Anirudh Suri

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The China vs India Conundrum: Inside Apple’s Race to Exit China | Patrick McGee, FT

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The China vs India Conundrum: Inside Apple’s Race to Exit China

Anirudh Suri: For some time on our podcast now we’ve been exploring the relationship between big tech firms and nation states and as I called it in my own book, The Great Tech Game, this tug of war between nation states and big tech firms for control, influence and dominance in what I call the great tech game. However, in recent years one can argue that the relationship between big tech firms and nation states has become very, very nuanced and I couldn’t think of anyone better to explore those nuances with than our guest today, Patrick McGee, and so I’m excited to have with us today Patrick whose book we’ll obviously delve into great detail, but we’ll also talk about the global implications of some of the themes that Patrick has so eloquently and with such great in-depth research detailed out in his book. So, welcome to The Great Tech Game podcast, Patrick.

Patrick McGee: My pleasure, thanks Anirudh.

Anirudh Suri: Patrick, let me first start off obviously using your book, which I think has obviously done really well as well and has raised a lot of questions amongst people’s minds including my own. Let’s talk about your book first as the starting point. You argue, of course, that Apple struck almost a Faustian bargain with China, but give us a brief overview of why you believe that this Apple-China relationship is such an important consequential one for us to understand.

Patrick McGee: Yeah, I’m excited to be on your podcast because, you know, I think it would be fair to think that the book is just a corporate history, so if you’re interested in Apple, great, and if you’re not interested in Apple, why would you read it? You know, that might be a fair sort of supposition. But my take would be that it’s really about the US-China tech rivalry, with some emphasis on India’s potential to sort of play a big role helping the US decouple from China. And it’s just told through the lens of Apple, which I argue is the most consequential corporation of any kind, including Chinese, for what Xi Jinping calls “Made in China 2025.” I think it’s really difficult to underestimate just what a profound impact Apple had because it wasn’t just financial, in terms of, you know, the investments they would make on the production lines in China, which are extraordinary figures. I mean, we’re talking tens of billions of dollars per year for at least the last 10, 15 years. But it’s also that there’s a cultural transformation as well.

You know, Steve Jobs used to call this giving a shit. He cared about everything. I mean, I have fun anecdotes about Steve Jobs, you know, having a tantrum of sorts because the wiring within certain products wasn’t to the color that he had specified, right? I mean, consumers don’t even open up their products, let alone examine the wiring. And he was really concerned about this sort of stuff. And he was famous for this kind of stuff. When he was building his own computer in the early 1980s, he wanted the machinery in the production line to match the logo colors of the 1980s Apple logo, right? I mean, the kind of thing that doesn’t really matter at all but really mattered to him. He just had this design aesthetic. And we all know that version of Hollywood Steve Jobs where, you know, he’s got this great vision and he’s stubborn and intolerant of any sort of defect, and he brings up the people around him to sort of operate at a level that they otherwise wouldn’t operate in.

I mean, he’s a difficult figure to talk about because he doesn’t have tangible engineering skills, but he’s able to lead, right? He’s not a manager, he’s a leader. And he’s able to get people to operate just beyond their own actual capabilities. And really, what my book lays out is that if you’re building 230 million iPhones a year, right, an enormous quantity but at the highest quality, and you know, certainly in the Jony Ive era, really trying to upend what the smartphone was on a yearly or biannual basis, you needed not just great engineering, you needed that cultural impact. So the thing we know about Steve Jobs raising up the 12 people around him, essentially that’s what happened in China across hundreds of factories.

And it sounds a little bit insane until you recognize the figures that come from Apple, which is that the number of people Apple trained since 2008 is 28 million people, so greater than the labor force of California, and the amount of money they were investing in Chinese factories by 2015 when they did their own sort of internal supply chain study was $55 billion a year.

So on an annual basis, that would be four times that of the CHIPS Act, which was President Biden’s signature policy to bring back chip fabrication to America. So really difficult to emphasize just how unheralded Apple’s role has been in helping China industrialize across major industrial clusters. The Taiwanese often get the credit for that, which itself is probably a sort of a novel news item for a lot of people, but companies like Foxconn, Pegatron, Quanta—these are Taiwanese companies that largely play a massive role building the earliest computer factories in China on the mainland. And then, you know, industrial clusters sort of form around that, like a spoke and hub model. And Foxconn is the most important, and Apple has been Foxconn’s biggest client since about 2000. So, I think once people put the puzzle pieces together everything I’m saying begins to make sense, and there’s a lot of coherence to it. But I think without the sort of prerequisite understanding that you sort of get from reading the book, it can sound totally unhinged because these are pretty pretty wild claims.

Anirudh Suri: No, absolutely. So I think the question I want to get to is the global implications of this, the implications for relationships between, you know, tech firms like Apple and nation states. And I know in your book you argue really that in many ways this doesn’t end up having the results that one would have wanted in the first place, right? So Apple seems to have struck a Faustian bargain on this, right? So talk to us about how training so many people in China, investing so heavily in China, turns out to be a big issue in retrospect.

Patrick McGee: Well, what makes the narrative really interesting is that China and Apple were very different in early 2000 than they are now. I mean, you can almost compare it to people getting married in their late teens and then finding themselves both feeling like they married a different person in middle age. All right, I mean, I think that’s a decent metaphor. We’ll stick with that metaphor for a while now, right? Let’s use it the whole hour. So what I would say is like, you know, people forget just how close to bankruptcy Apple was, not only in 1996, which I really think is the nadir of the company, but again in 1997 and again in 2000. I mean, in 2000, Gateway, a company people probably haven’t thought about for 25 years, literally tried to acquire Apple. I mean, that’s how close to the brink they are. I mean, they almost got purchased by Philips, they almost got purchased by Sun Microsystems. I mean, this was a company that before the really not even the iPod so much as the third version of the iPod, things are not going well. And they’ve got this sort of cool that Steve Jobs reintroduced to the company upon his comeback in 1997. They build the clear translucent iMac, I mean the product that more than anything else really does save Apple, or at least gives them some breathing room before the iPod.

The iPod is the most consequential product for Apple in the first half of the 2000s. I mean, this is the first time Apple’s had genuine market share and a cultural cache beyond just a few nerds, right? I mean, in the computer era in the early 1980s, let’s say Apple had a maximum of let’s say 20% market share, and then when the PC boom took off, it fell by the mid-90s to probably 3% or so, right? I mean, they are a niche company. The iPod changes everything. Everybody wants to be walking around Manhattan or whatever with the white earbuds in their ear, right? Iconic. The advertising is sort of off the charts. And they have something like 80% market share in the MP3 market. Nobody can touch them. And, you know, by the time the iPhone comes out, the iPhone is just as much like a sixth-generation iPod than it is a first-generation phone.

And so that transformation as a company is just fascinating, and China plays just a massive role helping to build those products. And the earliest chapters of the book are really like a seven-year narrative where Apple is trying to build someplace else, like in Taiwan, but also Korea, also California, Mexico, Czech Republic, and Wales. I mean, just this whole narrative that I don’t think anybody was really familiar with. It had maybe been covered in the local papers of those countries, but never really covered in a book. And so Apple and China really find each other. But what’s interesting is that Apple is this really demanding client. If you’re a company like Foxconn, they’re not going to pay you well, but they will train the hell out of your engineering workforce, your labor workforce, to really get you to understand the kind of quality that they expect, and then they need to maintain that quality as they build in higher quantity.

China at the time is, you know, on path, at least for anyone in Washington, on path to being the next great democracy. And America is kind of operating in this paradigm, a bipartisan paradigm, if not a sort of American consensus, that the route to democracy and human rights is to invest in foreign countries, let them build, let them sort of gain access to the American consumer. And out of that, you get a middle class, and what does the middle class do? It demands better rights and standards, and it’s going to be good for the environment, it’s going to be good for people, and it’s eventually going to sort of reform all of China. I don’t treat this as a fanciful notion. I do think it was an error. Why would China, a country, you know, with four times the population of America, want to fit into an American paradigm? I don’t begrudge them for not wanting to do that, but we have to contend with the fact that they don’t. But, you know, America has played kind of a starring role helping Taiwan, West Germany, Korea, and Japan all go from authoritarian countries in different ways to thriving democracies, thriving allies, thriving partners. It was a totally legit idea to believe that one could work with China in that way.

And everything changes in a sense with Xi Jinping coming into power. There’s a lot of discussion as to whether Xi Jinping really is the change agent. I mean, I’ve got books that say, you know, like this was sort of China’s plan all along, or that at least happened in the second term of Hu Jintao. I’m not a China scholar, but I’m more of the vein that China really did change under Xi Jinping, and in fact, to tell this story through the eyes of Apple engineers, it’s the engineers themselves who immediately had problems at the border entering the country, rules being enforced that had never been enforced for the prior decade, as soon as Xi Jinping comes into power. And so the book really tells the story of Apple scaling, but just as China is wanting to assert itself, right, put itself more on the world stage. It’s sort of the end of the “bide your time” era that Deng Xiaoping had implemented in the late ’70s, really all the way up into 2013. So the book goes so far beyond I think just like a corporate history. It gets real geopolitical real quick, and it’s only because Apple is maddeningly successful, and their success is highly dependent on a working partnership in a sort of “frenemy” relationship with an authoritarian and increasingly authoritarian country. And so the dynamics are really interesting, and the stakes in a sense couldn’t be higher. I’m going off on a long answer, so I’ll stop there, but I hope that answered the question.

Anirudh Suri: Yeah. I wanted to ask you now at that point, how much of the decision to invest so heavily into China is—if you were to go back to that time—is it a strategy to diversify away from overdependence on some of the other East Asian countries, or is it really what you are saying, which is, “No, I wouldn’t say so,” or “Maybe democracy came there because of this, so let’s try this in China,” and how much so?

Patrick McGee: So in a sense, you’re introducing a sort of geopolitical mindset, which makes sense for your podcast, that Apple simply did not have in the early 2000s. I mean, you have to remember this is all taking place in the unipolar moment, right? I mean, some of this is pre-September 11th, but even afterwards, and you have this sense in America that, uh, you know, you got the Francis Fukuyama idea of the end of history, like all cultures are sort of on their path towards a liberal democracy, and that there is no alternative to that. And so China is just the next player that’s going to embrace that idea. I mean, whatever the merits of Tim Cook are, and I think he’s doing well in a certain sense as a statesman, I don’t think he’s a geopolitical strategist, and he certainly wasn’t 20 years ago. So it’s not that they were overly dependent on Taiwan. Where else could we build? It’s just that Taiwan was so small. As soon as Apple begins to be quite successful with the iPod, Taiwan just is unable to keep up. They don’t have the labor force. Costs are going up because of constraints. They don’t have things like machinery. They can’t operate 24/7 factories, and China just becomes kind of the answer.

And so one thing that my book sort of revisits is this idea that Tim Cook came in in 1998 and made some decisions, is the architect of a strategy that “Let’s go build in China.” What I demonstrate really is that if you understand how…

Anirudh Suri: Patrick, sorry to interrupt you there for a second. Is your sense, Patrick, that the way tech firms today are either out of their own volition or by some nudge from governments trying to align their economic strategy also to the government’s geopolitical goals, is your sense that that’s a new phenomenon, and that back in the day, in the late ’90s, early 2000s, that’s not happening? Is it not that as the Chinese are being brought into the WTO that time, maybe the US government also wants some of its tech companies—I know Apple is not necessarily the Apple of today then, but still wants.

Patrick McGee:

Well, let me give you my favorite quote in the book, which comes from a former Apple Vice President. We’re having coffee, we’re having this kind of conversation, and he says to me, “Are you sure you’re not overthinking your thesis, because you keep telling me about geopolitics, but I was there in China in the early 2000s when we were setting up the early supply chain, and I can tell you we weren’t thinking about geopolitics at all.” And I think that’s kind of the book in a nutshell, because Apple is an engineering company, it’s a design company. They’re not thinking about the consequences of their actions. They’re not thinking about who leads China and what is the sort of Chinese statecraft.

Patrick MCGEE

So, you know, I think about that quote from 100 years ago, I think, “You might not be interested in war, but war is interested in you,” and it’s sort of something like that. You know, you might not care about the rise of China, the ascent of this country, but they certainly were thinking about that, and that’s pretty clear. I mean, you don’t have to be a Chinese scholar to know that since the days of Deng Xiaoping the idea was, okay, after three decades of rule by Mao, like we don’t have any skill sets. Our country is poorer than Sub-Saharan Africa. What are we going to do to get ourselves out of this? And Deng’s idea is to take a place like Shenzhen, right, basically some fishing villages at the time, but they’re close to Hong Kong. Why don’t we set this up as a sort of zone of capitalist experimentation and see how it goes? And the result is that today Shenzhen is larger than New York with far more skyscrapers. I mean, it’s an amazing success story. But the way that they get there is foreign direct investment, right? Originally from Hong Kong, originally from Taiwan, but eventually also from Japan and the West.

And so there’s a deliberate plan on the part of Beijing—by the way, I consider this brilliant rather than nefarious, I just want to be clear about that—to lure in this foreign capital to learn the necessary skills of how to build these products. And I’m talking electronics, but this is any number of industries, right, pharmaceuticals, apparel, et cetera. And then sort of thrive on our own, right, no longer need the ladder that’s been given to us, let’s say. And China just did an amazing job, sort of acting like sponges to learn, and there was just no better teacher than Apple. And even, you know, the founder of Huawei has called Apple a great teacher. Apple was designing products in a way that nobody else was doing. I mean, just remember computers in the late 1990s, they are ugly beige boxes. There is no design to them. When Apple comes around with the return of Steve Jobs, I mean, they are doing things with plastic injection molding and metal stamping that has not been done before. And when they take that idea and build it at a massive scale in China, there is an insane amount of learning.

And Foxconn, the Taiwanese company led by Terry Gou, is the company that just gets it earlier than anybody else, that okay, Apple doesn’t really pay you, but my God, do they teach our engineering teams how to do so many things so that if we can please Apple, we can please Dell, we can please HP, we can do anything because nobody is as demanding as Apple.

Anirudh Suri: Yeah, yeah. And let’s stick with that teacher point, because I think that’s an important point. If you look back into history, there’s always this idea that countries or companies that own certain amount of technology, at least the last hundred years, have been very protective of that technology, very protective of, you know, the whole IP regime that’s come about over the last several decades, and has become a core, let’s say, tool for companies to protect their technological inventions and their tech. No harm, right? However, as I think your book clearly points out, you are also suggesting there’s a lot that China, Chinese companies, Chinese factories, Chinese workers, Chinese employees learn, right? Now, to what extent are you referring to, let’s say, a work ethic as the thing that’s been taught, and to what extent are you talking about the tech transfer? And if it is indeed both, then how does that tech transfer really start to happen when otherwise companies have been so protective of their core IP?

Patrick McGee: Yeah, the answer is sort of different depending on what year we’re thinking about. So let me just give—I’m fast forwarding a little bit—but let me give an answer from around 2010, 2011, which is to say that Apple invented the iPhone of course in 2007, and between that year and 2015, the volume of iPhones sold went from about 5 million to 230 million. And if you remember, you know, I have a dissembled iPhone, the original one in front of me, and the difference between the iPhone and the iPhone 3G, and then the 3GS, and then the 4—I mean, this was times when it was really being re-engineered, just re-taught, and there were new supplies, new component makers, et cetera.

And so what would happen during that phase of exponential growth is that if Apple made a design change that obviated the need for a certain component supplier, that supplier would be like 95% dependent on Apple because of how demanding Apple was and how much they need—I mean, they need their top talent, right? And so what would happen is these companies would make these big investments to keep up with Apple and to supply them, and then find themselves, just like, you know, with no notice, that we’re not on the next product. And so they’d have all this staff, they’d have all this machinery, they might even owe Apple money because Apple sort of operates like a bank sometimes, and they would find themselves bankrupt. And this would happen over and over.

And so Apple, out of a sort of a self-preservation, starts to tell companies, “Okay, however fast you’re growing with us, please make sure you’re growing that fast with somebody else.” And think of what that means. I mean, if you are Lens, which is the company that takes glass from Corning and then tempers it, right, strengthens it, cuts it, shapes it, and places it on the iPhone, what do you do with that skill set that Apple has very much taught you how to do? Well, of course, you call up Oppo, Xiaomi, Huawei, Vivo, and you say, “Look, we’ve got this skill set, we’ve got all these employees, we’ve got this great machinery, we can build this portion of the smartphone for you.” And this basically happens across hundreds of companies where they take their skill sets that they’ve been taught by Apple and they begin to supply the domestic homegrown companies.

