Technology

The Chinese government once ‘moved’ a mountain to serve Apple


While surveying the site, Apple’s manufacturing partner pointed to a small mountain in the distance, saying that the factory would be built there. The Chinese government has “moved” that mountain to serve Apple.

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Since establishing its first production line in China in the early 2000s, Apple has expanded its production scale, making the country a global hub for the company’s equipment supply.

However, expert Doug Guthrie said that too much dependence could make it difficult for Apple to respond to requests from the Chinese government.

Guthrie is one of the leading experts on establishing business relationships with China. In 2014, Guthrie joined Apple to advise the company’s operations in China.

Sensing that Western companies will struggle in China under Xi Jinping, Guthrie thinks Apple could be one of the biggest targets. Most Apple products are assembled in China. This country is also the second largest market for Apples globally.

“Do you understand who Xi Jinping is? Do you hear what’s going on here?” These are the questions Guthrie asked during a meeting with Apple executives. He carefully explained the risks that Apple can face when it is still dependent on the Chinese supply chain.

Apple makes concessions to China

In fact, many American companies such as Apple and Nike have faced difficult situations under Xi. Although doing business in China is still profitable, the requirements and policies issued are making it difficult for American businesses.

Samm Sacks, China expert at the New America Foundation, said that Western companies often find it difficult to do business in China. Challenges are always present and change over time.

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Apple’s new data center in Guiyang (China) is used to store iCloud user information in this country. Photo: Airbus.

Like many American companies, Apple is easily influenced by the policies of the Chinese government. Mid-May, the above post New York Times shows that in order to comply with China’s new cybersecurity regulations, Apple has accepted to build a data center in Guiyang to store iCloud user information in this country.

According to Apple, iCloud user data when transferred to local servers will be kept safe and controlled under strict security procedures. However, the article claims that the company has “ceded most of the control to the Chinese government”.

Responding to the press, Apple denied that it left user data to the Chinese government.

“We have never compromised the security of our users, nor their data, in China or elsewhere,” an Apple spokesperson said, adding that Mr. policy making at Apple. He left Apple in 2019.

Potential and dependence on China

As a sophomore, majoring in Economics studying Mandarin at the University of Chicago, Guthrie paused her studies, borrowed money from her family, and moved to Taiwan. Here, he participates in cycling with the club every morning, learns Mandarin and then teaches English in the afternoon.

After earning a doctorate at the University of California, Guthrie joined New York University in 1997. Thanks to her research on China’s economic potential, Guthrie was approached by many companies for advice.

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Apple expanded its production line in China with the iPod factory, its best-selling product line in the early 2000s. Photo: Getty Images.

At that time, China was shifting from a country that produced toys and tennis shoes to cars and computers. The government often requires foreign companies to share technology in exchange for access to workers and customers.

To prevent that, Guthrie and other experts have pushed for China’s admission to the World Trade Organization (WTO). In 2001, China became a member of the organization.

That same year, Apple opened a production line in China. Although operating on a small scale, Apple leaders quickly realized the potential in this country.

In 2004, Apple expanded its production line in China with the production of the iPod, its best-selling product at the time. While surveying the site, the leader of Apple’s manufacturing partner pointed to a small mountain in the distance, saying that the factory would be built there. Apple executives were somewhat confused, but the factory needed to be built and up and running in six months.

Less than a year later, Apple executives returned to China. The factory is working and the mountain disappears. The Chinese government has “moved” that mountain to serve Apple.

Over the years, China has spent billions of dollars setting up Apple’s supply chains, helping with the hiring of workers and building factories. Currently, the majority of Apple’s iPhones, iPads, and Mac computers are assembled in China.

After leaving the George Washington University Business School in 2014, Guthrie worked for Apple, consulting on the company’s operations in China. Guthrie’s first research project involved supply chains.

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Apple CEO Tim Cook shakes hands with Chinese President Xi Jinping. Photo: AP.

At the beginning of the job, Guthrie said that Apple leaders realized that they were too dependent on China and wanted to diversify the supply chain. India and Vietnam are the two countries considered, but Guthrie thinks that is not a suitable alternative.

Although the Vietnamese government is open to cooperation, Guthrie realizes that the number of workers here is not enough. Meanwhile, India is densely populated, but factors related to the government apparatus make the construction of infrastructure and factories complicated.

Many production lines, which are Apple’s partners, have been opened in Vietnam and India in recent years. However, CEO Tim Cook has publicly stated that their supply chain will still be concentrated in China.

For Guthrie, this stance puts Apple in danger, especially when the Chinese government repeatedly puts pressure on American businesses. In 2014, the country introduced a policy to limit the proportion of temporary workers in the workforce of a factory to 10%. From day one, Apple and its suppliers violated the regulation.

Guthrie said Apple executives were worried and confused. They knew the company could not comply with the temporary labor needed to keep up with times of increased procurement demand.

“You’re supposed to be out of compliance. They don’t do it to shut down your factory, but to let you figure out what they want and then find a solution,” Guthrie said.

Warning come true

Guthrie thoroughly explained Apple’s risk of concentrating too many production lines in China. That dependence leaves the company with very little leverage.

In fact, Apple has been “grabbing” with many requests from the Chinese government. At one point, they wanted Apple to provide the iPhone’s secure source code, meaning to create a “backdoor” that would allow authorities to bypass the security layer.

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China provides a big business market for Apple, but its over-reliance on the country has created a dilemma for Apple. Photo: Reuters.

An official revealed that Apple had denied the request, and explained to the Chinese government that it did not need user data.

Apple also has to pay attention to its ranking in China’s annual list of socially responsible companies. In 2017, the company shared a report on its contributions in China. Apple executives were delighted when the report was praised by the Chinese government.

Apple’s social responsibility score in China is steadily increasing. From 2016 to 2020, Apple’s ranking jumped from 141 to 30 out of the total number of businesses operating in the country of billions of people.

However, Apple has not always been successful in denying requests from the Chinese government. For example, Tim Cook has agreed to store user data on a server operated by the Chinese authorities. In addition, the hardware device called the “key” to decrypt iCloud data is also located in China, not the US.

Guthrie’s warning was correct. China provides a big business market for Apple, but its over-reliance on the country has created a dilemma for Apple.

According to the Zing/New York Times

Apple is no longer different when it comes to China

Apple has had to make many concessions on data storage in China. That makes the company no longer different from other Chinese tech giants.

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