How Apple tied its fortunes to China

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In 2007, Nokia had 900mn users. Its market dominance seemed so great that Forbes ran a cover story on the company asking “Can anyone catch the cell phone king?” The same year, Apple launched the iPhone.

Sixteen years and 1.2bn users later, the story of how the Finnish handset maker got blindsided by the iPhone is well known. Nokia, the story goes, didn’t have enough software savvy to keep up with visionary Apple co-founder Steve Jobs and design whizz Jony Ive.

But the cellphone’s multitouch, full-screen features were not Apple’s only advantages. The company was also outmanoeuvring Nokia on hardware and production before the iPhone even went on sale. And it did so by making a substantial bet on China and its manufacturing sector.

Supply chain researcher Kevin O’Marah vividly remembers his confusion when, in mid-2007, Apple vaulted from out of nowhere into the No. 2 spot of the Supply Chain Top 25, an annual ranking of the world’s best-run corporate supply chains.

“Everyone was shocked,” he says. “It was like, ‘What? This doesn’t make sense. They have a terrible reputation.’”

Apple and China

Coming Wednesday: In the second part of this two-part series, the FT looks at what avenues the US tech giant has to diversify beyond China

The supply chain ranking turned out to be an early indication of a profound shift in operations at Apple, which held the No.1 spot for the next seven years. In that time it became the world’s most valuable company, while placing itself at the centre of geopolitical tensions.

O’Marah began to learn that Apple was not really “outsourcing” production to China, as commonly understood. Instead, he realised that Apple was starting to build up a supply and manufacturing operation of such complexity, depth and cost that the company’s fortunes have become tied to China in a way that cannot easily be unwound.

Over the past decade and a half, Apple has been sending its top product designers and manufacturing design engineers to China, embedding them into suppliers’ facilities for months at a time.

These Apple employees have played integral roles co-designing new production processes, overseeing the minutiae of manufacturing until…

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