In-Depth

'Apple in China: No Plan B'

The New York Times

Jack Nicas, Raymond Zhong, & Daisuke Wakabayashi | The New York Times
'Apple in China: No Plan B'
'Apple in China: No Plan B'
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Apple in China

2

May 20, 2021
BIG IDEA | “This business model only really fits and works in China. But then you’re married to China.”
‘The Chinese government was starting to pass laws that gave the country greater leverage over Apple, and Mr. Xi would soon start seeking concessions. Apple had no Plan B.’

‘In 2014, Apple hired Doug Guthrie, the departing dean of the George Washington University business school, to help the company navigate China, a country he had spent decades studying.’

‘One of his first research projects was Apple’s Chinese supply chain, which involved millions of workers, thousands of plants and hundreds of suppliers.’

  • ‘The Chinese government made that operation possible by spending billions of dollarst o pave roads, recruit workers, and construct factories, power plants and employee housing.’
  • ‘Mr. Guthrie concluded that no other country could offer the scale, skills, infrastructure and government assistance that Apple required.’

‘Chinese workers assemble nearly every iPhone, iPad and Mac.’

  • ‘Apple brings in $55 billion a year from the region, far more than any other American company makes in China.’

‘ “This business model only really fits and works in China,” Mr. Guthrie said in an interview.’

  • ‘ “But then you’re married to China.” ’

‘The Chinese government was starting to pass laws that gave the country greater leverage over Apple, and Mr. Guthrie said he believed Mr. Xi would soon start seeking concessions.’

  • ‘Apple, he realized, had no Plan B.’

‘ “For Chinese authorities, this is no longer about, ‘How much money are you pouring into China?’ This is about, ‘What are you giving back?’” Mr. Guthrie said.’

  • ‘Mr. Guthrie delivered his warning to Mr. Cook’s top deputies.’

‘As Mr. Guthrie was delivering his warnings, Apple set about keeping the Chinese government happy.’

  • ‘Part of that effort was new research and development centers in China.’

‘But those R&D centers complicated Apple’s image as a California company.’

  • ‘At a summit for its new Chinese engineers and designers, Apple showed a video that ended with a phrase that Apple had been inscribing on the backs of iPhones for years: “Designed by Apple in California.” ’
  • ‘The Chinese employees were angered, according to Mr. Guthrie and another person in the room. If the products were designed in California, they shouted, then what were they doing in China?’

‘ “The statement was deeply offensive to them,” said Mr. Guthrie, who left Apple in 2019 to return to his home in Michigan. “They were just furious.” ’

  • ‘The next iPhone didn’t include the phrase.’
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