LONG BEFORE Tim Cook became Apple’s boss, when his job was to wring costs out of the company’s supply chain, he learned of a problem with a supplier in China. “This is really bad,” he told his staff. “Someone should be in China driving this.” Thirty minutes later he saw one of his executives sitting at a table. “Why are you still here?” he asked quietly. The executive stood up, drove directly to San Francisco’s airport and bought a ticket to China.
Mr Cook’s bet on China extended beyond its factories to its consumers. Sales to the region have risen from next-to-nothing in 2010 to $52bn last year, or almost a fifth of Apple’s revenues. Since Donald Trump’s election in 2016, “Tim Apple” (as America’s president once called him) has jetted to Washington and Beijing to try to ease rising trade tensions between the two superpowers. Horace Dediu, a technology analyst, says Mr Cook “knows how to navigate the political mind”.
Mr Cook’s lobbying has helped Apple avoid direct hits from Mr Trump’s tariffs, already imposed on $250bn-worth of Chinese imports. But its shares have fallen by almost 12% in the past month. On June 1st, after The Economist went to press, China was expected to retaliate with tariffs on $60bn of American goods, including components for Apple devices.
Whereas Huawei claims to have a Plan B to survive its blacklisting by America, and Samsung, a rival smartphone-maker from South Korea, is shifting supply chains from China, Apple appears to have no clear alternative to assembly in China. Few other places possess the expertise to produce the high-end components that Apple needs. The existing network would take years to unscramble.
One fix would be for Apple to develop another indispensable product that no self-respecting affluent Chinese consumer could do without. For all his success, Mr Cook has not yet managed this. Another would be to develop services that do not need production in China. Apple’s much-trailed announcement in March of new video-streaming, payments and other services shows it is trying. They may prove a hit, but would be no substitute for the iPhone. Mr Cook must be hoping that he has not miscalculated the risks to the supply chains he has so intricately engineered.
All this effort.