Article by Peter Alexander from linkedin article:
"Not only is Apple unable to quit China, the company has found itself hogtied to the Mainland. For all the talk of diversifying production through an aggressive investment campaign into India, it is now clear that doing so in any meaningful way is proving problematic. It is the irony of all ironies too. You see, it was Tim Cook himself who is responsible for the concentration of Apple’s production in China in the first place back in the early 2000s.
What goes mostly unrecalled is that Mr. Cook – while in the role of Chief Operating Officer – architected Apple’s near complete offshoring of manufacturing into China. Blame massive demand for the iPod as being the catalyst. A fast, reliable and cheap option to was needed and Mr. Cook decided that China was the perfect match. So successful was the ability to execute production at scale that Apple then double and tripled down on China. The results were unquestionable. Sales surged, margins exploded and Apple became the first company to reach a market cap of $1tr.
Then came 2016, the Donald Trump presidency and the dawning recognition that China may actually be a manufacturer’s Achilles’ heel. More daunting though was the fact that no other geography or region, be that India or elsewhere, had the necessary infrastructure in place to efficiently support, at scale, the likes of Apple.
What do we then see? Well, Mr. Cook is once again back in China meeting with senior Chinese officials. I’ve lost count at how many times he has traveled to China this year. Easily more than any other CEO. Mr. Cook is patient zero of the Faustian Bargain now with golden handcuffs (to mix multiple metaphors).
What Mr. Cook faces today may be the most extreme corporate example, but Apple isn’t anywhere near the only example. There are countless other global companies facing the very same issue (and fate). Even after four frantic years, not a single replacement for China has been identified. The sheer efficiency offered, mainly delivered via the distribution network of roads, rails and ports is unparalleled.
All of what’s shared above needs to be far better contextualized among those American leaders now drafting trade policy. 30-plus years of globalization in which China amassed a critical position in manufacturing cannot be undone overnight. It may not be what Trump signed up for, but based on the present-day realities of global trade, the only option – as I see it rather clearly – will be a negotiating table and a “Grand Bargain”.
The full Bloomberg article is linked below:
Apple’s Cook Joins CEO Summit With Chinese Premier on Trade
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Linkedin article:
