Patrick McGee: Apple trained China's smartphone rivals and now faces an existential supply chain trap

on Apple supply chain. Very excited to have him in the studio. Welcome to the show, Patrick. How are you doing? I'm doing great, but I haven't watched WWDC, so I hope you don't have any questions about that. No, we don't need to talk about that. Uh the the the timeline is not loving it. I have a post here.

Why does Apple have a whole conference just to show everyone they slightly adjusted the colors on a few icons? Oh no. So um that is um a little bit dramatic, but but in other news, we have our intern here in the studio assembling an iPhone from scratch.

Uh not really from scratch, but I I don't know if you can see, but he's he's getting it together. He's assembling the first iPhone in America. And so I think that's that's more of our focus today. Oh god, I said iPhone manufacturing would never happen in America. I think that's what's happening.

This is the first Americanmade device. You're witnessing history. He's starting. It's a 4S, so we didn't we couldn't go all the way to, you know, whatever the 16 or the 17, whatever we're on now, but we had to start somewhere. So, but uh but anyway, thank you so much for joining.

Um would you mind introducing yourself in the book and kind of like what led you to want to dig into this so much? Because I know you you interviewed like hundreds of people for this. It was obviously a massive project. take me through the the journey to actually start investigating the story.

So yeah, Steve Jobs would sometimes say you can't understand your life until you connect the dots backwards, right? It' be a real trick if we could know where the meaning was going forwards. That would improve things.

Uh so I've spent 12 years at the Financial Times and it was basically like three years in Hong Kong where I was getting to know China. Uh three years in Germany where I was covering the automotive industry, but in retrospect really understanding supply chains and manufacturing, industrial policy to some degree.

and then four years covering Apple. So, you sort of put those three things together and really get my book. The first three years of covering Apple, I did what most Apple reporters do, which is that I I didn't focus at all on how the sausage gets made, as it were. I focused on product features.

I focus on the rise of digital advertising and Apple's privacy policies. I mean, I think I had some decent stories, but it didn't really occur to me to look at what we all know, which is that the products are made in China. Mhm.

And the real like discovery that I made, if you will, is that we had never covered a job within Apple called manufacturing design engineer.

And these are the people who go to over to China, literally by the plane load, to train, audit, supervisor, and mount billions of dollars worth of machinery in the aggregate in hundreds of factories across China.

So, I wasn't really familiar with like what makes Apple most unique in hardware, which is that they don't sit around hoping that component makers in their supply chain come up with more durable materials, cheaper materials, lighter materials, etc.

They go and they train all of the people to come up with those innovations. So, it's it's it's a co-invention process really.

But the uh amount of people they've trained and the amount of money they've invested in China to make all that happen was staggering to such a degree that I compare it in a way that sounds unhinged if you haven't sort of read the 200 preceding pages in the book to the Marshall plan. Yeah.

Can you can you give us more on the exact scale of the investment and how you actually pulled those numbers? Are they available in SEC reports? Uh or did you have to do some digging to actually piece everything together to actually get the full scope of the scale of what's happening? Yeah.

So, the line I have on this is that when Tim Cook goes to Jong Nong Hai, the Citadel of Communist Power, and invests or rather pledges to invest 275 billion dollars into Chinese factories over the next 5 years, if he were to hold a uh press release uh a press conference I should say, from Jangghai, um that would have been corporate suicide.

This was when Donald Trump was campaigning on America First platform. And so, uh so was that 2016? May 2016. Yeah.

And so basically what happens is that when Xiinping comes into power um particularly when he becomes president in March 2013 Apple fears that its products are going to be blacklisted because there is a 3-week digital blitz creek against the company where um all sorts of state sponsored media are threatening the company and even regulators are saying uh threatening things to Apple and Apple basically doesn't understand.

They're in a state of confusion. There's not a single senior person living in the country and there never has been at the time and Apple responds by basically hiring or naming a team of people that call themselves the gang of eight and they are to be Certino's eyes and ears on the ground.

Essentially they are tasked with coming up with a way to plate local and federal officials in China without resorting to joint ventures because that is anathema to Certino. A joint venture is like if the three of us wanted to go make a company in China, 50% of it traditionally needs to be Chinese-owned.

um that's supposed to be illegal after 2001 when China enters the World Trade Organization, but it really just evolves rather than is prohibited.

And so Apple has been operating under the radar to such a degree that even though by 2012 they are the largest producer in China without actually, you know, producing anything themselves. You could sort of compare it to Uber in that respect.

Um they're also the largest retail seller in the country, uh among foreign countries, foreign companies. And so they're wildly successful, but they're operating so secretively that the Beijing leadership doesn't understand what contributions they are making.

And so Apple does its own supply chain study to sort of flip this on its head. And what they realize is that they're investing $55 billion a year into the country. And so they sort of take this to Jong Nong Hai to basically like say, "Get off of our back.

You have no idea how much we're contributing to your uh companies. " And if I'm just to round this out, I would say if we fast forward to today, 55% market share uh in global smartphones is the Chinese manufacturers like Huawei and Oppo and Vivo and so so forth.

And the reason they're so good is that Apple trained all of their suppliers. Yes, I remember you making this point about how Apple is essentially like the reason that OPPO and Huawei exist because they trained all of the manufacturing uh houses to build competitors to iPhones essentially.

Um, and and you and and you made the point that uh that Apple didn't kill Nokia with necessarily like product innovation in the United States. It was the manufacturing and the birth of the Chinese manufacturing supply chain that was taken advantage of by Huawei and OPPO and the other Chinese phone companies.

But is there a reason why Nokia wasn't able to go to China and say, "Hey, we're going to piggyback on the same supply chain. We we're okay being a year behind on the lagging edge. " Did you ever dig into the the exact dynamics by that? Was that just a blunder by the by the Nokia team?

Because it seems like if you see this rising manufacturing powerhouse, you might want to go and take advantage of it. If Apple for Microsoft with the Windows phone, right? Totally. Totally. The trouble is going to China is not the secret.

If you've watched the Blackberry movie, in fact, this is the final scene where they do have the Blackberry Storm, I think, just made in China. Um, it's a really simplistic way of thinking about it because it's not just that China has the skills and capabilities of pulling this off.

It's that Apple has this pyramid structure in the company where Johnny IV and the design studio called ID were given like a godlike power to come up with unfathomably in intricate and difficult um designs and then the manufacturing engineers basically had to go make it happen. Nobody had the skills to go make it happen.

And so like the line that I got from one of these manufacturing design engineers is that the perfect attitude was to say to Johnny Iive, "I have no idea how to build this, but I'm going to like move heaven and earth to go figure out how to do it.

" And nobody but the Chinese were willing to sort of put in the investment, the tailor made industrial policies, build factories on a scale that was needed to build iPhones at at the volumes that Apple needed. Um, so so China emerges as the perfect answer to Apple. Mhm.

Before we get more into into what happens next, can you talk about some of Apple's early experiments? I know they were trying to do stuff in California, the Czech Republic. Sounds like they didn't I know.

And um so so yeah, there's this seven-year narrative, and it sounds long, but I trust me, it's fast-paced and it sort of, you know, crosses continents where Apple doesn't just sort of like, you know, abandon making its own computers, right? Because they used to make them on three continents and turn to China.

That's a seven-year experimentation stage where the translucent iMac alone was built by LG in Korea and then they expanded to building them in Mexico and in Wales. It's a great strategy. Unfortunately, it's actually a fiasco.

The Mexico factories literally on fire for about a month and so production is halted and the production line in Wales was known as the toaster line for the propensity of the circuit boards to catch fire. So, they have all these other problems that just like make China begin to look better.

What happens is Foxcon comes on board. So the my line about this is that Johnny IV and Steve Jobs, the meeting of their minds is what makes Apple products unique, but it's the meeting of the minds between Terry Guo, founder of Foxcon, and Tim Cook that makes Apple products ubiquitous.

So when Foxcon comes on board, this is a Taiwanese company that's Yeah. And I was going to and I was going to say, did they feel more comfortable partnering with Taiwan? Like so they begin with Taiwan. In first five years of Steve Jobs's comeback, Taiwan is the most important country.

It's where a lot of the products are being made, namely the iPod, but also the Power Books and the Eyebook. If you remember Reese Witherspoon in her little bunny ears, uh, in in Legally Blind, you know, lining up to buy a computer, she definitely buys the little bright orange computer.

I mean, Apple is redefining aesthetics, not just of computers, but later of MP3 players and later, of course, of smartphones. And so, you know, I like to joke with people like, "What's your favorite Dell computer from the early 2000s, right? Cuz nobody has anything. You can't even remember any of them.