So, you know, in the earliest years of iPhones being sold in China, I mean, Nokia is the dominant company, but Nokia doesn’t have those same relationships that the Chinese companies do have. And so the Chinese companies, not just the supply chain, but the four companies I mentioned, they grow by leaps and bounds, not really by mimicking Apple, I mean, partly by mimicking Apple, but partly just by relying on the very suppliers that Apple had trained up and then taking those skill sets and building the Android universe. So, you know, by the end of the decade of the 2010s, I mean, there are essentially no non-Chinese Android companies. There’s Samsung, but that’s about it. I mean, if you want to talk about something like the Google Pixel, the Pixel sells in such low volumes that it gets categorized as “other,” right? Today’s smartphone world is basically a whole bunch of Chinese companies, and this is certainly true in India, but also Indonesia, in Europe, and so forth. A whole bunch of Chinese companies, Apple, and Samsung. Everybody else is dead essentially. I mean, Nokia died, Motorola was acquired by a Chinese company, LG no longer makes phones, Sony is not really in the phone business, and obviously BlackBerry is dead. So the impact of Apple sort of exporting its technology transfer or exporting its technology and it being sort of imbibed by the Chinese, the effect is the Chinaification of the smartphone industry. This is not a story about globalization; it’s very much a story about China.

Anirudh Suri: Yeah, and does Apple not anticipate that? What’s going to happen? Is that Beijing’s plan all along? I mean, this is not an industry-specific phenomenon, right? I mean, like you teach a given country and its workers how to build something, they will try to cut you out of the picture, build alternatives, competitors. So is Apple not anticipating that, one? And is that the unintended consequences of Apple strategy, or is this something they anticipate and they say, “It’s okay, we don’t care”?

Patrick McGee: Yeah, so there’s a couple different answers here. So one is that during this stage Apple has, I think you could rightly call it a certain arrogance or hubris. That they notice that people are copying them, of course. They do go after Samsung and sue them on multiple continents and eventually win, I think, around a billion dollars, which is pretty inconsequential in the grand scheme of things. And, you know, there’s a famous quote from Jony Ive, speaking, I think, in 2013 at a Vanity Fair conference where he’s asked about Xiaomi’s likeness to phones, to iPhones rather, and he basically says like it’s brazen theft and I don’t like it, it’s not okay. But those kinds of outbursts really diminish with time. And I would suggest maybe two reasons—there’s multiple, but let’s just stick with two. One is that the arrogance I’m speaking of is that Apple thought we’re innovating so much that if the companies are copying what we have shipped, they’ll always be one step behind, because what they’re not copying is what we are about to ship.

And in the world of smartphones, not so dissimilar from the world of fast fashion, if you’ve got a lead on your competitors of 6 months, 12 months, 18 months, that’s enough for you to outsell everybody else in the premium sector, and then you move on to the next thing. The problem, before fast forwarding, is that smartphones aren’t really being revolutionized the way that they were in the first, let’s say, decade of the iPhone, right? We’ve sort of come to a point where a 6-inch glowing rectangle in your pocket is pretty—they’re all pretty similar now. So Apple’s trying to do things, there’s a new button, right? I mean, this is pretty small bore stuff. You know, now it’s in titanium, okay, I guess that takes some weight off of it. You know, they try to do colors, which is pretty inconsequential. The first thing that people do is buy a case for it. There’s just not a whole lot they can do. It’s not going to be a triangle next year just because it can—that doesn’t make any sense, right? So there’s a sense in which they just think they’re going to make—you know, take the lead on design and keep up. And I think that logic sort of hits an end as early as 2019, let’s say. I’ve got sort of the court documents to back up some of the internal panic within Apple once the Chinese are very much outmaneuvering them and getting ahead of them in certain ways.

The other one is political, which is to say that when Xi Jinping comes into power, he has a bunch of reasons to think that Apple is this exploitative company, akin to the paradigm of the Dutch and East Indian trading companies that caused China’s century of humiliation. And Apple begins to worry that it’s going to be blacklisted from the country. Facebook, Google, and other companies are blacklisted in the country, so that’s not an idle threat per se. And Apple basically has to learn how to play politics. They have to learn the game of incentivizing and working with, you know, not just Beijing, which is really their focus beforehand, but also the local cadres, the local mayors.

Apple’s understanding of Chinese politics was terrible before 2013. They really didn’t know anything. They had just relied on people like Foxconn, which was brilliant at understanding politics, to do everything. And after Xi Jinping comes into power and Apple feels threatened, it’s the first time in their 20-year existence in China that they really hire senior people. I mean, they have at least two vice presidents living in the country after 2014 for the first time ever. I mean, you have to remember Steve Jobs, who died in 2011, never set foot in China once, right? So I think that it is crazy. And, you know, so, like when Walter Isaacson writes his biography of Steve Jobs, I mean, China is mentioned in the index three times and never for a consequential reason. But that’s not a knock against Walter. I mean, if you’re writing a history of Apple in 2011, to miss China would probably be a big misstep, but for a biography of Steve Jobs, I mean, China is not part of his worldview. It’s not part—it’s just where things get built. And that’s more of a Tim Cook story than it is a Steve Jobs story.

So anyway, my point is that when Xi Jinping comes in and Apple feels threatened, they need to sort of demonstrate the technology transfer. In other words, it goes from this liability that things get copied when we build here to, “Hey, look at how much Chinese companies are learning from us.” In other words, they totally flip something on its head from being a liability to being a political asset, because they can show, “Hey, look, the investments we are making are resulting in Huawei, Xiaomi, Vivo, these companies really taking power in the most iconic product of the 21st century, which is undoubtedly the smartphone.” So they’re able to do that jiu-jitsu trick of taking something that had actually been sort of anathema to them and realize the political power that it had, which would allow them to remove obstacles within China and sort of ingratiate themselves with the political leadership from the local cadres in Shenzhen all the way up to the highest echelons of power in Beijing.

Anirudh Suri: And does that suggest—you’ve spoken about the consumer day campaign in 2013, I believe, in your book. What does all of this suggest about Xi Jinping’s view at that time about doing business in China? And about these, of course, you mentioned that he started to at least portray them and see them as the modern-day East India Companies. But on the ground, in terms of doing business, what does all of this suggest to you about what Xi Jinping’s worldview is of tech companies, foreign tech companies in China?

Patrick McGee: Yeah, it’s funny, you know, I don’t think I—I like to give lots of nuanced answers, and I think this one’s actually pretty simple, which is that if you’re in China, you need to be in China for China, and that’s an explicit thing that Xi says. Essentially, they don’t want Western companies in the country that aren’t somehow helping the Chinese consumer or Chinese companies.

Anirudh Suri: And it’s very Trumpian, yes?

Patrick McGee: Oh gosh, the more that you read Chinese politics, the more you will understand the current White House. You know, Trump is very Chinese in that sense. I mean, I’m not—I’m trying to say something negative, to be clear, but there’s a positive attribute of it as well, which is that he kind of gets on an instinctual, emotional level how authoritarian rulers rule, because he’s of that ilk. So again, I mean, take that which will, but I think there’s often a certain naivete on the parts of other people who don’t have those instincts because they don’t understand how other people think. But, you know, Trump is very much a “might makes right” kind of person in a way that Xi Jinping absolutely is as well.

Anirudh Suri: And so other than this, what does Apple get right then, once it starts to learn about the politics of China, about the politics of doing business in China, as you’re saying, in the subsequent years now under the Xi era? What does Apple get right and what does it get wrong?

Patrick McGee: You know, that’s a really interesting question because what I’ve wondered about is that in a certain sense, my thesis is that Apple has gone so deep into China that they’re married, and it’s a Catholic marriage, right? There is no divorce. They can’t get out of this. Yeah, but what I’ve wondered is like, I guess my, you know, in my telling, it’s kind of a cautionary tale. So the basic lessons would be something like, you know, supply chain 101 would say you don’t put all your eggs in one basket. And my criticism is that how did the company that built the world’s most sophisticated supply chain make the supply chain 101 mistake, which is that you don’t do that, especially as the country becomes belligerent and authoritarian, and you’re contributing to building up your own rivals in the country? Right? That seems to be quite an ironic and calamitous mistake.

And so I would hope that, you know, someone like Jony Ive and Sam Altman probably don’t need my book to understand this. I think Jony Ive kind of lived this and can see it for himself. But I would hope that the lesson would be trading with China is fine, but the vast consolidation of everything—of training vast workforces and having your best engineers going to China on such a periodic basis—I mean, they literally convinced United Airlines to fly to cities they had never flown to three times a week with the understanding that Apple would buy so many first-class seats that if the rest of the plane was empty, they would still make money. I mean, this is the kind of influence Apple was having, not just on China, but on the airline industry, right? I mean, no company sort of is doing that sort of level of detail, that level of minutiae that Apple was. So I would hope that the lesson is, you know, for some young startup company, okay, fine to sell in China, fine to have some of our stuff there, but let’s maybe make sure that we’re never so reliant on foreign contract manufacturers, or at least foreign contract manufacturers of one country, that we find ourselves in the same position.

