Opinion: Why China and Apple’s relationship is fine, thank you

They are both long-term planners and partners.

From friend-of-the-blog David Thall, writing in another forum:

Chinese leadership may be a lot of things, but they are not stupid. And neither is Cook and Company.

Without rehashing their co-dependent relationship—which everyone here knows very well—simply put: Apple employs a lot of Chinese, so Apple gets to sell a lot of product over there. And at a very profitable margin.

If I can offer any insight, and this is just my opinion of course, it is that China and Apple share something else significant in common. They have spent years and years developing their business relationship.

They are both long-term planners and partners.

Contrast this to Trump and his gang’s short-term political agenda. A president who, relatively speaking, will be gone soon. Whether he gets re-elected or not, he will inevitably pass like a bad case of gas. Or perhaps a better metaphor—a kidney stone.

I can’t see China wrecking it’s very good long-term relationship with America’s premiere company for a relatively short-term political inconvenience— throwing out the proverbial baby with the bath water. It’s not in their nature.

If China screwed Apple with tariffs, what would Cook—the master of supply & demand, do?

He would without question mitigate the damage to Apple—by developing a more reliable manufacturing partner. Maybe build automated manufacturing domestically?

Bottom-line: China has a lot more to lose long-term if they damage Apple short-term. JMHO

My take: My humble opinion too, down to the kidney stone.

17 Comments

  1. Bruce Oran said:

    This piece segs nicely to your last item, “What if Apple could swap Tim Cook for Jeff Bezos?” If I remember correctly, it was Tim Cook who first went to China to establish a relationship with and for Apple, not Steve Jobs. In fact it probably was not in Jobs nature to have the patience and fortitude to go to China upteen times for “meet and greets”. I know I am digressing, but you cannot compare Tim Cook with Steve Jobs, Jeff Bezos or Elon Musk (also touted as someone better suited to lead Apple). Can you imagine Tim Cook ever telling an analyst that their question was stupid?! My point here is that Steve Jobs final executive decision, choosing Tim Cook as his successor, was probably his best and most visionary. Were it not for Cook’s manner, patience and willingness to sit down at the table and listen instead of demand, there would be no relationship with China. China is not impulsive and neither is Cook’s Apple. Both well suited for doing business with one another. I thus agree with the above post and disagree with the previous (that Apple would have been better off with Jeff Bezos-Wall Street would have hated him or any non-Jobs in that roll as well). The relationship with China and the leadership and people saavy of Tim Cook allowed this friendship to blossom.

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    July 4, 2018
    • Jonathan Mackenzie said:

      I wish I had read this before commenting in the other article, because I just said the same thing only not as well.

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      July 4, 2018
    • Fred Stein said:

      Love everything you said Bruce; and David’s metaphors, too.

      Adding: Tim Cook excels in a specific and important way. He does not let his ego influence decisions. Think how many successor CEOs make big acquisitions or other bold moves to make their mark.

      And Tim he already has. It’s hiding in plain sight. Apple Watch towers above the wearables market. And they’re only getting started in this segment.

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      July 4, 2018
    • Richard Wanderman said:

      Brilliant comment and right on the money about Cook’s intelligence, patience and calmness which are all needed to build long-term relationships (and about Trump’s opposite traits which are undermining those same relationships).

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      July 4, 2018
  2. Gregg Thurman said:

    Jobs was a visionary CEO that duplicated himself in the culture he fostered at Apple, ergo, there is no reason, or need, to find another “Jobs” to lead Apple.

    Cook on the other hand is a people person very well suited to manage the culture of, and extend/create relationships/partnerships beneficial to, Apple. He has done that much better than Bezos, Musk et al could have done.

    Well thought out/written piece David.

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    July 4, 2018
  3. Robert Paul Leitao said:

    Interesting content for conversation. I currently have a kidney stone that’s too big to pass. Painful? Absolutely indescribable if an effort is made to pass the stone. And that’s my point.

    Combined, the United States and China represent roughly 40% of the world’s GDP. Each of the two economies have systemic challenges to balanced growth and due to the size of the two economies and individual efforts at growth, there will always be points of conflict and competition.

    There may not be more than just a few “win-win” scenarios and negotiations will take time. The president’s public approach to negotiations with all of its bluster may be disquieting and may generate great anxiety, but the negotiations will take time and a mutual investment of goodwill to discover workable solutions.

    Attempting to force a resolution (I’ll liken it to trying to force an oversized kidney stone to pass) would likely be excruciatingly painful and neither economy can afford the risk of a full-blown trade war. It resolves nothing. Inventiveness and creative solutions through earnest negotiations are really the way forward.

    As it relates to Apple, I don’t see the company as a target in the dispute and it doesn’t make any sense for either side to push Apple into the position of being a combatant in the dispute or to create damage for an enterprise that is a beneficial partner to both big economies.

    I do like the kidney stone analogy. It’s a painful predicament but working creatively to resolve the issues will generate far less pain and bring about a much better outcome for all parties involved.

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    July 4, 2018
  4. Jonathan Mackenzie said:

    I appreciate the power of saying “This too shall pass.” But we should remember that kidney stones can be fatal. It’s not just the pain and inconvenience that is the problem. It is the non-zero mortality rate. There aren’t any guarantees that this will all work out in the end.

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    July 4, 2018
    • Fred Stein said:

      Thanks for the cautionary note. A casual survey of the history of real wars shows many were started with the notion that the other side would back down by a show of force. Pearl Harbor, Fort Sumter, and the list continues.

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      July 4, 2018
  5. John Kirk said:

    “If China screwed Apple with tariffs, what would Cook—the master of supply & demand, do? … He would without question mitigate the damage to Apple—by developing a more reliable manufacturing partner. Maybe build automated manufacturing domestically?”

    I think this is prescient. Cook may well be moving in this direction already. China has cheap labor, but cheap labor is about to be disrupted (again) by technology. And if – no, when — it is, Apple, not China, will be in the driver’s seat (perhaps literally).

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    July 4, 2018
    • Robert Paul Leitao said:

      John:

      In my view, it makes no sense for China to disrupt Apple’s component manufacture activity in the region it seeks to dominate or run the risk of diminishing Apple’s manufacturing activity on the mainland. While the economic value of iPhone assembly per unit is modest compared to the selling price, Apple is also creating a robust developer economy on the mainland which synchs with the nation’s long-term economic plan. App development is a high-value, 21st Century industry. It generates domestic jobs and desired domestic consumption.

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      July 4, 2018
      • John Kirk said:

        I didn’t say China was going to disrupt Apple’s component manufacture activity and I’m sorry if somehow implied that. I was trying to make a comment on how automation is changing the way cheap labor in China is being used.

        Sorry about that. I’ll try to do better next time.

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        July 4, 2018
    • David Drinkwater said:

      This isn’t, in my opinion, all that different than the economic root cause of the USA Civil War, though the competitors may be different: we are talking about inexpensive labor vs the high cost of industrialization. (I suggest this with great trepidation,, because of my political leanings.)

      With respect to Apple and China, it may generally be moot for the short term, but it may cause upheaval. I try to stay optimistic.

      I think on the basis of what is already technologically in place (and entrenched) in the supply chain, there is not a lot of risk of change for either Apple, or AAPL, or China due to the bluster we see in Washington.

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      July 4, 2018
    • Gregg Thurman said:

      “Maybe build automated manufacturing domestically?”

      Foxconn’s Terry Gou has repeatedly expressed his desire/goal to automate assembly at his Chinese plants.

      I don’t think he has moved in the direction simply because of the disruption to the Chinese labor market that would entail. I’m confident that the Chinese government has been working behind the scenes to delay any changes in how Foxconn assembles a product.

      The number of Chinese employed by Foxconn (iPhone is its primary product) is China’s Achilles heel, and they know it.

      This trade brouhaha is just a blip in history that will pass faster than imagined, with a positive outcome the result.

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      July 5, 2018
  6. Peter Kropf said:

    Kudos on the image as David says, but I’m sure TC is wishing PED wasn’t so clever.

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    July 5, 2018
    • Gregg Thurman said:

      You could say the same thing about Chinese leadership. The image does raise the question about who is in control of Chinese policy.

      In that regard, I think you could insert India for China in about 10 years.

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      July 5, 2018

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