supply chain backlash. So Apple specifically tells its suppliers, don't be more than 50% dependent on Apple, go forth and multiply essentially, right? Go supply somebody else. And this is where Apple ends up having this enormous influence training up their own competition.

Because think about it, if you're Lens, if you've just taken the Corning glass and you've learned how to cut it, shape it, temper it, et cetera, what do you do with that skillset when Apple's specifically saying, make sure we're not your only client. You provide it to Xiaomi ... Huawei, et cetera, and those companies collectively have 55% global market share in the smartphone industry.

CHAKRABARTI: But this is all predicated because Apple was the one doing the initial training to get those suppliers up to the standards that Apple wanted. That's what you're saying?

McGEE: Yes, exactly. So I'm saying like there was a rational decision on part of Apple. But the sort of second order impact was to build up their own competition.

And the third order impact was that once you've trained people to do all that stuff, they're not just gonna stick with glass or smartphones. You could say, this is, I think, a dominant reason why China is so good at producing EVs, and that might sound a little strange, but what's an electric vehicle?

It's a smartphone on wheels.

What's an electric vehicle? It's a smartphone on wheels.

CHAKRABARTI: (LAUGHS) That's right. Back to the glass story for a second. Just for people who don't know it. The story goes that Apple, what, flies an engineer to China. And the day after Steve Jobs is like, the glass isn't good enough. And we're gonna ship these, this brand-new product pretty soon. And some 8,000 workers who were living in dormitories at the factory location in China are woken up, given a tiny breakfast, and for the next 12 hours they are fitting brand new glass screens to some 10,000 iPhones. So like those 8,000 workers were just roused in a matter of minutes or hours, if not minutes. And that rapidity I keep coming back to.

So it's the rapidity of labor and then the speed at which the knowledge that you're talking about is transmitted across the little farm of industries that are coming up in China. But I have to ask you though. This, you are right. You're right. Makes rational sense.

So where's the problem though, Patrick? I don't, this just is how the world works when technology wants to push that event horizon of what's possible.

McGEE: Yeah. Absolutely. And readers of the book have noted and I'm glad about this, that the book is really written in a how it happened way.

It's neutral in tone. There's no particular ideology that I'm trying to push or convince the reader of, and I like to say there are, it's a no villain narrative. The portrait of Tim Cook, let's say, is not some screed against capitalism or something like that. I do think if there's an indictment here, it's against shareholder first capitalism, right?

A sort of laissez-faire capitalism that basically just says, go build things wherever you see fits. And what happens in that narrative is that there ends up being this pretty stark divergence between, let's say, the foreign policy of Cupertino and the foreign policy of Washington, because what isn't really thought about by the Apple engineers, I really shouldn't blame the engineers, the higher echelons of Apple, I should say.

It's the national security implications of what it means to train 28 million people, of what it means to invest $55 billion a year in a country just as it's becoming our chief adversary. That's a strange place for the narrative to take. To be fair, like it's a corporate history, but it gets real geopolitical, but just by the nature of how successful Apple ends up being. And what's ironic in a way is it's their success that makes them vulnerable.

We haven't talked about my favorite part of the book yet, which is actually the birth of the iPhone as a hit product within China. But by 2012, Apple's earning $20 billion of revenue in China. Today they have $70 billion of revenue in China. That makes them captured, to quote my subtitle, because it's so difficult for Apple to leave.

It's so difficult for them to expand to India. Because what happens to the $70 billion business in China? What happens just among Chinese consumers if Apple becomes the poster child of de-risking from China, rather than how it's seen now, which is that the iPhone is an indigenous product. So it's so ironic that their exposure to China is really a way of saying their success in China is what keeps them there.

CHAKRABARTI: Okay. Wait, so clarify that for me. You're saying that the $70 billion market in China is revenue on the iPhone from iPhone sales in China.

McGEE: Not just the iPhone, everything you think that Apple sells, yes.

CHAKRABARTI: I see. Okay. So not only are they made there, but it's a hugely important market for Apple.

And, taking us back to where we started, the Chinese government, President Xi himself, has shown a very open willingness to punish or criticize Apple. Patrick, when we come back, there's a lot more that I want to talk about where Apple is with China now, and we'll do so in just a minute.

Part III

CHAKRABARTI: Patrick, I can't help but to keep making comparisons between how much Apple, one company, now, granted, what, the second biggest company in the world, but how much one company, an American company has invested in China. Versus how much the United States government is willing to invest in America itself, right? Like I quoted that figure from your book earlier, that by 2015, Apple's investments in China reached $55 billion per year every single year.