However, it could equally be seen if you’re Nvidia or someone like that that has business in China as a sort of template of, “Hey, Apple’s wildly successful. How do we replicate what they’ve done so that we can make the same moves?” And so that I don’t really want to be a consultant for someone with that question, because I think, you know, sort of on an ideological or geopolitical basis, that’s not what I agree with. But it absolutely could be seen in that way because if your measure of success is just like Apple’s market cap and their ability to scale in China, and you sort of have, I think, what I would call the 2000 mindset of not really considering the geopolitics, then of course they’re an outstanding example.

I mean, the other example, just to sort of, you know, take this beyond Apple, would be Germany’s deal to get natural gas piped in from Russia. I mean, that was in the Merkel era, right? I mean, we’re not going so far back. And clearly they just weren’t thinking about the geopolitical stakes of that. I mean, that’s sort of what shareholder capitalism is: you find the best deal, you don’t really consider the politics, right? You have a fiduciary duty to your shareholders, and this was sort of Germany—so it’s not a not a not a corporation per se—but that was the thinking. And in retrospect, I think of that as very naive, and I think of Apple’s issue being a combination of hubris and naivete. But it is fair to say what they did right? And essentially what they did right was they began to operate at the local level.

Well, I guess I have to quickly back out, give you a 15-second understanding that the biggest difference between Soviet Communism and Chinese Communism is that Moscow really was ruled from the top. Communism in China is probably putting it in sort of cute terms, but the local cadres are essentially responding to a blueprint that Beijing puts out, and then they are responding proactively in ways that are sort of up to them as to how best to execute those plans. So someone might say there’s a mandate to do electric vehicles, but what that means is that Shenzhen is going to compete with Hangzhou, which is going to compete with Suzhou, et cetera, and there’s just massive competition. And China has really kind of found a way to introduce dynamism into the public sector in a way that we certainly don’t have in the West. You know, if you talk about bureaucrats in California, you’re talking about people that are inhibiting your growth. Bureaucrats in China are more like a venture capitalist that sits on your board, invests in the company, and wants to clear hurdles and obstacles to get you to build things.

So there’s something actually really impressive and competent about Chinese capitalism. And I wish Congress had more of a view of China’s competence rather than just seeing them as a nation that just steals. My narrative is not that anything was stolen from Apple. My narrative is that Apple gave it away, and they gave it away for their own sort of selfish purposes and in a political paradigm where they needed to demonstrate what they were giving in order to sort of get favors. And so yeah, so if you wanted to get the positive lessons out of this, it would be to understand that power doesn’t reside in Beijing, it resides at the local level, and that you would want to sort of distribute your production into various industrial clusters to work hand-in-glove with a bunch of local officials, and that you can get a lot out of them because if you understand the way that those municipalities in China compete, you can leverage one against the other to get free factories and tooling and all sorts of things and access to migrant labor and so forth.

And if I’m really jumping ahead, if India is going to compete with China, they need a political system where local cadres—I guess you wouldn’t call them cadres in India—but they would need to be incentivized in a similar way because you somehow need that competition at the public level. Otherwise, things just take too long, and that’s sort of the problem in America.

Anirudh Suri: Yeah, yeah. No, I want to come back to the lessons for countries like India that even Apple wants to diversify to and India wants Apple to come in, et cetera, in a minute. But just to close out the piece we were discussing, Patrick, tell me, other than the piece that you mentioned, what other things does China get right in its dealing with Apple, from China’s standpoint?

Patrick McGee: Well, China understands, certainly by 2013, that what Apple has created in China—and to be clear, in partnership with lots of local Chinese corporations, I’m not trying to maintain that, you know, China didn’t contribute anything, they contributed lots—what they understood was that Apple had no place to go. If you understood that they were growing iPhone volumes literally at an exponential level at that time, let alone the other products they were creating, that Apple had not made the investments anywhere else.

And so Xi Jinping is able to exercise his power against Apple, recognizing what a bind that they were in, because their near total dependence on China for building their products was such that they couldn’t just sort of move a bunch of production lines back to Taiwan or Wales or Mexico, some of the earlier places that they’ve been operating in. They certainly couldn’t go to India. They definitely weren’t going back to the US.

And so Apple sort of has diminishing power, diminishing leverage in the relationship. And so especially as Apple moves towards more like content and services in the late 2000s, Beijing is just able to revoke licenses for the iTunes Store. They’re able to say, “No more VPNs and get around the great firewall. You know, we don’t like that new New York Times story, so The New York Times app no longer works in China.” And Apple doesn’t really have counter proposals or counterarguments to these things. It just has to acquiesce. There is no Plan B. And so that’s the sort of tragic fate of Apple, but if you’re asking how China played it off well, yeah, they have this “might equals right” mentality, and they’re able to execute against what is after all only a corporation. I mean, as big a corporation as you might be, Apple’s not a country. There’s no real dispute as to who has more power in that relationship, and so China just has to flex a little bit and Apple I think has to unfortunately fall into line.

Anirudh Suri: Would Steve Jobs have fallen into line, you think?

Patrick McGee: So, fantastic question. I have thought a lot about this, but with the caveat that I never covered Apple under Steve Jobs, obviously. I feel like I know him in a certain sense having studied him and everything like that, but I never met the guy. So I’ve instead put the question to people that worked with him very closely. And I’m thinking of one person in particular—I don’t think this was an on-record call—but he really paused for a solid minute after asking the very same question. Maybe my question was slightly different. It was, “How would Steve Jobs have reacted to Xi Jinping?” ‘Cause I would like to think that Apple under Steve Jobs would have given him the middle finger and said, “Maybe it means that we don’t have an iPhone for two years, but that’s not—we’re not the sort of, I don’t know what the metaphor would be, but we’re not going to get pushed around. And if we need to go build this someplace else, maybe let’s go do that.”

But to be sympathetic, I’m not therefore criticizing Tim Cook, because you have to be sympathetic of the position he was in. Steve Jobs had been dead for maybe 18 months by the time Xi Jinping came into power, flexed his muscles against China, and Apple had to end up, you know, through Tim Cook, apologizing in Mandarin on the Apple website. This is the prologue of the book, if anyone’s interested. He was not the founder of the company. He was under all sorts of pressure. I mean, this is just around the same year that Carl Icahn is taking stake in Apple and asking for changes and stuff. I mean, if you just understand in a fair way what was expected of Tim Cook and how low expectations were—I mean, everyone thought the visionary of the last century had just died, the company is kind of going to be done with, it’s never going to have the same creative powers. Tim Cook had a lot to prove. And the idea that he was going to say, “No iPhones for two years because we’re going to go build this someplace else because nobody messes with us,” or something like that, it’s a totally fantastical, you know, fanfiction sort of account of what Apple should have done, and so I don’t subscribe to it, and I think it’s an unfair critique.

Anirudh Suri: Can I ask you now to maybe extrapolate some of the lessons you have learned or you’ve derived from studying this China-Apple relationship to say, tell me what you think are the emerging themes or emerging strains in the relationship between large big tech firms, often foreign ones, with foreign governments? Like what sort of key three, four takeaways would you have on how that relationship is evolving? Right? Of course, you started off with the reference that the Chinese had, I think often in India people have, of the colonial corporations like East India Company and how they really dominated right at that time these foreign lands that they came and did business in to begin with, but then they became geopolitical powers. Now, Apple’s story turns out hasn’t played out like that, right? Apple’s story has been that they’ve come, they’ve done a lot of business, they’ve made a lot of money, become very valuable, but then when it comes to the foreign government, they’ve not really been able to dominate the way the East India Company might have done 150 years ago, right? So with that historical context, tell me what you think are some of the lessons that one can extrapolate about how the dynamic between tech firms or these large corporations and foreign governments is how that’s playing out.

Patrick McGee: I’ll give one sort of simplistic lesson, which is I think this is a Peter Drucker phrase: What gets measured gets managed. And Tim Cook is supposed to be the real master of looking through Excel sheets and measuring everything on a weekly basis, right? They have these executive team meetings where Tim Cook leads them, and they go through hundreds of pages of Excel documents such that when he came into power in 1998 as a senior vice president of operations, some of the people on the team had glasses, some of them didn’t. Within a few years, everybody will have glasses, right? And it’s just because they’re going through all these big sheets of paper, column by column, row by row, looking at everything. Well, here’s my sort of critique: where on the Excel sheet, what column do you point to or sort of graph China’s ascent as a geopolitical power? Where do you put the technology transfer? Where do you put, “Whoops, we’re actually up arming America’s biggest geopolitical rival”?

