‘China has Apple by the balls': How the rising superpower captured the tech giant

Sydney Morning Herald

13-06-2025

This story is part of the June 14 edition of Good Weekend. See all 14 stories.
Investigative journalist Patrick McGee describes it as the biggest untold story of technology in the 21st century: how, over decades of jaw-dropping investment in China, Apple became one of the world's biggest companies – but in the process helped China become a technology and manufacturing superpower. That power is now being used to challenge the West.
You've said that Apple wouldn't be Apple today without China. And China wouldn't be China without Apple. How so?
By 2015, Apple was investing $55 billion a year into China, and a lot of that was in training people to assemble iPhones, iMacs and other Apple products – by [Apple CEO] Tim Cook's public estimate, 3 million people were trained. Apple sent planeloads of its best engineers – from MIT, Caltech and Stanford – to train the Chinese on how to produce their products. Overall, it has trained 28 million people in its supply chain since 2008. That's bigger than the labour force of California or the population of Australia. It has had more impact on China than the Marshall Plan on Europe after World War II.
In 1999, none of Apple's products was made in mainland China; by 2009, virtually all were, and company profits shot into the stratosphere as a result. Apple was on the brink of bankruptcy in 1996 but within a decade became the richest company on Earth, thanks to sales of its iPhone and iPad. What did China offer that no other country could?
China has policies and a population base tailor-made for the electronics industry. They created bonded zones [places offering generous tax breaks and streamlined customs procedures to attract foreign investment] in cities like Shenzhen. Back in the 1980s, Shenzhen was a series of fishing villages. Today, it's a city of 18 million people. We in the West don't understand how easy it is to build a factory in an area like Shenzhen. The government provides you with the labour from the western part of the country, where literally millions are leaving backbreaking agricultural jobs to work 12-hour shifts in factories. Businesses get free land and cutting-edge machinery. Local cadres in the political system are incentivised to build factories and get growth from their region. The bureaucracy is shaped to be more like a venture capitalist. China has invented a new form of capitalism, where instead of having dynamism in the private sector, it's on the public side.
'Apple provided China with the Ivy League equivalent of a hardware engineering education.'
You write that Apple essentially cracked the code on how to manufacture the world's best products without doing it itself.
In the early 2000s, Apple was figuring out how to manufacture their products in China without owning any of the factories. It was about orchestrating the production of the products rather than building them themselves. But the orchestration they've done is just phenomenally obsessive. This isn't normal outsourcing. They're not just saying, 'Here's a blueprint of what we need; let us know when it's ready.' They're inventing the processes, the components.
So by bringing all its technological expertise and sophisticated production methods to China, Apple taught the Chinese how to develop high-level manufacturing …
Indeed. Jony Ive [instrumental in the design of the iPhone, iPad, iMac and Apple Watch] came up with some spectacular-looking products. But the only way those designs came into large-scale reality was that China was investing massively in supply chains, in infrastructure and in ports. And as one engineer told me, Apple provided China with the Ivy League equivalent of a hardware engineering education. Because Apple is epic, the technology transfer is also epic.
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US Vice President J.D. Vance has very patronisingly reduced the Chinese competitive advantage to its having 'millions of peasants' available to work in factories. But its economy has moved far beyond just low-cost labour producing cheaper products, hasn't it?
Yes and no. China has robotics and automation on a scale we [the United States] completely lack. But hundreds of millions of people still live in impoverishment, and go to cities like Shenzhen and Guangzhou to work in factories. China has the capacity to move an entire Western city's worth of people, say, up to 500,000, who are willing to relocate for a few months at a time to assemble iPhones and then go someplace else. We have nothing like that. Even if it could, we in the West wouldn't want that to change, because that's not what anybody really wants to do with their life.