" Nobody was doing the sort of thing that Johnny IV was doing.

But what we've forgotten and what my narrative sort of fills is just like to have that maniacal obsessiveness in design is one thing and that's where a lot of the stories are, but to actually build those in the tens of millions per year and later the hundreds of billions per year like clearly there's a story there, right?

And it's weird that we've omitted it. Um, but to build at that quality, that quantity, and that cost, China just emerges as the perfect partner. So, it's it's the combination of Certino's skill and China's scale that makes for the perfect marriage. Yeah. What's the stat on on the Tim Cook era?

It's something like 20% of smartphone sales, but 80% of profits, something like that. Isn't that insane? And, you know, I'm only giving like a figure for 2016. But, it's actually increased since then. So, the market share for the iPhone has never gone above 20%. But these days, they reap 85% of industry profits. Wow.

And that is just insane. I mean, find me another sector that comes anywhere close to that. It's remarkable. Yeah. Give it up for big tech profits. How much uh Yeah. How much of uh what you're seeing today with uh there's some criticism of Apple for kind of faltering on the AI side, on the product side.

Uh maybe the iPhone's gotten a little bit stale with uh to be clear, Mark German just said they didn't really announce any new AI features. Yeah.

At the same time, uh, while people have been going after Apple for the lack of product innovation, lack of software innovation, it feels like in this particular moment, Tim Cook is the perfect CEO for Apple in the sense that they are facing immense geopolitical challenges. The supply chain is more complicated than ever.

And Tim Cook seems to be a fantastic leader in terms of the execution of that strategy.

And so we're in this weird I understand that there's a weird dynamic, but it feels like in terms of the challenges that Apple the the size of the challenges they could miss on AI, but if they're able to scale up to a billion iPhones a year, they win. Hard disagree. Okay.

Um I understand the point that you're making and Tim Cook has provided immense value to Apple, but I do think it's sort of a times up moment. The reason I say that is Apple is so wedded to China that it has basically become an existential risk to the company.

I'm not saying therefore the company's going to downfall, you know, but but if something like their export license from China was canled, it's not like, oh well, thank god we have 25% of iPhones now being made in India. None of those phones are independently made in India.

They're all reliant on the Chinacentric supply chain. And if Apple's going to come out of it, I mean, basically, if you agree that that's an untenable situation, it's a 15-year effort, if it can happen at all. And you can't have the guy who created the current strategy leading the company if that's the goal.

So I would just on the supply chain side that's on the operations side. That's his wheelhouse if you will. The AI strategy is probably just as fundamental in the sense that we're now at a stage where people's next phones could very well be based on what AI features they have.

And Siri, to quote Sachadella, is dumb as a rock and they're basically not even allowing you to have chat GPT replace Siri. I mean Siri GPT is not allowed to go through my emails, not allowed to go through my photos, etc.

It could probably work wonders if it could, but Apple for privacy reasons that may or may not be uh genuine um privacy do that. And when you get into China, Chad is not allowed in China.

And so AI is really taking off with the likes of Bodu and Alibaba and Deepseek, of course, but Apple's going to be put in this strange position where, you know, my book is about how they've trained up the hardware engineers in China over the last 25 years.

Is the next 25 years the story of how Apple's training up the AI developments in China? Um, I mean, for starters, I don't know that they're a great teacher just given that their own Siri product and AI isn't all that good. But that strikes me as an untenable position for them to be in.

And so AI is like another maybe not existential risk, but certainly a large risk for Apple that they certainly are flailing. And if the buck stops somewhere, it's with Tim Cook. So I would say there's two reasons that that you'd call for new leadership right now.

So talk about getting out of China, building up manufacturing capacity in India, Vietnam, America, anywhere else. Tim Cook has done it once in China. He's not he doesn't have any unique tie to China. He's not Chinese. He just went over there, figured it out, built it up. It took immense time and investment.

He's done it once. Can he do it again in a different country? Is that possible? So you sometimes hear that within Apple. And I would say that it reeks of hubris.

In other words, China was a once- ina century partner in terms of the tailor made policies in terms of literally having hundreds of millions of people go from the migrant labor pools and into cities like Shenzhen and Sujo to make all this happen.