Those aren’t things that fit on an Excel sheet. And if you’re looking just at things like product volumes and especially things like margins, it leads you into this problem because, you know, right now Apple’s predicament is that they’re being hit with tariffs, and they know that they can’t raise prices in America and say it’s because of tariffs because Trump goes after you for that, right? Amazon learned this the wrong way a couple months ago. And so they also need to please shareholders by having margins that are either stable or rising. And so the most likely thing you would do if you’re looking on the Excel sheet is to work with more and more Chinese companies at the expense of US or Japanese or Taiwanese multinationals in China, because it’s the Chinese companies that have the political leverage to work at lower volumes.

I mean, an analogy I would give is, some people, and rightfully so, think that internships where you’re not paid are unfair and exacerbate inequality, because who can accept the internships but people that already have an apartment paid for by mommy and daddy or something, right? So you’re giving internships to people that are already privileged if they’re unpaid. Well, in the same way, the red supply chain in China can operate at zero or at least lower margins because they’re operating within a paradigm of Chinese capitalism where command and control of industries is the number one thing, right? Politically aligning your business with the interests of the CCP is the number one thing. So if you’re a Taiwanese company, you know, having a lucrative business, one that actually makes economic sense, one that provides dividends for shareholders, that’s what’s important.

But that’s not important to the Chinese companies, or at least it’s of tertiary importance, let’s say. And so if Apple’s going to be finding a magic formula to sort of maintain its relationships with China, maintain if not raise its margins, and keep its prices stable, the logical outcome would be let’s make sure we’re working more with Luxshare and BYD and less with Foxconn and Pegatron. And so I think that’s the sort of direction that Tim Cook’s Apple would be going in. And of course, this would very much be behind the scenes and not very public because there’s not really great public data and transparency, nor is there the right media landscape within China to be covering these things. And so that’s what I would worry about. Somehow CEOs need to be thinking more about the geopolitical implications of their actions now. Maybe that’s not true for everybody, but it’s certainly true of any of the trillion-dollar companies.

And certainly for not a lot—I mean, you know, a company like TSMC is absolutely having to think about that all the time, right? There’s a reason why TSMC doesn’t actually want to be investing a whole lot in Arizona. They’re being sort of pressured to do that, I think for reasons that I would support. But, you know, Taiwan has the silicon shield of all the expertise of the highest, most sophisticated chip fabrication in the country. And so that prevents Beijing from invading the country. So the more that they replicate those operations in a place like Arizona and other countries that are incentivizing to do so, the less the silicon shield matters. And so anyway, more and more, I think you’re seeing companies think in this geopolitical sense, but this is all pretty new. I mean, even by the time I submitted the manuscript, Nvidia didn’t really have any lobbyists in Washington, wasn’t really thinking geopolitically at all, and Jensen Huang has had to go up the learning curve really quickly over the last six months to deal with Trump and to fly back and forth between Washington and Beijing. But that is very much a 2025 story. Nvidia just wasn’t doing anything like that before.

Anirudh Suri: Yeah, yeah. Let’s move to India, right? We’ve mentioned it a couple times as, and of course you mentioned it in the last chapter of your book, as a possible now rising alternative to China and for Apple to diversify away from China given the geopolitical learnings it’s had now in recent years. What’s your sense of how successful that’s likely to be? What obstacles do you see there? And how much do you really see that scaling up?

Patrick McGee: So I wish I could be more optimistic, and if you knew me just as a person, you would know that I’m, you know, I’m sometimes compared to a golden retriever. I mean, I’m just a happy, happy-go-lucky person. And it’s weird to write such a pessimistic book because that’s just not my nature. But I don’t leave the book or this topic with a whole lot of optimism because I don’t think America is going to re-industrialize at the sort of scale that would rival China. Even when you talk to people that are really invested in that thesis, they’re largely talking about reinventing how to do stuff, and they’re not thinking of scale in the way that China is almost exclusively thinking about scale. They’ll let someone else invent something, but then they’ll scale the hell out of it.

So that worries me a little bit. In so far as moving to India, people think there’s a lot more going on in India than there is. Basically the twin forces catalyzing Apple assembly of iPhones and some other products in India are basically tariffs. It’s a strategy of tariff avoidance. So Narendra Modi put tariffs on products, specifically cell phones coming from China back in, I think, 2015, 2016. And this was around the time when Apple kind of realized that their market position in China was probably peaking. They weren’t really going to get beyond one out of five smartphones sold in the country. But their market share in India was 1%, perhaps less. And so there was a thought that basically we could grow our market share to about 20% because India is catching up, the GDP is growing 7% a year, it’s the next great middle class. Of course, today they have 1.5 billion people. So Apple was beginning to see India as the next great place for us to do things. But because of the tariffs that Modi had put on China, you had to assemble the products in India if you were going to actually sell them, right?

I mean, they’re already out of the—I talked to an Indian analyst once who said, if you surveyed people on the street, nine out of 10 would say they would love to have an iPhone, but fewer than one out of 10 would be able to afford it. And so if you’re adding a 20% tariff from China onto that price that’s already out of the league of 90% of people, then that was obviously not going to be good. Okay, couple that with Trump’s—Trump 2.0—no tariffs on China going to the American market, that’s not going to fly either. So there’s been sort of compounding reasons to move production to India so that phones going to America aren’t hit with the China tariffs.

Anirudh Suri: The irony is that India, I believe today, actually has a higher tariff than China does from Washington’s perspective. So that’s the stage of negotiation the two are at. That’s right.

Patrick McGee: Yes, although your guess—it’s 50%—but I think it’s the case now that Trump is and now that Tim Cook has been to the White House that there’s an exemption, a carveout for Apple because they’re demonstrating a commitment to building in America. So I mean, I, you know, look, I think the way Trump negotiates is very mafioso. You know, “Here’s a rule, but you’re carved out because we like you.” I mean, that’s not really the way the country is supposed to work, but that’s how it’s working right now. And Apple’s sort of having to fit within that paradigm.

But anyway, so going back to the production, which is the wrong word in India, really what we’re seeing is assembly. So if you think it takes a thousand steps to build an iPhone, the fact that the final step is now being done in India, that’s just enough for there to be a quote unquote “substantive change” to the product, which for legal rules allows you to therefore say “Made in India,” stamp it, put it in a box, and send it to America without the China tariff. So that’s the logic. But people think there’s a lot more production going on in India than there is. And I’ve talked to some of the engineers who are in India.

Anirudh Suri: This, I mean, the optimistic side, the golden retriever side of you, do you see this as the starting point of something bigger, or do you feel…

Patrick McGee: Yeah, so not to be unfair, you do have to start somewhere. However, we’re talking about investments in India in terms of assembly that go back to 2017. And so what’s really nice about that date is that it’s one decade after the original iPhone was being built in China. So just to give some sort of irrefutable numbers, you go from zero iPhones in 2007, right, ramping up to 5 million or so in China, to I think 150 million or so by 2014, right? If you just sort of take that same chart and put it to iPhones made in India, you go from zero in 2017, right, to the start, to around 15 million by 2024. So in other words, the rate of iPhone production in India was happening at one-tenth the rate that it was happening in China. And even that vastly overstates what was going on in India, because everything was going on in China, right? They weren’t just doing the final assembly. They were taking components, to be fair, from around the world, but also doing a whole lot of the plastic injection molding, the metal stamping, the quality test and control. All that was happening in China. And this was at a time when the phone was changing dramatically, when smartphone touch glass was being invented quite frankly. So to say that… So I’m just saying the comparison between the depth and breadth of everything that was going on in China in the first 10 years of the iPhone versus what’s happening in India, honestly, it’s just not very comparable.

So I’m a huge advocate of Apple moving, you know, heaven and earth to build things in India. The mistake people make is to think that that’s already happening because they look at how many phones are quote unquote “assembled” in India and then sent off. And assembly doesn’t mean you’ve severed your dependence on China at all. Everything’s already sub-assembled by the time it gets to Karnataka or Tamil Nadu and then it’s put together. Correct?

Anirudh Suri: No, so no, absolutely. I think so. So now the next question then becomes for a country like India and for a company like Apple, given the experience it’s had in China, right? So first question, what lessons should Indian political and business leaders be drawing from the way things have panned out between Apple and China, to say, “Okay, we don’t want to just assemble. We also want to get into some of the higher or deeper, rather, pieces of the iPhone production.” How would you suggest or advise Indian political and business leaders to play it given the…

Patrick McGee:

I strongly hope that governors and mayors within places like Tamil Nadu and Karnataka are studying the rise of Shenzhen and thinking about what they can do. I think India should be doing everything it can to attract Apple and other companies because Western companies are embedded in other things. So right, you mentioned Shenzhen, this is so, so, so tax exempt zones, right? So I mean, I’ve talked to some Indian officials about this, right, and their concern is that when they sort of are talking about this publicly, it’s like there’s a backlash because it’s like, “Why are we giving money to these foreigners, right? Why aren’t we spending on our own domestic programs?” And I totally understand that. But if you’ve got the sort of right language to explain it, it’s like, “If we lure in this capital, they will provide not just jobs, but training and education programs.”

