The Information: How Tim Cook saved Apple in China

From Wayne Ma’s “Facing Hostile Chinese Authorities, Apple CEO Signed $275 Billion Deal With Them” ($) posted Tuesday to subscribers:

The cornerstone of Cook’s strategy was a memorandum of understanding between Apple and the National Development and Reform Commission, China’s powerful economic planning agency. The 1,250-word agreement was originally conceived by Apple’s government affairs team in China as a way to improve relations with Beijing and win an audience with senior leaders, according to a person familiar with the agreement. Face-to-face meetings with top Chinese officials became a priority for Apple brass after regulators shut down iTunes books and movies in April 2016, the person said.

To mollify authorities, Cook in May announced an unprecedented $1 billion investment in Didi Global, then China’s most valuable startup, giving Didi an edge in its grueling ride-hailing war against U.S.-based Uber.

Five days later in Beijing, Cook, along with Chief Operating Officer Jeff Williams and government affairs head Lisa Jackson, met publicly with senior government officials at the country’s secretive leadership compound, Zhongnanhai. Neither side disclosed details of the visit, but they were there in part to sign the economic deal, which committed Apple to aiding roughly a dozen causes favored by China. They included a pledge to help Chinese manufacturers develop “the most advanced manufacturing technologies” and “support the training of high-quality Chinese talents.”

In addition, Apple promised to use more components from Chinese suppliers in its devices, sign deals with Chinese software firms, collaborate on technology with Chinese universities and directly invest in Chinese tech companies—akin to the Didi investment. Apple promised to invest “many billions of dollars more” than what the company was already spending annually in China. Some of that money would go toward building new retail stores, research and development centers and renewable energy projects, the agreement said.

According to separate internal documents, Apple’s China pledge would amount to more than $275 billion in spending over five years. The agreement said the deal would automatically extend for an additional year, through May 2022, if neither side had objections in the future.

My take: Ma, who plays Apple’s Woodward and Bernstein at The Information, offers this cautionary note:

The revelations also suggest Apple’s dependence on Cook for government affairs could present risks down the road if he were to step down as CEO.

Knowing Cook, he’s been carefully training his replacement(s).

11 Comments

  1. Dan Scropos said:
    “The revelations also suggest Apple’s dependence on Cook for government affairs could present risks down the road if he were to step down as CEO.”

    No worries. He’ll be an Apple Fellow for life.

    5
    December 7, 2021
  2. Tommo_UK said:
    I’m just glad that along with keeping the Chinese authorities happy with lots of money (a trick they use on developing countries to keep them in line), Apple is rapidly diversifying and distributing its manufacturing operations all over Asia including the much-anticipated huge investment in India.

    Cook may have managed to beat China at their own game longer term by weaning Apple off China even whilst keeping China happy by seeming to be playing for Team Beijing.

    9
    December 7, 2021
    • Jerry Doyle said:
      @Tommo_UK: “…. Apple is rapidly diversifying and distributing its manufacturing operations all over Asia including the much-anticipated huge investment in India…….Cook may have managed to beat China at their own game longer term by weaning Apple off China even whilst keeping China happy by seeming to be playing for Team Beijing.”

      I support your statements above Tommo_UK, but China still knows that it has the upper hand over Apple in the longer term no matter Apple’s attempt to diversify and distribute its manufacturing operations over Asia. Apple still needs access to China’s 1.4B population to sell Apple products.

      Until CEOs of foreign countries develop some form of consensus strategy on how to deal with China’s subtle blackmailing of corporate enterprise, China will continue to exploit businesses wanting access to China’s markets. International organizations must come together and retaliate against China similarly, by blocking its access to foreign markets, if global CEOs ever hope to establish a level playing field.

      1
      December 7, 2021
      • John Butt said:
        Try selling beef to the USA and you will find the same features. Big countries are bullies and China is also underdeveloped.

        1
        December 7, 2021
  3. The agreement likely included many actions Apple was going to take anyway. We must also filter the results, the factories getting all this tech are run by Hon Hai/Foxconn, a Taiwanese entity. Chip fabs in mainland China are not up to Taipei standards. Everything Apple invests in benefits every market where they sell devices that make a difference in people’s lives. If they can keep costs down, services & reliability up that helps the Argentinian rancher, the Parisian waiter, the Lithuanian horse trader along with Xi Jinping’s cronies.

    8
    December 7, 2021
  4. Fred Stein said:
    “building new retail stores”

    “Whatever you do,” cried Brer Rabbit, “Don’t throw me into the briar patch”

    6
    December 7, 2021
  5. Bruce Oran said:
    My concern is that what Cook can accomplish and the US government cannot, will become fodder for Congress to impose new restrictions. Cook is walking a very dangerous tightrope.

    2
    December 7, 2021
  6. bas flik said:
    Cook is best CEO ever existed on planet earth.
    China is favoring Apple over its own large caps which they are destroying.
    i ordered one big marble statue of TC for my garden.

    9
    December 7, 2021
  7. Ken Cheng said:
    It’s basically formalizing investment that Apple would have likely made anyway. Governments like that.

    In the past, Apple would do things and not tell anyone, and get little to no benefit, like investing in green initiatives. When Greenpeace first did their scoring of companies, Apple scored fairly low. And the metric they scored low on? Not publicizing their actions! So, Apple learned that they needed to tell people about all the investments they were making, and their score went up.

    Same with the Supplier Responsibility Report and conflict minerals, etc.

    In 2018, Apple promised to invest $350M in the US over 5yrs.
    In 2021, this year, Apple promised to invest $430M in the US over 5yrs.

    Formalizing what Apple would intend to do anyway, is just good business.

    3
    December 7, 2021
    • Kirk DeBernardi said:
      Ken C. —

      I don’t think this info, if actually true, was in any kind of press release as you mention Apple’s intent to “formalize” their actions.

      So is it, “Move along. Nothing to see here.” or more like, “Sorry…forgot to mention formalizing this one.”?

      1
      December 7, 2021
      • Ken Cheng said:
        Ha, good point. Which one of these is not like the other? By formalizing, I mean for the Chinese gov’t to know. The other instances I mention, while publicly disseminated, are also essentially for a specific target audience.

        0
        December 8, 2021

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