The People's Republic of iPhone

New Statesman​

2 days ago

Photo by In Pictures Ltd./Corbis via Getty Images
On Friday 23 May, Donald Trump threatened to impose a 25 per cent tariff on what is arguably the world's most successful consumer product, the iPhone. This would be a historic tax hike on American consumers, because Apple currently sells around 70 million iPhones in the US for about $1,000 each; the US government would ask for $17.5bn in additional taxes on a single product line from a single company. But what Trump wants is actually more extreme: he believes that in order to escape his punitive tariff, Apple might bring production of the iPhone back to America.
There are two reasons that this is wishful thinking. The first is that the iPhone is the apex product of globalisation. It would be impossible to make something as complex as a smartphone with the resources of a single country. Apple's supplier list runs to 27 pages of companies, many of which are themselves multinationals with long lists of their own subsidiaries. It is not the product of one country – more like 50. It will never be the case that the iPhone can be described as a purely American product. As Patrick McGee explains in Apple in China, in light of the company's long history of contract manufacturing, the vast sums it has invested in China, the knowledge and skills it has imparted to Chinese workers and the Chinese factories it has developed, it makes more sense to describe it as Chinese.
Trump's discomfort with Americans using Chinese phones is not without foundation. What Apple has achieved in China is a spectacular example of industrial strategy. Apple's investment in China for a single year, 2015, was $55bn – greater than the combined research and development spending of every business in the UK. Around the same time, Apple's engineers were working in 1,600 Chinese factories. 'We were unwittingly tooling them up,' a former Apple executive told McGee, 'with… incredible know-how and experience.'
It is unclear how other countries can loosen China's grip on technological manufacturing; an American iPhone would cost more than three times the price of current models, according to one analyst. But this is a power that China has been helped to acquire by the Western capitalists who rushed to exploit its people for cheap labour, and who never stopped to consider the long-term implications. A former Apple vice-president told McGee: 'We weren't thinking about geopolitics at all.' For all the Silicon Valley rhetoric about changing the world, Apple does not appear to have understood how successfully it was doing just that.
We're reminded to question the information we see on our screens, but the screen itself is also an illusion. The devices of digital modernity are made, we are told, by companies that are American, German, Japanese and Korean. The brightest minds compete in an unending race to make the displays ever more crisp, the computers ever more intelligent. We choose between phones and laptops made by Google, Microsoft, Apple or Amazon, televisions made by Philips or Samsung, games consoles made by Sony or Nintendo. But there is only really one company. It makes products for all of these companies, and hundreds of other businesses around the world. It is called Hon Hai Precision Industry.
Hon Hai began in 1974, in a shed in a suburb of Taipei called Tucheng ('dirt city', in Mandarin), in which ten people moulded knobs and dials for televisions from molten plastic. Their boss was Terry Gou, the 24-year-old son of a police officer, and recently released from national service. As personal computers began to proliferate, Gou moved to making components, mostly sockets and connectors; the trading name for the company, Foxconn, refers to connectors. The 'fox' part is simply an animal Gou admires. He also admires Ghengis Khan, and wears a bracelet from a temple dedicated to the Mongol emperor.
Gou was instrumental in Apple's return from the brink of defeat. In 1997, Steve Jobs and Jony Ive had created the iMac, which offered to replaced the complicated and boring world of personal computing with an aspirational consumer product that connected easily to the internet. Apple quickly realised why everyone else made beige boxes – making anything else was expensive and difficult – but the company's designers and executives had an additional problem, which was that if they didn't do exactly what Steve Jobs told them to do, he would scream at them and then sack them. Every engineer who doubted the design eventually left and the 'unmanufacturable' iMac was finally manufactured by the Korean company LG. When Apple's exacting demands became too much for LG, it began looking for another company to build its products, and in Taiwan it found Terry Gou.
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In Gou's factory at the end of the 1990s, the roof was made from corrugated metal and the air conditioning was reserved for equipment, not people. Around the building, banners reminded workers of the wisdom of 'Uncle Terry', which included such aphorisms as 'work hard on the job today or work hard to find a job tomorrow' and 'hungry people have especially clear minds'. Gou, more than anyone else, took advantage of the opportunities offered by the special economic zone that had been established around Shenzhen, in Guangdong province on the east coast of mainland China, in 1980. At the time the zone was created, Shenzhen was a town of around 70,000 people; by 2020, it had a population of 17.5 million. This accelerated growth was the result of the 'Guangdong model', in which local government and private businesses (often led by Taiwanese entrepreneurs such as Gou) collaborated to produce growth. Gou's factory was subsidised and outfitted by the state; the advanced machines on which he began making Apple's designs had been paid for by the Chinese Communist Party.
China also provided its people, in vast numbers. Among the sources that McGee has obtained for Apple in China are documents showing that when Apple needed to increase production – in the weeks before a new iPhone went on sale, for example – the Chinese state would be able to secure an additional 800,000 workers for its production lines. This would be done by government-backed companies, which would send buses into rural areas to draw workers from China's 'floating population' of internal migrants. These migrant workers numbered in the hundreds of millions, a larger workforce than that of the European Union.
Apple was an exceptionally demanding client, led first by Steve Jobs and then, after his death, by his trusted lieutenant, Tim Cook, whose forensic eye for detail was even more exacting than his predecessor's temper. On his first day as CEO, Cook presided over an operations meeting that lasted for nearly 13 hours. But this was also what China needed: a company that would push its factories to ever greater standards and quantities of production. Jobs, Cook and Gou helped to make China the global factory. By 2010, the executives of Silicon Valley joked that within 20 years, there would be two companies left. Wal-Mart would be the only shop, and everything it sold would be made by Foxconn.
As the Guangdong Model brought economic growth to China, Apple discovered that the country was also becoming its most important new market. Despite the role the company had played in China's industrial development, access to this market still came at a price. In 2016, Cook and two of his top executives visited the headquarters of the Chinese Communist Party, where they promised to invest $275bn in the country over the following five years. McGee points out that this sum is more than twice the amount (in real terms) that America had invested through the Marshall Plan in rebuilding Europe after the Second World War.
The effects of this investment can be seen on government buildings around the UK. The technology transfer enabled by Apple and others enabled the rise of a new generation of native Chinese companies, such as Huawei. China ceased to be a taker of foreign technology and began pushing its own technology into other states, including Britain. Huawei equipment was installed in the UK's mobile networks, and cameras made by companies such as Hikvision (of which the Chinese state is the largest shareholder, and which human rights organisations have alleged supplies equipment used in the mass surveillance of Uyghur people) appeared at sensitive sites in the UK. Some were worn by our own police officers. Attempts have been made to ban Chinese technology from our infrastructure, but it will be years before it is removed, if it ever is.
The trade policy of the Trump administration is an erratic series of pronouncements made via social media, which are almost always delayed and abandoned. And if Trump does persist in battling Apple, he will be abruptly reminded that trillions of dollars of American savings are invested in the company. Xi Jinping has no such concerns. Apple must appease him or lose access to the world's largest group of consumers. As the trade war between America and China grows, then, it must be asked if the world's most influential technology company can avoid picking a side – and to what extent it already has.
Apple in China: The Capture of the World's Greatest Company
Patrick McGee
Simon & Schuster, 448pp, £25
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[See also: The lost futures of Stereolab]
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This article appears in the 04 Jun 2025 issue of the New Statesman, The Housing Trap