I mean, Apple basically opened vocational schools and trained hundreds of thousands of people through the last 20 years, right? English as a second language—I mean, things like that. They were working in combination with Pearson the education company and Foxconn to get that stuff done. You know, like the ripple effect, if you will, of having Apple in your country, I think is hard to underestimate. And all you need to do is look at the rise of China, specifically four or five different places in China where their manufacturing is paramount, and recognize what they did to do that and then try your best to replicate it. Now maybe replicate is the wrong word because for a whole host of reasons about what China can offer versus what India can offer, I’m sure there’s a bunch of adaptations that you would have to introduce. There are certain things, for instance, that I would not advocate that India introduce in terms of how they have a dual citizenship structure within China where people are discriminated against at the state level that Apple, you know, frankly exploits. So I don’t want to see everything replicated.

But no, I absolutely think that India can be, should be doing everything they can. Now where it’s going to be difficult is that China is just masterful at this. I mean, you know, compare the high-speed rail with, you know, between various cities in China with the rail capacity and speeds in India. I mean, a lot would need to be done if you’re really going to rival that. And you could say the same thing. Compare the ports of India with the ports of China. There’s a lot to be done. And you can’t expect Apple to do that stuff. Apple can do stuff within the factory, but who’s building the eight-lane highways from the factory to the ports? That’s got to be incentivized at the local level in India to make that happen. So there just needs to be a hell of a lot of coordination.

Now here’s the thing: as much as I’m supportive of that, you have to take into account that Beijing doesn’t want to see any of that, right? Beijing…

Anirudh Suri: Correct. As business is taken away, it’s not going to stay idle. Correct. Yes.

Patrick McGee: Yes. And and and so where you should maybe not draw lessons, for instance, is that Samsung used to build a lot of products in China and now they largely do not. But there’s no lesson there because Samsung used to have 20% market share in smartphones in China and now they have less than 1%. So when they needed to move their production to Vietnam, to Argentina, et cetera, to India, there was no risk of a consumer backlash. The Chinese consumers weren’t buying their phones in the first place. Apple has a $70 billion business in China. So the more that Apple is seen as the poster child of de-risking from China, the worse it is for their relationship with Beijing and the worse it is for their, you know, 100 million consumers in China. So I don’t want to propose something that’s totally unrealistic.

I would really like India to be making these, you know, making itself attractive to Apple, but the reason why I call Apple captured is that it’s not intuitive that they can actually just respond to what India offers and move things, because the more they move, the more problematic it is with Beijing. But the less they move, the more stuck they are. So I mean, I really do think…

Anirudh Suri: Yeah, yeah, yeah. No, so I think you’ve laid out the complexity of it very nicely. To what extent is Apple in a way a stamp that you just need even if it was not scaled up? And once you have a little bit of Apple in your country, even if it’s just, let’s say, assembly, how much of other companies would derive comfort from the fact that Apple’s being able to do this? Let me come and move en masse, right? So the game then becomes not Apple per se, but saying, “Okay, I have that stamp. It’s like going to a great university. I have the stamp. Now I’m going to let other people come and compete here.” And maybe that’s the game India plays.

Patrick McGee: Look, that could very well be possible. I mean, maybe the best chance for India is to find the next Apple and to attract them rather than the current Apple. And, you know, to some extent, that seems to be the role that a company like Tata that seemingly does everything is playing, right? Wanting to build their own electric vehicles rather than, you know, have Tesla come to the country. So, maybe that’s the way to do it. I guess I see the limits . To some extent what you’re describing I think is what’s happening, whereas the lay person does think there’s a lot happening in India, even though I don’t think there is. The problem is I think the supply chain people, right, the executives that would be making those decisions, they know the difference between a stamp, as you put it, and the real logistics and production. So I don’t know that the right people are going to be quote unquote “tricked” by the press release that a lot of iPhone production is happening in India. These are people that know the topic better than I do, right? I’m a journalist. I’m not someone who sort of works with machinery. So I guess I would—my guess is that…

Anirudh Suri: I think that’s a fair point. I think, of course, they know what they’re doing and they want to see real evidence of whether you can go deeper into the value chain and have the right infrastructure, talent, et cetera, to support that. But maybe it is that overfocusing on Apple as the only large company to try, given its deep roots in China, might not be the the the basket that you want to lay all your eggs into as a country like India. Yeah. Well, this and this is where you get to what is the term that Jensen Huang uses? AI sovereignty, I think he uses, right? Like that each country should have their own AI infrastructure. And look, if AI is going to be as big as it is, then maybe India should say, “Forget Apple, let’s make sure that we’re investing in data servers.” I’m being a bit flippant about that, but perhaps that’s something like that is the real answer.

Anirudh Suri: Yeah, yeah, yeah. No, I think India’s AI strategy is something we could spend, you know, another hour talking about. But let’s talk about Apple’s AI strategy and the future of Apple, given that you’ve mentioned, I think, the one company that has very clearly overtaken Apple as the most valuable company in the world. How are you seeing Apple’s future play out in the AI space? You know, if one could argue that its iPhone strategy has maybe played out and is now facing so much complexity, most of its competitors seem to be focusing on AI. How are you seeing Apple play its AI game?

Patrick McGee: So before I say some negative things, let me just first start with the potential that Apple has is tremendous, right? Because before you tell me your weaknesses, you’re going to tell me your strengths. They have—and I’m not—this is a loaded term, but I’m not trying to mean it in a loaded way—they have a monopoly on the product, both at the operating system level and the software level, right? So the hardware and the software and the operating system, which means that if Apple plays its cards correctly, something like Siri has unprecedented access using AI to do things on your phone that OpenAI and every other company will never be able to do.

I mean, Apple can plausibly argue for privacy reasons that no AI agent on the phone will ever be able to sift through your emails to get answers, but there’s no problem with Siri doing that. I mean, Siri already should be doing that, but they don’t. So, you know, Apple has advertised this as part of Apple Intelligence that it will be able to go through your photos to find memories for you, you know, within seconds. And so what that means is that they want the sort of infrastructure for AI to be within the phone itself, right? Not on, not exclusively anyway, on data servers, but on-device processing. And that’s something that OpenAI or whoever is never going to be able to compete with.

So I want to say that, you know, if they’ve had a breakthrough on AI in the next five years, that will be the breakthrough, right? That everything is happening on chip rather than in the cloud. And that has huge consequences if they get that right, because the processing happening on the device to be a good product would plausibly have to keep up with the insane development that we’re seeing in the cloud. And what that would mean is that, you know, tens if not hundreds of billions of people that really love Apple would see the need to upgrade their phone every year or perhaps every two years rather than every four or five years because they want the latest AI features.

So even if Apple’s not charging monthly fees for access to its AI, you know, if the fact is that it requires higher processing and more memory on an annual basis to keep up with whatever is going on at OpenAI, then you would want to upgrade your phone. I mean, I would certainly be among the people that would want to have the latest and greatest AI features embedded on the phone every year and would therefore find myself in some sort of financing program where I get a new phone every year. So that matters greatly because remember Apple revenue is still more than 50% made up for just from the iPhone hardware purchases. So if they can accelerate, or maybe let’s say crunch down the replacement cycle, that plays out hugely for Apple.

Okay, so the potential is there. The trouble is, I see no plausible signal that they’re about to unveil something at some sort of master stroke level. And in fact, some of their best talent is being poached by, you know, tens of millions of dollar pay packages to places like Meta. And the most breakthrough things seem to be happening at OpenAI. And Apple has this privacy posture that I really support, but it really hinders them in doing things quickly.

Because if you think of something like Grok, the AI feature from Elon Musk, or even Facebook in terms of the AI features of Meta, what that allows them to do is there’s real time input into their own data centers where people are speaking, let’s say, in Gen Z language, right? And so the models are able to adopt and mimic that language because they have daily, you know, frankly, minute-by-minute input from people around the world, and that goes into their data servers and they’re sort of able to train on that, right? That gives both of those companies major advantages. Apple doesn’t have anything like that. I mean, the thing is Apple could, if every time I used my phone, all of the text was being taken and scraped by Apple, but they’re not going to do that. And so I don’t want to criticize them for that. They shouldn’t be doing that. I’m glad they don’t do that. I really support that, but it’s boxing with the gloves behind your back.

So I don’t see how they sort of come out of that. It strikes me as a real conundrum. And so I want to be clear that I’m just trying to describe the situation, I’m not criticizing anybody for that. But so the fact that they don’t have the AI features now, the fact that they advertise features that don’t exist 16 years after the fact—and I’m referring to the Apple Intelligence features—the fact that they seem to be losing some of their top talent and that they’re that these other people seem to be racing well ahead of them, and we can see that even in terms of market cap of Microsoft and Nvidia, it really doesn’t lead me to think that Apple sort of has a lock on the future. And then let me just say one thing. The absurd response from the common person is to say, “Oh yeah, but Apple’s often late to the market. Look at the iPod, it wasn’t the first MP3 player. Look at the smartphone, look at the iPhone, it wasn’t the first smartphone.” And what’s weird about this is yeah, that’s true, but that’s the Steve Jobs era. That’s like me betting on the Chicago Bulls today because in the 1990s they sure were great with Jordan. You would never make that mistake in sports, but we make that mistake all the time with Apple.

And it’s like Steve Jobs isn’t there, Jony Ive isn’t there. What evidence is there that Apple is going to come from behind in revolutionary technology and shock the world? It’s a fantasy. I just don’t see it. And Tim Cook has great qualities, but AI product vision, product design, none of those are his skill sets in the same way that you recognize that LeBron James isn’t the same player on every team, Tim Cook isn’t the same player on every team. So I would say the 2022 mission accomplished for Tim Cook, well done, here’s a billion-dollar package. Somebody else needs to come on board with a different skill set. That’s what Apple needs right now.

Anirudh Suri: Yeah, yeah. Patrick, let’s move to what I call the briefing segment, in which we’ll do a little bit of a rapid fire.

Patrick McGee: Oh god, this is my weakness. We talked about the weaknesses of Tim Cook. My weakness is rapid fire sessions.

Anirudh Suri: Well, you’ve talked enough about your strengths. Now I’m a slow Canadian. I don’t know, I got nothing. Go ahead. So, so a few rapid fire questions, right? Let me know, you can raise your hand if it’s getting too difficult. Okay, so some of them are going to be briefing segment questions targeted for political leaders and some for CEOs.

Patrick McGee: Like, like, set your expectations so low, but go for it. Now you’re going to have fun with this.

Anirudh Suri: If you were sitting across from President Trump today, he calls you in, he’s like, “Patrick, you’ve written a great book on Apple and China. What would you advise me to do differently from what I’m doing?”

Patrick McGee: It’s a totally fair question. And to some extent, the answer is dependent on how much is how much am I dealing with a real Trump versus some hypothetical version, because, you know, frankly, handing him a gold bar is something that like personally I’m aghast by, but it was probably the right thing to do in a certain sense, right? I didn’t like that CNBC called it a political master stroke because it’s like, are we really telling young people, let’s say, to look up to this as a leadership model? Like, again, this is the mafioso stuff.

Anirudh Suri: And then you wear a suit, Patrick. You’ll have to wear a suit as well.

Patrick McGee: The main honestly, the main thing I would say is if you treat politics as sort of like, think of like the way, you know, there’s a bullseye policy and then there’s like the outer layers and each one is a win in its own right. Now, maybe the thing you want is the full bullseye, but you have to recognize that other things have points. And what Trump wants is the iPhone to be made in Pittsburgh, right, in America, something like that. I would say, look, it’s not going to happen, and we can talk about why for an hour if you need to, but there’s at least 20 reasons why that’s never going to happen. So instead of going for like the full enchilada, the full bullseye, let’s think of the outlying things. So if iPhone production largely, you know, not just assembly, but really does move to India, maybe that’s not a win for Pittsburgh, but that is a win in so far as we’re lessening our dependence on China. So take that as a win rather than thinking that you need to do everything.

I think there’s far too much cajoling and pressure on Tim Cook to move things really to America when just lessening our dependence on China is a good enough win. Now, Tim Cook, well, look, I think Tim Cook’s contributions to Apple have been massive, but there was this blind spot, and the book is about the geopolitical blind spot. And I still think of Tim Cook as a competent incarnate. I still think he has great skill sets and knowledge, but I don’t think Apple should any longer be his focal point. I would frankly—my sort of dream press release to wake up Tim and tell him—you should resign now. Tim Cook, if look, if Tim Cook said, “I’ve resigned from Apple, and I’m going to work for the White House and I’m going to try to improve bureaucratic efficiency across like the Washington ecosystem,” that would be amazing, right? I mean, you have to recognize his skill sets, his competence in terms of what he’s able to do and what he’s able to get out of people. I just think he’s sort of run its course as to what he’s accomplished for Apple.

And if you recognize the deficiencies of the approach and how it’s up, he owes it to us to do the same thing for the re-industrialization of America and to help with America.

Anirudh Suri: So now you’re sitting with the Indian Prime Minister.

Patrick McGee: Oh, well, again, I think we sort of already touched on this, but look, I mean, do whatever is feasible, however difficult it might be politically, to attract not just Apple, but foreign capital into the country.

Anirudh Suri: I mean, I think many things I should do, Patrick. One is you mentioned, I think, let me extrapolate from our earlier conversation, drive competition between different states. Yeah. For that, build overall infrastructure. I think that was another point you made. Any others you had for…

Patrick McGee: Well, and look, I don’t want to overstate my sort of competencies as an Indian consultant or something, but I mean, I think I think Modi of all people actually really gets that government often gets in the way. Right? I mean, I’ve got sort of enough people that are close to Modi that I’ve spoken to who talk about his disappointment with how much the government can sort of intervene in ways that are unhelpful. And so I guess I would just encourage that template that, you know, sort of do whatever you can to sort of drive an agenda of abundance, to sort of quote Ezra Klein and Derek Thompson, where I think everybody who’s exposed to China wants to adopt the “China Plus One” strategy. And if India can just make itself the natural home for everybody pursuing that strategy, I think there’ll basically just be endless opportunities. Everybody would like to be building in India if India can just demonstrate the capabilities and competence to follow through with it. So whatever is needed, do it.

Anirudh Suri: The last, let’s say, political leader you’re sitting with now, Patrick, is Xi Jinping. What do you advise him now in 2025?

Patrick McGee: I mean, let’s for starters, I wouldn’t take that meeting. I mean, maybe that’s the best answer. That I’m not going to advise Xi Jinping.

Anirudh Suri: Put the photo frame you have in the back, put that in front of you and pretend you’re talking to Xi Jinping.

Patrick McGee: I look, I love the question, but I’ve never thought of this. I’ve never had the hypothetical what would I tell Xi Jinping. The trouble talking about it is that I don’t, you know, want to support his goals. So I mean, I’d probably just go back to the sort of basic economic stuff of, you know, the sort of standard economist…

Anirudh Suri: Your suggestion is back off? Your suggestion is back off?

Patrick McGee: Oh, no, no, back off, but that China is over-reliant on exports, frankly, and construction, and needs to pursue a consumer-oriented economy, to stop people from saving so much and instead invest in building up products and so forth. You know, look, I really don’t think China and the US have to be at odds. There’s not any reason why they can’t go back to the sort of the 2010 era. And the way that we’re going, it just seems like, you know, a war over Taiwan is likely, and nobody wins that war, right? Everybody loses if that war is ever actualized. And so I, I just think we should be doing everything we can to avoid that. And so if there can just be a rebalancing of the Chinese economy, I think that could be win-win.

Anirudh Suri: And this is really now a long question, but I’ve put it into the rapid fire segment for us just to make it slightly more difficult for you, Patrick, but you can take your time with it. Now you’re sitting with, let’s say, the tech, the CEO of a large tech firm, right? Not Apple, let’s say not Nvidia, but other tech firms, given the geopolitical churn, right? Like we’ve discussed a lot now, geopolitics has become such an important navigating ability to navigate the geopolitics of today has become so much more important than let’s say it was in 1998 or 2000, right? What are the three, four things that you would tell a CEO of a large tech firm today about how to navigate the geopolitics of both the US-China competition, but also just the overall geopolitical churn we are seeing?

Patrick McGee: Look, it’s a good question, but I, I don’t know that I have such a good answer. I think it’s sort of repeating themes that we’ve already talked about. So if I’m talking to a company that’s sort of the next Apple, you know, look, I would say look, to be a competitor, realistically, is to have a certain number of operations in China. I mean, that’s just where the best consumer electronics are being made today, you know, largely as a consequence of Apple’s investments there. But it’s going to be really difficult to avoid China if you’re not having things like circuit boards and, I mean, just so many things, like anything you can think of in electronics production, if that’s not being done in China, you’re going to be losing out, frankly. You’ll never get to the stage where you have a successful product. But I would just say, don’t over rely on that. I think there needs to be a Plan B from the get-go. Plan B has to be just as important, if not more important than Plan A. And whatever you’re building in China, you should be finding ways to replicate those operations or support those operations someplace else so that the country doesn’t have the leverage over you and that you could always ramp up Plan B at expense of Plan A.

