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How Apple Works
The company’s design success is backed by aggressive innovation and rent-seeking
It happened gradually, and then all at once. Twenty years ago the presence of gadgets was already growing, but was not anything like today. Mobile phones, portable music devices, computers and cameras were little more than functional tools. An action that the average person now performs dozens of times per day – glancing at a phone – had barely appeared on the horizon of human experience.
What persuaded us to welcome technology into the most intimate sphere of our lives? Part of the answer, as I argued in a recent piece for the New Statesman, is the design formula of user-friendly minimalism, first perfected by Apple. With its obsessive commitment to simplicity, Apple made devices accessible and inviting, not to mention stylish, even as they became much more powerful. Nobody interested in design can overlook this company’s spectacular success in defining the aesthetics of the 21st century.
But understanding Apple’s impact on the world also requires looking past the shiny facade of its products. The radical simplicity that made Apple a revolutionary force in design is an example of something more fundamental: the company’s aggressive approach to innovation. Ultimately the key to Apple’s success is that it takes nothing as given: it breaks every process and system down to its building blocks to see how it can be done differently. It insists on exercising control over every aspect of its products, including their manufacturing, engineering and core technologies.
Seeing Apple for what it really is – an economic juggernaut powered by aggressive innovation – illuminates not just its past achievements, but the jeopardy it faces today. It’s possible that in the next decade, Apple’s new technologies will transform our lives once more; but it’s equally possible that the shifting landscape of globalisation will bring the company to its knees.
Around the same time Apple was preparing to launch the iPhone in 2007, it was engaged in a no less ambitious undertaking in China. Led by Tim Cook, who would later succeed Steve Jobs as the company’s CEO, Apple devised a supply chain of unparalleled sophistication for the manufacturing of its devices. It was the start of a deep entanglement that has been crucial to Apple and significant to China itself.
Most dramatic is Apple’s partnership with the Taiwanese firm Foxconn, now China’s largest private employer, with over a million workers in the country. Of these, as many as 300,000 work at the “iPhone city” complex near Zhengzhou, Henan province. But this relationship also involves the Chinese state. The provincial government invested heavily in the Zhengzhou plant: it built roads, airports and workers’ apartments; it offered preferential tax deals; it awarded bonuses for meeting export targets; and it has ensured a steady flow of migrant labour, in some cases demanding that officials in surrounding cities and villages fill worker quotas.
Labour demand surges in the summer months, when the plant can assemble, test and package half a million iPhones per day. The work is notoriously stultifying, with each individual repetitively performing a task such as polishing a screen or fitting a single screw from morning until late in the evening.
The story of Apple is the story of millions of such workers – more than twenty million to judge by Apple’s own estimates – doing a stint in Foxconn’s factories. But to focus on the particular is to lose sight of the stupefying complexity of this supply chain. What we are talking about here is an enormous ecosystem of suppliers providing materials, components and engineering skills. This is itself a remarkable innovation: nothing quite like it exists anywhere in the world. And it has not only been the making of Apple; it accelerated China’s transformation into a high-tech manufacturing superpower, boasting a pool of expertise no other nation can match.
As Patrick McGee outlined in a pair of brilliant reports for the Financial Times in January, Apple’s operations in China are defined by relentless attention to detail. Before the Covid pandemic, the company was booking fifty air tickets from San Francisco to Shanghai every day. Its strategy is to embed its “top product designers and manufacturing design engineers… into suppliers’ facilities for months at a time.” McGee explains:
it is typical for an Apple engineer from California to meet the CEO of a Chinese parts supplier, then pepper them with questions until their technical ability has been exhausted. The Apple engineer will then be brought to the next manager, and then the next, where the same thing happens until they have gone deep into the hierarchy, entering some windowless conference room in the basement where the person who actually wrote the line of code necessary to answer Apple’s questions is located.
Such fine-grained understanding has enabled Apple to direct enormous sums of money towards new machinery and engineering techniques, without which its trademark gadgets would not have been possible. The famous “unibody” aluminium frame used for Macbooks is one such innovation.
A similar story can be told across multiple dimensions of Apple’s technology. In 2020, for instance, the company implemented a quiet revolution in the field of semiconductors. Like most personal computers, Macbooks traditionally used a microchip architecture developed by Intel. But Apple’s silicon department designed its own semiconductors for iPhones and iPads, using a different architecture known as ARM. These were not considered powerful enough for laptops, at least not until Apple developed its M1 chip, the first of its kind to outperform Intel, and started putting it in Macbooks.
In one product category after another, Apple has not been content to make a new product; it always wants to redefine the category. It tried to design a car with no steering wheel or pedals. It is aiming to make an augmented reality headset that people will wear “all day and everywhere.” It is working on another chip technology, silicon photonics, that will measure blood glucose levels via the Apple watch, a potentially transformative breakthrough for diabetics.
All this being said, we should not get too carried away with the mythology of Apple innovation. A great deal of the company’s commercial success comes from the extractive aspect of the digital economy, which focuses on milking rents from customers and competitors. Most notorious are Apple’s efforts to confine users to its own fiefdom of products, its devices being designed to function poorly with other companies’ headphones, location tags and so on. It has repeatedly refused to give Android users equal access to its iMessage system, hoping this will make parents more inclined to buy their children iPhones.
Some have even argued Apple’s period of aggressive innovation is over; the company’s model is all about juicing its existing advantages now. While this seems plausible – the annual iPhone update is almost a venerable tradition at this point – it also feels like giving a hostage to fortune, considering the multiple top-secret teams working on Apple’s next wave of technologies. Maybe in ten years’ time I’ll be writing grouchy articles about how Apple’s headsets lured us all into virtual reality.
On the other hand, Apple’s deep connections with China, the bedrock of its success for the past fifteen years, increasingly looks like a liability. A recent spate of criticism from both Republican and Democrat politicians in the United States, aimed at Apple’s cosiness with Beijing, may be a sign of trouble ahead as US-China tensions escalate.
Despite on-going talk about diversifying its manufacturing to India, where Foxconn has recently committed to build an enormous new plant, China still accounts for more than ninety-five percent of iPhones, Airpods, Macs and iPads. Even if the assembly of these products can be done elsewhere, the supply of materials, components and skilled labour is even more dependent on China. Apple is stuck, in other words; at the very least, it will struggle to keep its empire hidden behind a minimalist image.
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