So, it's not that China was just some blank slate with a lot of people and you could get it working. It's not just the density of the population, it's the dynamism of the population and the way that they're willing to work and the sort of bonded zones that China has.

I mean there's so many reasons why none of this is going to happen in America cuz even on a philosophical basis we wouldn't want to replicate things like the dual class uh structure of citizenship that you have in China where if you're rural you really can live in Shenzhen but you can't raise the kids there you can't get the social benefits you certainly can't retire there you know philosophically we don't want to replicate that uh whether India has to go that far if they're going to do so I don't know but they at least are a country of 1.

5 billion people they have wages that are similar to the early 2000s in China and they do have major policies of wanting to become a manufacture ing powerhouse.

I don't think they're doing enough, but it's not just a matter of Tim Cook sort of copying and pasting the strategy into a new area that doesn't take into account just how different India and China are.

Can you can you tell us more about that difference uh India's democracy, but there's a lot of uh lack of infrastructure I've heard flagged as just like there's not enough scale at the ports, there's not enough industrial manufacturing equipment in the in the country. Same thing with uh Vietnam.

Although it's it does feel like uh Apple's maybe had a little bit more luck with AirPods in Vietnam, but I don't know if there's more color to that. And it might be more of one of those like final assembly things that we've been hearing.

On the whole, I would say more is actually happening in Vietnam than people give credit for uh and less is happening to in India than than people think. Uh the problem with Vietnam is you just hit constraints, right? I mean, the population in Vietnam is literally 115eenth that of China.

So it is never going to rival China in a way that India could. India just doesn't have the skill. I don't know that they have the drive. They don't have the same nichian will to power.

The epigraph of my book is from a made in China 2025 document from 10 years ago which which says without manufacturing there is no country. There is no nation. No other country let alone India thinks of manufacturing in that way. Um but China does.

So it's really difficult for India to compete and even though they have a lot of people they don't have the same migratory patterns. So I studied a study that looked at maybe 80 maybe 84 countries of internal migration and India was at the end of the list.

So you don't have this culture especially of young women 17 18 years old leaving their parents' homes and going to work in a factory in Carnotica as like an equivalent of Shenzhen.

Now maybe you don't need to replicate every facet of how China pulled this off over the last 25 years, but it's not as though I look at India and see a bunch of qualities that would help them in manufacturing that China doesn't have. It's sort of one way that the advantages that China has.

And as the world moves into automation, it's a little disconcerting that I believe I'm accurate in saying China has more industrial robots than the rest of the world combined. And they certainly have more than an order of magnitude more than in India.

A lot of the issues around moving Apple's manufacturing around the globe today come down to demographics like you're outlining and just cultural differences. How does Apple's leadership think about automation?

Because if Tim Cook is willing to invest 50 to hundreds of billions of dollars a year in a country, couldn't is isn't there a world in the future where, you know, Apple's investing a hundred billion dollars into American iPhone manufacturing? It's the, you know, end to end automated. I know that.

I know that's like extremely difficult. It kind of gets around the cultural issues, but it gets around the cultural issues and it just becomes a capital formation issue.

And the stat that we that we were toying with was that I think over the last decade, Apple has returned almost a trillion dollars to shareholders via dividends. Yeah. And so that's that's enough money to do really really big mega projects.

The question is is it is it is it just that's not even that's not enough money, no amount of money can get you there or is there some other factor?

Yeah, because I think when people say like, oh, it's impossible to automate iPhone production, I don't think that the average person genuinely believes that in the fullness of the next 20 years.

There's no way an iPhone could basic you could put the parts in one side of a factory and a finished iPhone would come out the other side. Uh, so let me say two things.

one, I'm totally in favor of stiffing shareholders and cutting the buyback program in half and spending the other $50 billion a year on building resiliency into the supply chain. So, I'm not exactly sure that's what you're suggesting, but but I would advocate that.

Um, secondly, even if, let's just say, artificial intelligence on steroids is able to upend the way things are manufactured and you don't need 400,000 people in Jung to do it, nevertheless, China has unfortunately a number of advantages in terms of the refining and the mining of the metals.

Even if the metals are being mind in Africa is Chinese companies that are orchestrating all of these processes.