Which is what? Four times more? I said four times more than the CHIPS Act. One of the signature acts from the Biden administration. Would've invested in the United States just once. There's just a complete chasm in terms of investment and will, when it comes to Apple's move to China, versus the United States willingness to invest in itself.

There's no way to close that chasm, is there?

McGEE: Yeah, the book ends on a pretty pessimistic note. I just wanna touch on the numbers first. Because I feel like if the listener is saying that just must be wrong. Like that's like the appropriate reaction. If you're just nodding your head to that, having not heard the number before, like that's the appropriate reaction.

It just sounds like it's wrong, but it's worth knowing that in that year, $55 billion was only 22% of Apple revenue, right? This company is just absolutely enormous. And when Tim Cook says that 3 million people in China in any given year are assembling Apple products. It's worth knowing that the estimates for how many American jobs are created just serving Chinese demand, like across all industries, that's as low as 1 million, right?

So one super corporation has more of an impact on job creation in China then all of China's 1.4 billion people has on America. It's so difficult to wrap your head around that, but once you get a sense of just how large and lucrative and I don't know, aesthetic or design-oriented Apple is, you begin to realize just what a significant player they are.

Then the numbers begin to fall into place. I find that if you're writing about China or Apple, you always have to give analogies or metaphors or something to contextualize the number. Because the human brain just isn't really quite up for understanding how big they are. Let's give one crazy number.

When Apple became worth $3 trillion on the first trading day of 2022. Apple's value, market capitalization, since Tim Cook had taken over in 2011, had risen on average $700 million a day. And when I published that in the Financial Times, like people complained on social media that this error had been published without editorial support or whatever. And then they did their own math and realized that was correct.

That's counting the weekends and stuff. It's really a billion dollars a day if you were just looking at trading days. My point is just like every time there's a crazy number, if you're like, that must be wrong, or there's a decimal missing or something like, yes, that is the appropriate reaction, like the number is accurate. But we're just operating on such a scale that it's hard for us to comprehend.

CHAKRABARTI: Which makes me wonder if even as President Trump continues to talk about wanting to bring manufacturing back to the United States, and to be fair, so did President Biden. But like the efforts that the U.S. is making under various administrations, we might talk a big game here, but please, in the face of the numbers that you just gave, it's paltry and it's laughably small. Yeah. Okay. We're gonna open a plant in Texas or something, but come on. Patrick?

McGEE: Absolutely. And I would say it's such an American way of thinking to think about invention rather than scale. And that's China's secret sauce, right? There's someone, I'm stealing this from someone, but frankly I forget who, so I can't footnote it for you, which is that like America will invent the ladder and then China will use the ladder, right?

And so that's what we're missing. I was just at a conference in Detroit and it was all about all the latest inventions and how we're going to build and all this sort of stuff. But yeah, the scale just isn't there. I would say the quote-unquote laziest sort of reaction to my book is just to condemn Apple and say, why don't they invest $55 billion a year in Ohio, right?

And build everything here. What that's really not taking account is just how much China offered. Like your $55 billion goes way more dollar for dollar than it would in Ohio. Because the Chinese officials and the companies were just doing so much in terms of building eight lane highways, let's say, between the factories and the ports.

Building high speed rail, which of course is, I think there's more high-speed rail by far in China than the rest of the world combined.

CHAKRABARTI: They're building up their country. Exactly. It's not just the technology. Yeah, go ahead.

McGEE: Yeah. Look, the prologue to the book, or not the prologue, the quote that begins it.

I forget if that's an epitaph.

CHAKRABARTI: No, Patrick, no I don't want you to, I'm gonna ask you about that at the end.

McGEE: Okay, got it. Anyway, so China has this Nietzschean will to power on becoming the world's largest economy, but it really is through manufacturing, and I just don't think any other nation thinks like that.

So when people say, oh look, Foxconn's opening a factory in India, problem solved. And they'll even point to some big numbers. There's a recent announcement that Foxconn was going to build dormitories for 30,000 people in India. And so you think, oh wow, that's a massive operation. 30,000 isn't a big operation when you realize that there's 3 million people in the Chinese supply chain just for Apple.

That's 1%. So again, the numbers are so large that absolutely. Look, people have been like angered by the end of the book because they realize, Oh my gosh, China has like really won and I don't think we can compete. And I agree, I don't think we're going to compete, but I think an interconnected world that relies on India and Mexico can compete.

