How China Tricked Apple

ABOUT JOHN COOGAN:

I've been an entrepreneur for the last decade across multiple companies. I've done a lot of work in Silicon Valley, so that's mostly what I talk about. I've raised over 10 rounds of venture capital totaling over $100m in funding.

I work mostly in tech-enabled consumer packaged goods, meaning I use software to make the best products possible

CONTACT:

Disclaimer: This video is purely my opinion and should not be regarded as a primary source. I am not a financial advisor and this is not a recommendation to buy or sell securities. Always do your own due diligence.

[JohnCooganPlus]

Please ignore all the bots in the comments! I'll never ask you to message me.

[k.h.p.]

At the end of the day, it's all about profit for Apple. China might not be innocent, but Apple isn't exactly naive about any of this. They chose of their free will to engage with China. Apple wasn't tricked at all. All about $$$ (profits).

[xianfan]

In this story, a wealthy landlord gives a meager fee to a starving guy on the street to do the job. The starving guy hired many poor kids with even less money to do the job. The wealthy landlord cannot care less about how the starving guy treats the poor kids. You are telling me the starving guy tricked the wealthy landlord and is THE evil role.

[MMLL]

My family been in the manufacturing industry for decades, and I do not agree how the Chinese initiated the "Quality Fade" scam. Before 2010, most Chinese manufacturers do not pro-actively provide solutions for their clients, manufacturers merely producing whatever they've been told, no more and no less. The Quality Fade strategy was employed, not so much from the Europeans but mostly US companies, cutting corners down right to second digits of the decimal point. Oh yes, especially the big brands with excellent reputations, they know their loyal customers would believe in them and the brand could get away from negative PR and CS by pushing all the blames to Chinese manufacturers.

[thaisiggi]

Foxxconn is a Company from Taiwan producing iPhones in China Shenzhen

[rgarcia]

This "quality fade" was used in US from way back and we still recognize it as, for example, candy bars shrink in size, drinks shrink, air in the packaging increases, air in the recipe increases, etcetera. All while the price increases. Just remember how much profit plays in inflation. In some studies increased added profit being 54% of the increased prices.

[austincodes]

Just because your company is in a hard place doesn't make it less evil. They care about money more than human rights. The morality fade has been extremely obvious for a while now.

[GlobalMan-nrhq]

Nice content. A few noteworthy points to add: Apple went into China eyes wide open. It wasn't really "tricked" by China. The allure of lower labor costs from low skill to high skilled blue collar workers, lower supply costs, dexterous and hardworking workers, good infrastructure, proximity to huge China and in general, Asian market were and are still the main drivers. Interestingly, a few things have changed the aforementioned factors. For one, the cost of labor has risen in China though its still far lower than US or EU standards. Another is the competition from local Phone makers - the quality and functionality of the top smart Phones are roughly equal to the IPhone already and at a lower cost. The thing that still sets apart IPhone from the local brands for the local users in China is the attachment of "luxury" to the IPhone and all things Western.

The real playbook from China is to attract foreign companies over either joint venture or, in Tesla's case. a fully owned foreign venture. The locals learn the manufacturing processes, production methods, quality control, supply chain management and a bunch of other "soft" knowledge. This knowledge is transferable - in other words the "osmosis" method helps bring up the entire capabilities of the region. This is a natural phenomenon and the consequence when companies moved to lower cost areas. We shouldn't attach anything really nefarious here to the host country . The wake up call is the awareness that globalization has the unintended consequence of the hollowing out of an industry and its supply chain ecosystem at home. We need to also understand that it is a foolish assumption that blue collar workers will suddenly move up the skill chain to become e.g. Software, Electrical, BioTech Engineers. They dont - many end up flipping burgers and other low end service jobs if that at all.

[timsuniverse]

Apple hires Foxconn to build Apple products. Foxconn is a Taiwanese company. Foxconn and Pegatron are Taiwanese companies. Foxconn doesn't build Apple products in Taiwan. Foxconn chose to build Apple products on the mainland
to be able to meet the volume production demands. Now Apple is asking Foxconn to transfer some of the production to india and vietnam.

[Ink]

The title of this content should be ‘how apple took advantage of China’. China’s capacity made Steve Jobs dream a reality.

[paulhirst]

I have just been laid off from a manufacturing job in the uk. Zero hours contract one days notice. I was personally bottling around 1000 bottles of high end supplements a day over 8 hours not 12. They sell for £40 per bottle.Even so I'm facked. Nothing to pay the bills that have doubled. China is not so bad.

[suezbell]

My sympathy is only for consumers -- not the businesses who keep raising their prices to keep their management compensation and shareholder profits rising with literally no regard to the stagnation of wages for much of the US labor force. Corporations and their owners and leaders -- infected with boundless greed -- wanted cheaper foreign labor and denied US workers fair wages in pursuit of their own profit. This has been going on since before I became aware of it as I was about to graduate from HS in '69.

[dewiz]

A bit of rewriting of history. The iPhone plastic screen was NEVER going to be. According to Walter Isaacson’s Steve Jobs biography, the vision for the iPhone didn’t happen until Jobs visited the Corning factory and became aware of. Gorilla Glass. Similarly, when Obama asked Jobs why Apple didn’t manufacture in USA, Jobs stated “we don’s have the 5000 engineers that we need”.

[pepitocoronejo]

I like the term "quality fade!" Noticed this phenomenon long before China prominence while growing up in my country. Filipinos had/have very high tolerance for shoddy products that quality fade was the norm in the 70's and 80's.

[edwinvargas]

If anything, this shows how much humanity could accomplish if we all worked together.

[TheStevelargent]

Apple is a joke. I worked at an Apple facility in the early 80s. Most of the people in that plant were temp workers. Only a few were real employees. That is where the "joke" started. I will never own an Apple product.

[KingsleyOkeze]

You have an interesting way of telling this stories John. Thanks alot!

[kthwkr]

The company I worked for had most of it's customers as the big car manufacturers. And they wanted to get into the Chinese market. China required for them to build a large portion of the car in China or else they couldn't sell there. So we were required to open a manufacturing plant in China to satisfy the car manufacturers obligations.

[theobserver]

They’re dug in too deep. Thanks for the comprehensive explanation.

[mydogsbutler]

The reason why China has become the manufacturing capital of the world is because they can produce most things cheaper and faster than anyone else. This is because despite the nomenclature "communist' party of China... China isn't actually communist any more. Long gone are the days of Mao's state control of all industry. China today is a mixed economy like the west. It's main difference is China has an authoritarian single party system.

However that's not the real reason why some in the US are hostile towards China. The US does business with plenty of far more totaltarian states than China (See Saudi Arabia). The real reason is nationalism. American nationalists feels threatened by the rise of the Chinese economy. For the first time in living memory the US economy is on the brink of being second in the world. China has already passed America in real world PPP GDP. And in a few years China will pass the US in nominal GDP.

IMO the Americans that try to harm the Chinese economy rather than work together to iron out differences are harming America's national interests. China is not Cuba. At this juncture China's economy is so big they can withstand any economic or military card the US can throw at it. They'll even eventually build a native world class semiconductor industry from scratch. In a few decades the Chinese economy, with 1.4 billion people, will be twice and maybe eventually three times the size of the US. At that juncture China will have a larger military, better medicine, and more advanced technology than any country in the world. it will be the dominating superpower supplanting the US.

Poisoning relations for the sake of nationalism would lead to lower quality of life in the US. It would be like Canada one day destroying relations with the US for the sake of Canadian nationalism. It would harm Canadian interests more than American..