So even in a state where uh it is as you say sort of lights out factory where you throw in the components and then iPhones come out um that's probably still more likely to happen in China in China than America because they're the ones who have all the expertise sort of end to end in the supply chain and then you know shipping an iPhone even on a flight to US is immaterial in terms of the costs.

So, you really would need the sort of political uh catalyst that we're seeing now in order to make that happen, but it has to sort of be the perfect convergence of everything happening.

And Tim Cook can't just be the only person who's being pressured by the White House to do this because if you're going to have Foxcon and a whole bunch of industrial clusters setting up shop, you know, in Pittsburgh or wherever it is that Trump wants it, they can't just be supplying iPhones, right?

There is no factory in the world that all they do is supply iPhones, right? Think of a TSMC building chips for any number of company that you can think of. That is what you need. So, it's not a matter of convincing Tim Cook to open a factory. There's no such thing as an Apple factory.

You need Tim Cook to convince his underlings in the supply chain to build things, but in order to do so, they need to be building for, I don't know, Sony and Samsung and a whole host of industrial clusters or so. So, a whole host of companies in an industrial cluster.

Otherwise, the economics and the efficiency don't make any sense. Yeah. I I remember you mentioning that it sounded like Apple had a mandate that their suppliers would not be overly reliant on Apple to the tune of more than 50% of what they produced being for Apple. Why did that dictate come from Apple?

You would think it would come the other direction where if I'm a supplier, I don't want to be too dependent on Apple because if they pull out, I lose my entire business. That's true, but Apple has all the leverage in these relationships. And so if Apple says jump, the supplier says how high.

And so if Apple's really and just think of how demanding Apple is and particularly how much they scaled, right? So 5 million iPhones were built in 2007 nearly a quarter billion by 2015. So if you were a supplier just trying to keep up with that, like that was enough business.

Even if you were making one 1% or 2% margins, the volumes were were making you grow at a level that you had never grown before.

Um but yeah, what happens is that if Apple obiates the need for a certain component and turns direction just as they go from 100 million iPhones to 170 million iPhones, well, you would just go out of business. And so this would happen and it would it would develop bad will from the supplier community towards Apple.

And so Apple began saying for its own protection, however fast you grow with us, please grow as fast with somebody else. And that's what sort of gives birth inadvertently to the Chinese smartphone industry. I don't mean the suppliers, I mean Huawei, Oppo, Evo, etc.

So, speaking of the consumer market in China, how how cooked is Apple in China? I know sales are down double digits as of at least last year. It doesn't look good, especially with all these new AI features coming online.

Is that driven by just consumer choice and nationalism or are there actual structural uh policy choices that are that are driving that change? My question back to you is whether cooked was a pun. We make tons of tons of I just wasn't sure how intentional that was. Oh yeah, of course. Um, yeah.

I mean, well, let me give the sympathetic view first, which is that after Trump 1. 0 kneecapped Huawei, Huawei was at the time, first of all, outs selling Apple globally in terms of smartphones. But more importantly, it was the only phone to penetrate the top tier.

Apple doesn't really care if other phones uh other phone makers sell more phones than them, but they do care if they're in the top tier. And so when when Chinese luxury buyers were purchasing Huawei phones instead of Apple phones, it was a really big deal.

But Trump um you know disallowed Huawei from having access to Google services, which maybe doesn't matter so much in China, but I mean I used to live in Germany and it had a Huawei. If that thing didn't have YouTube and Gmail anymore, you know, gone. I'm not going to have it.

Um and they also disallowed them from having 5G technology from from Qualcomm. So that worked really well at a time. And China market share for Apple was 9%. And then when Huawei gets kneecapped, all the luxury buyers in China that need a 5G phone just as 5G was really coming on the scene, they all bought iPhones.

So the market share doubles to 17%. Um, you could say that as a result of that, as a result of Huawei being on the sidelines, Apple's market share was sort of overly inflated. So now that Huawei is back, we have had two years and now this is the third year of Apple market share declining in China.

But if I'm to be sympathetic, I would say it might just be that they're sort of right sizing or like refining an equilibrium now that Huawei is back in the game. Unfortunately, I wouldn't sort of go with the sympathetic view.

I'm more cynical here because now that Huawei is back and you're seeing more nationalist fervor in in China and now that iPhones are going to be built in India which actually diminishes the sense that the iPhone is an indigenousmade product in um China and now that IIA sorry AI is taking on more preeminence in terms of why you should buy a phone and Apple's having all sorts of problems on their own and the problems are only compounded by the fact that they can't use partners like Chat GPT in China.