I don't think we're going to compete, but I think an interconnected world that relies on India and Mexico can compete.

So I'm massively in favor of the integrationist world, Pax Americana, and this is where I think, tariffs on our own allies and stuff is pretty terrible as a policy. I would love to see more of this moving away from China. But frankly, somehow Beijing is gonna have to be at the negotiating table because they're not just going to let go of this power willy-nilly.

CHAKRABARTI: Oh, absolutely not. There's no table without China at it. But I want to also just touch on that, okay. The political controversy over, why didn't Apple invest more in the United States? Hasn't gone unnoticed by Apple, right?

Just this year, in what, February of this year, Apple announced that it would spend $500 billion in the U.S. over the next four years that includes this. I've mentioned Texas, a factory in Texas to make some of Apple's chips and for artificial intelligence servers. And Apple says it could create 20,000 research and development jobs across the country at that time.

McGEE: Yeah. So I'm so sorry to disappoint people that this is basically nonsense.

So this is actually Apple's third such announcement in 12 years. Okay. So I think the number goes from in the first Trump term, it was a $350 billion announcement over four years, and then it became a $420 billion announcement, and then a $500 billion announcement.

If those numbers were actually being invested in America, oh my God. Like every day you would just open the newspaper and it would just be page after page of classified ads where Apple is just hiring people at 15 different factories. Just think of what you actually just said, quoting the press release. If you're spending $500 billion and you're only creating 20,000 jobs.

You're doing something wrong and Apple is the most capitalist, efficient corporation on the planet. None of the numbers make sense. My guess, and this is just a guess, but I think it's a pretty educated one, is what Apple is counting as spend or investment is actually share buybacks and dividends.

Because again --

CHAKRABARTI: Stop.

McGEE: Remember how big Apple is? Yeah. Okay. So Apple spends more than $100 billion on share buybacks per year, right? This is just a company purchasing its own shares. Because that's how profitable they are. And that is more than the top six or seven Wall Street banks combined in terms of how much they spend on buybacks, right?

So Apple's just enormous in this respect. And 70% of Apple shareholders are in America. So if you're spending $100 billion a year and you count $70 billion as an investment in America, it is an investment in America in a certain sense, but it's not building factories and such.

So if any of these three press releases, you go through them and you think, okay, I'm gonna audit this. I'm gonna do some back of the envelope math. What's hilarious but also depressing is that they don't really back it up with any substance. After saying $500 billion, they literally list a few examples where the figures are, we're spending a billion dollars on a factory in Houston for data servers.

And you're like okay, great. Where's the other 499 billion? So I think Apple is doing something pretty unethical in a certain sense. They're never deliberately lying to you. Because these things are legal and they've got top teams for doing it, but they're mis-conveying, let's say, what the actual message is.

So I would just encourage any reader who's skeptical of what I'm saying, go to the press release. Google it. Apple, $500 billion investment. Do your own math and you tell me where you get on what's actually announced.

CHAKRABARTI: I'm like sadly amused by you saying that accurately that inflating share price by doing stock buybacks is an investment in America.

Because it's an investment in the shareholders of Apple, but the reason why this story really just captures my mind is that. I don't know. I tend to look at these things, Patrick, in terms of the giant swinging pendulum of history. And for the 20th century, like even the 19th and 20th century by dint of our natural resources, first of all, here in the United States.

And then of course, the cruelty of enslaved labor, which came to an end in the mid 19th century, but then also a couple of world wars. Those are the things that gave the United States the edge. What you have left after that, after those things become exhausted, is the people of the United States and investing in the American people.

That has not happened in the way that it needs to sustain our edge as the world's leading power, I would say. Whereas as the pendulum swings back in the 21st century, it swings back towards other countries, China through force. And through, as you talked about earlier, the continued subjugation of many of its people, but has still radically developed the country.

And I think it's a whole mindset that just no longer is in the United States. Is that too pessimistic a read, Patrick?

McGEE: No, I think you're right. If I'm to go back to an anecdote of the earliest years in which Apple is outsourcing, this is for the Newton, if people remember the Newton around 1996 the person in charge of this decision says look, I would message a bunch of suppliers in Asia. At the same time, I would message a bunch of suppliers in America. The suppliers in Asia would get back to me the next day, right? We'd get started. We might even fly someone over to inspect the factory, ta dah.

