I make no bones about my dislike of Apple and everything it stands for. To me, Apple represents the worst of American culture:
Apple had essentially cracked the code on how to manufacture the world’s best products without doing any of the manufacturing itself. It wasn’t really “outsourcing” in the normal sense—that would imply it was sending blueprints to companies capable of taking the orders and executing. Instead, Apple was routinely sending its top engineers, designers, procurement specialists, and lawyers from the United States into hundreds of factories across the country, where they’d import machinery, train armies of workers, coordinate the delivery of intermediate goods, and scrutinize suppliers to ensure compliance. Apple’s influence was enormous, but no senior executives lived in China or understood the politics, nor had Apple appointed anyone to oversee the business or manage government affairs. (kindle loc 97)
In fact, as the book discusses, despite American politicians' lamentations about how America has forgotten how to do manufacturing, it's quite clear that all throughout the book, Apple has not forgotten how to do manufacturing, and is in fact, at the cutting edge of advanced manufacturing. What it has done is to deliberately design its products and supply chain to take advantage of the resources available in China in order to scale its advanced manufacturing:
Apple wasn’t, by any stretch, the largest computer maker working in Taiwan, but its penchant for complex designs and intolerance for defects was unique and over-the-top, necessitating a form of intellectual investment shared by none of its rivals. Apple veterans from the time can’t stress enough that nobody else was embedding dozens of engineers into Taiwanese suppliers, then consistently pushing the envelope on what was possible. “Apple is single-handedly responsible for bringing quality into Southeast Asia,” says Robert Brunner, the director of the ID studio from 1990 to 1997. “If you look at the capability they brought up in that region, from a manufacturing standpoint, it’s solely on their presence and their demands on these organizations that caused them to build that competency of being able to make quality things.” For the biggest computer makers at the time, design and R&D were such secondary considerations to logistics and efficiency that Sun Microsystems CEO Scott McNealy once likened Dell to a grocery store: “They’re not in the PC business any more than Safeway is in the food manufacturing business.” (kindle loc 1083)
One of the most interesting examples is the use of end-of-line testing equipment. The book describes these pieces of equipment were originally designed for lab benches, and cost north of $100k each. Apple insisted on buying them in bulk and installing them at the end of factory lines in order to ensure quality. While you might expect that Apple expects its contract manufacturers to foot the bill for these machines, Apple went and bought them and had them flown into the factories and installed. This did a few things. First, these machines were exclusively used for Apple products. Secondly, it was a threat to its supply chain partners. If they ever stepped out of line, Apple would just pull its machines out and place them at alternate factories!
For Dell, ever focused on efficiency, China’s advantages were all about cost and scale—that is to say, they were about margin. But Apple looked at the armies of affordable, available labor and saw a different potential: unconstrained design. Or to put it differently: Western PC companies were shifting to China because of what was available; Apple shifted because of what was possible. Before the return of Jobs, Apple computers were manufactured in a fashion called poka-yoke, a Japanese term meaning “mistake-proofing.” The idea was that products should be designed for easy assembly. And a desire for more automation amplified the trend: From the sketching stage on forward, blueprints for hardware were constrained so machines could put them together without error. But what Apple was realizing was that thousands of laborers cheaply handcrafting Apple hardware on a conveyor-belt production line allowed its designs to be maddeningly intricate, complex, and automation-unfriendly. (kindle 1138)
The book is full of intricate details. For instance, it describes the initial design of the first polycarbonate iMac. What other biographies (usually written by sycophants like Walter Issacson) described as Jobs' genius in pushing his team to the limits and beyond is actually not true! The initial design by Jonathan Ives' group was essentially unmanufacturable! Despite months of Jobs' idiotic pushing, the physics just wouldn't yield. Eventually Jobs sent the design to a firm in Silicon Valley that he trusted, and they responded that the design was not manufacturer. Only then did Jobs believe Apple's manufacturing engineers, and Jonathan Ives went back and in cooperation with the manufacturing engineers came up with a design that was manufacturable at scale. To Apple's credit, the organization learned from these mistakes and from then on, product design would even go so far as to visit Taiwan and work with manufacturing to ensure that their designs could indeed be fabricated.