I would predict that by 2030 at the latest, iPhone share in China is going to fall back to single digits. Interesting. Uh can you talk more about the parallels or differences between Huawei, Xiaomi and and Apple? Uh Huawei's gone into GPU accelerators. They're competing with Nvidia on the Ascend side.

Uh Xiaomi has a car. Apple's kind of stumbled in cars or there was rumors that they were working on a car. They didn't.

Um I I I guess my question is uh why hasn't Apple reaped some some of the the the downstream dividends of adjacent product development based on their supply chain dominance because that seems like almost free money for them and and it seems like all the Chinese companies have been like oh yeah we make phones so let's also make hoverboards and cars and everything and there's been a much different culture in terms of product development.

Is it just come down to culture or is there something else strateg? It's a fair question. I don't really know why Apple uh abandoned the car project. And I think it could have been a winning product, especially in China, because they have such brand appeal.

On the other hand, I would say the pro the Apple car product probably should have died years earlier. The reason I say that is because Apple got caught up in the hoopla that Silicon Valley was in in 2015, which is that uh self-driving cars are going to be everywhere, right?

I mean, the the the founder of Lyft had said that quote, "A majority of our rides will be uh self-driving by I think 2021. " Yep. Travis Kalanick had said that they would buy a 100,000 Mercedes self-driving cars by 2020. Um, and Larry Paige of Google said self-driving cars will be bigger than Google.

I mean, there was a sense that self-driving cars were the next big thing and Apple was not immune and Apple fit into it.

As soon as we realized that the self-driving thing was a bit of a fantasy and it's going to take much much longer to um to develop, I think the project could have died because at that point it's just like is Apple just competing on acceleration with Tesla? Like what exactly are they going to do?

If you're in a self-driving car and you're using iOS apps on all these like, you know, uh sexy windows and stuff within the car like it makes all kinds of sense. Once you take the self-driving car element out of it, I don't know that the Apple car makes any sense.

The Chinese are in a different ecosystem where it does make sense for them to have a Xiaomi car, a Huawei car, etc. And maybe they're self-driving, maybe there's not, but they sort of like having an advance on all this technology and they like market share.

Apple only wants to be in markets where it's going to be a number one or number two player. It doesn't want to play second, third, fiddle to uh to Tesla and any number of other companies.

That was kind of remarkable that they actually uh went so heavy into Apple TV because they were behind HBO and Hulu and Netflix and they really like carved something out there that worked.

But I know a lot of Hollywood people that were very skeptical about that because uh in film and television the brand standard is so high and you have a couple bad shows, you get a bad reputation, but they they they slaughter. Can I give you my theory on why they moved into Apple TV Plus, please? Yeah, that'd be great.

Apple has a services division that is largely not what you think it is as the consumer. In other words, if I said, "What are Apple services? " you would say, "Oh, it's Apple, you know, it's Apple Music. " Random $11 charge. I get I get a couple.

What it really is is 30% fees on App Store and Google paying them $20 billion a year.

So, for the purposes of earnings calls, I think they want to push more into things like talking about Ted Lasso and what Emmy awards they won rather than having to say, "We squeezed more out of Spotify this year, and by the way, Google's now paying us $22 billion a year.

" I really think that was the motivation be uh for why they Why do you uh somewhat random, but why do you think they never made a a television? Oh, I don't know.

I mean, I've heard one thing, which is that Steve Jobs demanded, this is obviously, you know, before 2011, that when the phone when the TV was off, that the pixels be white rather than black and that Apple was unable to nail this. Uh, I'm not saying that's why the project died.

I mean, it's so interesting because I would I would happily never get any Apple media products. I don't need their shows. I would much prefer to have an Apple device instead of TV that works. This buggy Samsung, you know, absolutely. But it's funny, TVs are good, right?

Like when Apple comes out with the iPod, it's because they're looking at MP3 player on the market in 20201. And they're saying everything sucks. The reason why they never made a video cam even though they came out with iMovie is that video camcorders were generally speaking doing fine.

So they needed to break into one market. They decided Yeah. But I would argue I would argue that TV sucks. Okay, there's there's all these pre-installed. I hate every I've I've got it's a mess. I hate the four TV Samsung frame in the back there. I think that thing is great. It's okay. I have one too.