And then two weeks later, the American supplier would respond and it's sorry, but you've totally missed the boat here. So there's a certain, gosh, I don't know that I'd wanna call it desperation. Maybe just ambition. Hunger is probably the best word, on the part of these suppliers in Asia where they just really want to take these orders and move up the value chain, and they're just a sort of like willpower that we just don't match.

To some extent, you could get into the lazy arguments that like, it's a decadent culture that we have. We don't have people that want to take these jobs anymore. But we've really just given up manufacturing and I can't tell you how many. Like economic studies annoy me because they basically say, okay, sure, a bunch of jobs were lost to China, but after all we've got this thriving service economy, so the jobs aren't lost.

People just find a new job. And what that completely misses, of course, is the experiential know-how that's being lost. If you are not manufacturing, you are completely missing out on the innovation that happens on the floor, and by outsourcing basically all of that to China, China is gaining those lessons.

I think if you wanted to wow people with the latest, greatest, coolest smartphone, it's not made by Apple anymore, it's made by Huawei. It's called the Mate XT. It unfolds twice in Apple terms. It is an iPhone and iPad in one. It is thinner than the thinnest iPad Pro that you can go purchase.

I call Apple and China the marriage of skill and scale, but 25 years hence, China has both the skill and the scale, and we certainly still don't have the scale, but we're also diminishing in the skill. Because we're no longer doing that shop floor innovation. And the vice presidents from the days when Apple was actually making stuff its own, on its own they're very much retiring.

I call Apple and China the marriage of skill and scale. But 25 years hence, China has both the skill and the scale, and we certainly still don't have the scale, but we're also diminishing in the skill. Because we're no longer doing that shop floor innovation.

So we're losing that knowledge through attrition as China gains it all. That's a scary thing to think about.

CHAKRABARTI: But look, the Trump administration says, do not write off America because this is U.S. Commerce Secretary Howard Lutnick. Just this past April, he was on Fox News talking about Apple's investments in the United States.

HOWARD LUTNICK: Apple says it's gonna come back and build $500 billion worth of plants and equipment here in America. If you think it's going to be with 100,000 people like they do in China, no. It's gonna be robotics and it's gonna have 10,000 people, but those 10,000 people are gonna fix the robots.

They're going to, these are different kind of, these are the ones that can literally build things. If you go to China and you look at the factories, they have hundreds of thousands of 19- to 21-year-olds screwing in little screws on iPhones. Obviously, a computer and a robot can do that, and we just had to wait for the AI technology boom to be here now to let us compete with all that cheap labor all around the world.

CHAKRABARTI: On the one hand, tiny screws. Patrick, on the other hand, okay, the AI boom. I hear that. But in the last minute or so that we have. The real point, one of the major points of your book is that you call this knowledge transfer essentially from Apple to China, a historically consequential geopolitical event.

And this takes us back to that quote that you have at the beginning of the book about how a similar knowledge transfer from East to West is what pulled Europe out of the Middle Ages. Wrap up with that, like that is where we are right now.

McGEE: Yeah, I begin with the late Harvard historian of economics, David Landes, basically pointing out that what made the British Empire was manufacturing know-how, an ability to build stuff, right?

And the Industrial Revolution is very much about, of course, how to build stuff. And he's got this famous book, by the way, and it's called The Wealth and Poverty of Nations, from 25 years ago. But it's very much on like, why did the industrial revolution happen, when it did, where it did, and then how did those ideas sort of transfuse or diffuse across the world?

And so it's quite a global history in a certain respect. And it was a really influential book for me when I was writing. Because in his own way, of course, I think he's writing about technology transfer and just the importance of know-how and keeping it.

I think it's just hard to underestimate what it means to be able to build stuff and innovate on stuff. And I think America is too focused on invention, right? Maybe like Nobel Prizes or whatever for coming up with something like, let's say the lithium ion battery. Great, but who builds all the lithium-ion batteries today? China has 70, 80% supply chain concentration for batteries. In solar panels, it's more than 90%. In electric vehicles, it's gonna be more than 50, 60% soon. So it's great that we can invent stuff, not so good that we can't build it anymore.

It's great that we can invent stuff, not so good that we can't build it anymore.

The first draft of this transcript was created by Descript, an AI transcription tool. An On Point producer then thoroughly reviewed, corrected, and reformatted the transcript before publication. The use of this AI tool creates the capacity to provide these transcripts.