The shape is a pyramid, with Jony Ive’s Industrial Design team at the top. ID would conceive how a product would look and feel, with an exactitude that drove fear into the rest of the organization. Their creation goes to Product Design, whose role is to figure out the mechanical engineering and make the product functional. Then it moves to manufacturing engineers—a small team back then, and later a distinct unit called Manufacturing Design, or MD—who work with component makers and final assembly partners to actually build the product. Finally, the Operations team comes in. They work with vendors that their colleagues have already selected, and then optimize everything to help the product scale. But crucially, Ops also has a prerogative to find other component makers, other final assembly partners, to build resiliency, cut prices, and to instill competition. (kindle loc 1441)
The relationship with Foxconn is similarly described in detail. Foxconn bent over backwards to get Apple's business, despite making no profits. This was a deliberate strategy to build up his own company's manufacturing expertise:
“His people used to hate us, because they used to make no money out of us,” says an Apple operations executive. “The Compaq guys”—the Foxconn team building for Compaq—“were making a fortune on bonuses, and no one wanted to come work on the Apple account because there were no bonuses.” But Gou answered to no one. He took a long-term view, knowing that if his team could please Apple, they could please any client. (kindle loc 1410)
Gou even deployed a clever tactic to rotate his workers on Apple projects, to maximize the learning. “We trained all of them. Then one day we’d be like, ‘Where’d those engineers go?’ ” says Fadell. He’d learn that they’d gone to work on other projects, using their new skills in areas that were more lucrative. Then Apple would be forced to teach a new cohort of people, as if a new semester had started. (kindle loc 2007)
Page after page, the book's details and research is impeccable and very much worth reading. There's a whole chapter about employee burnout at Apple through constant trips to China. Once in China, the work was non stop and relentless. Apparently, many employees ended up losing their families as a result of this work schedule. To my surprise, Apple's manufacturing engineers must have been extremely poorly paid. The book describes one instance where a wife called up a husband and loudly denounced his upcoming trip to China and threatening a divorce if he made the trip. The manager's solution? Offer the engineer a $10k bonus for taking the trip, buying off the spouse. Even in the mid 2000s, I cannot imagine a single Google engineer's wife considering a $10K bonus (after taxes it would have been $6k) suitable compensation for taking away her husband for months. One engineer was even told by his doctor to quit his job or die on it:
Apple came close to codifying the principle that pushing employees to burnout was acceptable. In a slide deck called Leadership Palette, Apple states: “Fighting for excellence is about resisting the gravitational pull of mediocrity. It involves being dead tired and still pushing yourself, and others, to get it right, every time.” One engineer says the reason he left Apple after more than a decade is that during a routine medical appointment, his doctor noted his high blood pressure and said, “Okay, I need you to do two things for me: lose weight and quit Apple.” The doctor explained that the stress would basically kill him. Some Apple engineers can even rattle off the names of people who died on the production line or upon their return from yet another trip to Asia. The engineers were often in their forties and fifties, and while it’s not possible to conclude that overwork was their cause of death, many believe it was. One longtime veteran recalls that, during the funeral for one of these people, the number of Apple employees who left the Sunday service to join conference calls was unbelievable...Jon Rubinstein, who worked for Steve Jobs on and off for sixteen years, called the long workweeks “shattering,” and it’s what led to his own departure later on. “A lot of people got sick at Apple,” he once said. “The list goes on and on of people who got terminally ill or really ill… and I worried that if I stayed, I’d end up damaging myself, and my health was, frankly, more important.” He added: “Steve used to always tell the groups, ‘This will be the high point of your life,’ and I was thinking, God, I hope not, right? Because that’s really a sad way to think.” (kindle loc 2112 - 2122)
There's even a story of the manager of the Apple store in Beijing voluntarily going to jail in order to defuse a nasty situation at the Apple store. If you remember all those stories about fights breaking up in China's Apple stores about being given a chance to buy an iPhone? This book explains the background. It turns out all the people in those lines were scalpers who were paid to buy the phones and then those phones got distributed into the Chinese market.
The book describes Apple's slow awakening into China's politics and how Xi Jinping's ascendence caught them by surprise. But rather than diversifying its supply chain, Apple instead doubled down on it, making itself even more vulnerable to China disruption than before. It took multiple supply chain failures before Apple started taking even small steps to do manufacturing outside China, and even then those steps are half-hearted and slow, mainly out of fear that if Apple moved quickly China would cut them off. I have friends who defend Apple by saying that other manufacturers are similarly vulnerable. This book completely debunks that. It turns out that Samsung makes more phones than Apple but is almost completely immune to a China supply chain disruption:
Samsung, the only company that sells more phones than Apple, is much less vulnerable. Samsung runs its own chip foundries, which are second only to TSMC, in Korea and Texas, and in 2023 the company pledged to invest $230 billion to build five new fabrication plants over the next two decades. Indeed, Samsung is likely to be the biggest winner in the event of an earthquake in Taiwan, be it political or natural. Disruption to supply chains in Taiwan would hinder Samsung’s ability to import certain components, but the impact would be far less than for Apple. (kindle loc 5383)
Needless to say, the highlights and quotes I've provided in this book are a tiny fraction of the book filled with interesting, insightful stories and never before disclosed details. It definitely disrupts the usual story about manufacturing knowhow being shipped overseas, and it's a far better story than the usual books about China such as Breakneck. This book makes those books look like the shallow, sophomoric and poorly researched books that they are. If the Financial Times reporting is all like this I should give up my subscription to other magazines and subscribe to FT instead!
I wouldn't be surprised if come November I nominate this book as the book of the year. That's how good it is. Highly recommended.
P.S. One thought I had after finishing this book is that you should be very optimistic about manufacturing in the USA. Apple (and other American companies) still know a lot about manufacturing. If the country ever got its political act together enough to want to do a big manufacturing drive, the fact that China did it so quickly meant that the USA can do so as well. Of course, that depends on Americans politically understanding the situation well enough to vote accordingly. That part of the equation I'm not very opitmistic about.