I think the software level in my opinion it it wants me to upgrade and subscribe and do all this junk and it's just like not as I guess the question is how much you would pay because TVs aren't a high 10 grand. Yeah.

I mean I I I think it would I I I think it would I think it would be like the Apple Pro Display XDR which is like a $4,000 screen.

basically more than more than anything five to 10 times what so good that designers still demand it and I think that I think that they could pull that out but I but I think you're probably correct overall. Uh I last question and I want to get you and I want to let you go.

Um I want to hear the story of the mini tien that happened in 2010. That's a fascinating story. Oh god, what a terrible story to end on. Um it is the only bit in the story that I would call salacious and I only have it in there.

I don't like uh salacious stories is that it's just an in an incident that takes place where Apple really realizes they're in over their head and they don't understand the culture. Uh how many how many seconds do I have to tell the story? Uh a minute or two. Two minutes. It's hard. Okay.

So, it's hard not to like I need to give the backstory which is that the iPhone 4 in 2010 goes absolutely wild in China. it becomes the most conspicuous thing that you can own. And it's so conspicuous and there's such a supply demand imbalance that Apple at the time has four stores in a country of 1. 4 billion people.

And so these scalpers known as yellow cows begin sending migrants to the store by the thousands where everybody can each buy two units. And then these gangsters who are backed by the triads are basically like lining up these people getting all the phones that come out of the store.

Uh, and then going to a city like Chongqing, population 32 million, number of Apple stores zero, and they're able to sell them at 78 $900. They begin finding ways, illegal, uh, legal and legal, to make more money per iPhone than Apple.

And one of the ways was to go buy a phone in America at T-Mobile on a 24-month contract, and using a fake ID, they could acquire the phone for one month worth of the of the 24-month contract, smuggle it into China, and then sell it for $800 or $900. I mean, that's just the state of demand at the time.

More than that, they were actually zapping out out the phones. So, they were like rendering the thing inoperable, but in the process of breaking it, they were masking the fact that it was a stolen phone and then making more money that way as well.

Um, and they were even hollowing out the phone's component, selling off the memory and things like that.

So, if you understand just like through this brief thing that there's this chaotic scenes of of crazy demand of triad gangsters and everything, um, one of the worst things that happens in the book is that Apple runs out of product at the Shanghai Puong store. So there's 7,000 migrants waiting to buy their product.

And they're more scared of the triads who have hired them to be there than they are of the police. So when Apple says, "We're out of product. You need to go home. " They don't want to leave. They feel like they can't leave. And they literally prevent the glass doors from being shut on them.

And they stage a sitin in the store. So the police are unable to get them to go. The mayor of Pudong shows up. They're not able to go. And eventually after 11 PM 100 black cat black clad police officers that someone compared to like you know the uh the SWAT team or or to what's it called? Steel team six.

Um they those kind of guys show up and when a young woman sort of had having never seen these people takes a photo of them um one of the persons takes her behind the genus bar and beats are so bloody that the blood on the ground cannot be scrubbed out and they have to reimpport granite from Italy to replace the stone tiles.

Wow. Um it's a terrible story. The person who told me it has been having nightmares about it for the last 14 years.

But it's an example of Apple just not understanding what they were dealing with and it results in the political awakening the following uh couple years when they begin to hire senior people on the ground to understand the politics, the culture and the distribution issues that they're having in the country. Very rough.

Well, uh it's been fantastic talking to you. I pulling for Apple to reshore manufacturing and um diversify the supply chain. I'm on the side of Tim Cook. I think he can do it. I think he's cooking. I'm on the side of friend shoring. I would love to see more in Mexico and more in India.

I don't know what's going to happen in Pittsburgh. Yeah, Patrick, thank you for doing the work to tell the story and come back on anytime. This Thanks much. Okay, cheers. Talk to you. Cheers. Bye. Great. Uh, really quickly, let me tell you about Adio, customer relationship management uh magic.

Adio is the AI native CRM that builds, scales, and grows your company to the next level. Jordan, power users every day. Power users. We are power users. Uh, next up we have Aaron Sllo coming in the studio to tell us about Reindustrialized, all the things that are going on in his world. I'll be right back.

And let's check in on the intern cam. See how Tyler's doing. Uh, Erin, how you doing