The other thing is just that we need to be thinking really long term about this and if I’m going back to the conversation in my mind of course with Donald Trump it would be that like US presidents are always going to be focused on like the next two years right before the midterm certainly before the end of their presidency et cetera, but what has allowed China to accelerate so much is these long-term plans that take decades to play out and our political systems just aren’t so good at thinking in that vein but they need to be and so more bipartisan support for plans that will continue to exist beyond your presidency rather than just being scrapped up by virtue of executive order of your opponent four years later that would strike me as something that really needs to be to be done.

Anirudh Suri: What’s the best way in which you feel that the CEOs of large companies today, whether tech or otherwise, can build out that geopolitical muscle almost, right? That they didn’t need earlier necessarily, but today they need. And this is a more general question, not China specific. How do you think they can actually start to build that geopolitical muscle?

Patrick McGee: That’s a good question. Look, I’m just someone’s going to have a better answer than me. You know, the first thing that I think of, which is perhaps a good thought and perhaps naive, and I’ll forget it by tomorrow, is just about having someone that is dealing with those issues at the highest levels of the company. In other words, you know, we’ve seen new C-suite members in the last few years.

Anirudh Suri: Political officer, correct? Yeah.

Patrick McGee: Yeah. I mean, I’m just wondering, should that be at the highest levels? Should there be what would that be? A CGO, sorry? Yeah. I mean, yeah, maybe that’s what’s relevant. But again, I don’t know if that’s a good thought, but that’s something to ponder. So instead of putting me on the spot and then, and then, you know, me even let alone listeners sort of criticizing my first answer, let me just say that’s a very good thing to be thinking about and I don’t know what the answer is, but you’ll have me thinking probably for the the four-hour flight I have today about what could companies do to get up to speed.

Anirudh Suri: I suppose the simple answer could be you could read Apple in China.

Patrick McGee: That’s right. I like that answer. I like that answer. Buy a copy for everyone at your company, you know, that kind of thing. That’s that’s that’s right. That’s right. We recommend that for country companies in China as well and the US.

Anirudh Suri: We haven’t spoken about too many other countries other than of course China, Taiwan, US today. But if not India, which third country do you think Apple shifts its supply chains to?

Patrick McGee: Well, if we’re talking about America, then Mexico, right? And I, and I’m saying that because I wouldn’t—that’s not what I would say to a German company—but Mexico’s on the border, and one thing I would point out is that, you know, in political discourse in the US, if a factory closes, let’s say, but the company hasn’t gone under, they’re going to move their production. Nobody cares where the production is going to go. They just care that it’s leaving Ohio or something. But it does matter where it goes. If it goes to Mexico, then on average the intermediary goods trade that takes place is something like 20% of the product. If it goes to China, it’s something like 5%. In other words, the more investment there is in Mexico, the more it’s actually good for manufacturing partners in America because things travel back and forth, right? The aerospace sector outside of, you know, Los Angeles or San Diego can trade well with the maquiladoras in northern Mexico.

You know, and if I’m to have a full-on political fantasy about this, it would be that if we went back 25 years and China did not enter the World Trade Organization, but the likes of Apple who were manufacturing in Mexico at the time made the sort of investments that they did in Mexico, I don’t think you would have people fleeing from Honduras to get to America because there might be so much investment and productivity in Mexican factories. Because if they are playing the role that China played, then that would be the place that you would go to as a low-skilled laborer. You already speak the language, et cetera. And so one sort of thinks maybe there wouldn’t be a Trump presidency in all this rhetoric about building the wall because the more that Mexico thrives, the less people would want to be fleeing the country for better opportunities in America. So you just have to remember Mexico is our neighbor. The better that they do, I think the better it is for America. So investments in Mexico make just all kinds of geopolitical sense and how do we get companies to do that is a worthy problem to solve.

Anirudh Suri: Yeah. No, this has been great, Patrick. I think you did, I thought, phenomenally well in the rapid fire round. I think you were under-selling your…

Patrick McGee: What I’m bad at is like the “give me a one-word answer on Jeff Bezos” or something like that, like, you know, and I’m like, “Oh god, I have no idea.”

Anirudh Suri: Let’s do that then. Okay, no, let’s not do that. I want to say I’ve actually got a flight to catch, so I thank you so much for taking the time. This has been a lot of fun, a lot of insights, and I hope it encourages a lot of people, more people, to read your book. We end every podcast asking you for recommendations for books other than yours for listeners to pick up, so a book recommendation and a recommendation for podcast guests, oh, for your next podcast gift. So, so well, I can answer the question in one way, which is have you already interviewed Chip War author Chris Miller?

Patrick McGee: Chris. Yeah. Okay, so my book at least at the pitch stage was modeled off of the pitch for Chip War. So Chris Miller is just all kinds of helpful for that. So if people haven’t read Chip War, they absolutely should. To some extent, I think of my book as like a sequel or something like that to Chip War. And we have the same publisher, so it’s not sort of totally off base to think of it like that. The other book that I love is there’s two books by a Chilean author named Benjamin Labatut. The first one is called “When We Cease to Understand the World,” a bit of a pretentious title, but I love it. It is largely about the birth of quantum physics a century ago and it’s just a riveting read.

And he’s able to combine sort of essays with storytelling very much using the tools of a fiction writer in a way that a journalist couldn’t deploy to sort of, you know, talk about the inner monologue or thoughts of real life characters. So he’s sort of inventing something there, but it’s not out of whole cloth. The books are deeply researched. And then condensed into these small books. His second book is called “The Maniac,” and it’s largely a biography of John von Neumann, but again, just hearkening back to what I just said, the chapters are written from the perspective of von Neumann’s wife, of his mistress, of his daughter, of his colleague. And so there’s just something ridiculously creative and original going on in the works of this author. So again, When We Cease to Understand the World and The Maniac, both by, I think the pronunciation is probably something more like Benjamin Labatut. I just love those books, and I found them absolutely captivating.

Anirudh Suri: Awesome. I’ve never heard of them. I’m going to pick them up. That’s great.

Patrick McGee: Now, he’s not a geopolitical person, so he’s probably not the perfect guest for you. I have someone that would be great in two years, but they’re writing their book now, so I probably can’t mention them. I don’t know. Have you had Steven Witt on, who wrote the book on Nvidia, The Thinking Machine?

Anirudh Suri: No, I haven’t had Stephen on yet.

Patrick McGee: You know what? It’s a great book. It’s just been nominated for the long list of the Financial Times Book of the Year, which I was pleased to see. I don’t hear about it all that often, and I’m confused about that because Nvidia is now $4 trillion. You would think there’d be so many people scrambling to figure out how Nvidia works, who Jensen Huang is, et cetera, and it’s the best book on Nvidia to date. So Steven Witt. And I don’t know him or anything, but I think that’s a great recommendation.

Anirudh Suri: Any such book on the tech CEOs out of China or Asia similar to Steven that you recommend?

Patrick McGee: Oh, that’s a good question. I mean, I can, I’m looking at Influence Empire by Lulu Yilun Chen. That’s a book largely I think on Tencent, but I, I sort of was mining it for material in my research phase and realizing that it wasn’t sort of immediately relevant to what I was writing about, so it’s something I need to pick up, so I’m not sure I can recommend it. It looks good, but I haven’t, I sort of have not in detail enough. There is the House of Huawei by Eva

Anirudh Suri: Yeah, I finished that book a couple months ago. Yeah, no, I’ve gone through some parts of that book already. Yeah, I think that’s a great recommendation also.

Patrick McGee: Yeah, yeah, that would be a good one as well. Also long listed for the FT award. But yeah, no, I mean, to understand Huawei is instrumental if you want to understand China and how its businesses work and the ambitions, quite frankly, of their companies. And so that’s the first real book in English that gives you a full multi-decade history of Ren the CEO and and Huawei. She should definitely be a guest on your show.

Anirudh Suri: No, perfect. Both great recommendations, I think, both on the book books and the podcast guest. Thanks so much, Patrick. This has been a lot of fun. I’ve enjoyed it. I hope you have too, and best of luck for your next book, which soon your publisher will ask you to do so.

Patrick McGee: Oh, they’ve already asked. Yeah, I’m already in the tentative stages of a book pitch, and I won’t tell you what it’s about, and it probably won’t come to fruition. There’s all kinds of reasons why it wouldn’t, but it has nothing to do with Apple and it has nothing to do with China.

Anirudh Suri: With China. Okay, good. But no, thank you so much and hope we stay in touch.

Patrick McGee: All right, thanks so much. I really appreciate it.