WEBVTT - Apple Is the $2.3T Fortress That Tim Cook Built 0:00:00.040 --> 0:00:02.719 I'm Carol Masser and I'm Tim Stanevik the cover story 0:00:02.800 --> 0:00:06.040 this week. Ten years ago, Tim Cook became CEO of Apple, 0:00:06.160 --> 0:00:09.559 succeeding co founder Steve Jobs. In the decades since Cook's 0:00:09.600 --> 0:00:11.880 Apple has soared to a market cap of two point 0:00:11.920 --> 0:00:14.880 three trillion dollars, the most of any company, and could 0:00:14.880 --> 0:00:18.640 reach three trillion in twelve months. The revenue looks endless. 0:00:18.760 --> 0:00:22.200 It really does. So how has Cook transformed the company 0:00:22.239 --> 0:00:26.000 by expanding its portfolio products and services, deepening the company's 0:00:26.040 --> 0:00:31.160 relationship with China, and navigating complicated geopolitics during the Trump presidency, 0:00:31.480 --> 0:00:34.839 all while fending off antitrust scrutiny and using privacy to 0:00:34.880 --> 0:00:38.600 skewer competitors such as Facebook and as critics are swift 0:00:38.600 --> 0:00:41.599 to point out, Apple today looks increasingly like the IBM 0:00:41.680 --> 0:00:46.160 of yesteryear, especially the one depicted in its famous commercial. 0:00:46.520 --> 0:00:50.599 Of course, Cook happened to work at IBM. Tim Cook's 0:00:50.680 --> 0:00:57.080 two point three trillion dollar fortress trade war Trump please 0:00:57.760 --> 0:01:06.120 antitrust Zoock's problem, Ditto privacy Revenue endless by Austin Carr 0:01:06.120 --> 0:01:10.360 and Mark German. Joe Biden had a question for Tim 0:01:10.440 --> 0:01:14.440 Cook why the then vice president wanted to know, couldn't 0:01:14.480 --> 0:01:18.960 Apple make the iPhone in the US. It was January, 0:01:19.319 --> 0:01:23.080 during President Barack Obama's re election campaign and three months 0:01:23.080 --> 0:01:26.959 after the death of Cook's predecessor, Steve Jobs. Biden was 0:01:27.000 --> 0:01:29.520 in Palo Alto for a dinner meeting with Cook and 0:01:29.600 --> 0:01:32.480 a group of tech leaders that included Netflix chief executive 0:01:32.520 --> 0:01:37.160 officer Read Hastings, Google executive chairman Eric Schmidt, and Facebook 0:01:37.200 --> 0:01:41.120 chief operating officer Cheryl Sandberg. As everyone at the dinner 0:01:41.200 --> 0:01:44.720 well knew, the idea of mass producing an iPhone or 0:01:44.760 --> 0:01:48.760 any advanced consumer electronics in a domestic factory was an 0:01:48.760 --> 0:01:54.640 exceptionally tall order. The big Asian contract manufacturers, especially Apple's 0:01:54.680 --> 0:01:58.360 main partner Fox con, had built city size factories in 0:01:58.480 --> 0:02:01.840 China with armies of hundreds of thousands of skilled laborers. 0:02:02.560 --> 0:02:06.160 None of that scale existed in the US. Chinese factory 0:02:06.160 --> 0:02:09.760 employees generally worked much longer hours for a fraction of 0:02:09.800 --> 0:02:13.480 what even the lowest paid American workers make. I'm not sure, 0:02:13.520 --> 0:02:17.160 short of dictatorial practices, that you could ever make that work, 0:02:17.360 --> 0:02:21.280 says John Richard Tello, another Silicon Valley executive who witnessed 0:02:21.320 --> 0:02:25.560 the exchange between Cook and Biden. Biden's question put Cook, 0:02:25.880 --> 0:02:29.040 who had become Apple CEO the previous August, in an 0:02:29.040 --> 0:02:32.440 awkward position. He was the architect of the strategy to 0:02:32.480 --> 0:02:36.320 outsource Apple's production to China, a trend of increasing concern 0:02:36.400 --> 0:02:39.840 for the Obama administration. But Cook was also, as it 0:02:39.880 --> 0:02:44.440 turned out, extremely effective at deflecting political pressure. He was 0:02:44.480 --> 0:02:48.320 certainly more diplomatic than his old boss. Obama once asked 0:02:48.440 --> 0:02:51.960 jobs the same question, and jobs is characteristically blunt reply 0:02:52.120 --> 0:02:54.160 landed on the front page of the New York Times, 0:02:54.720 --> 0:02:58.840 those jobs aren't coming back. Cook, though, was smooth and 0:02:58.919 --> 0:03:02.560 non combative, so much so, in fact, that Richichello can't 0:03:02.600 --> 0:03:05.720 recall exactly what he said to Biden. By the end 0:03:05.720 --> 0:03:09.160 of that year, Cook announced a small yet politically significant 0:03:09.160 --> 0:03:12.800 shift Apple, he said, would start making some mas in 0:03:12.800 --> 0:03:16.840 the US, and then Apple's reliance on China only grew. 0:03:17.720 --> 0:03:20.079 You might think It's ever tighter embraced with the country 0:03:20.160 --> 0:03:22.800 would have put Cook in a worse political position. After 0:03:22.880 --> 0:03:26.239 Donald Trump was elected president in twenty sixteen, based on 0:03:26.280 --> 0:03:29.520 a campaign marked by anti China rhetoric, threats of a 0:03:29.560 --> 0:03:32.639 trade war, and promises to bring jobs loss to Shunjun 0:03:32.760 --> 0:03:36.400 back to American shores, not to mention the challenges of 0:03:36.440 --> 0:03:40.360 the coronavirus pandemic and rising antitrust fervor during his term 0:03:40.360 --> 0:03:45.400 in office. Strangely, though Apple thrived under Trump. In August 0:03:45.440 --> 0:03:49.400 twenty eighteen, the company's market value reached one trillion dollars. 0:03:50.040 --> 0:03:53.000 Twenty four months later, even as Trump bellowed on the 0:03:53.040 --> 0:03:56.480 campaign trail that these stupid supply chains in China should 0:03:56.480 --> 0:04:01.920 move home, it surpassed two trillion dollars. Current and former employees, 0:04:02.200 --> 0:04:06.360 executives at rival companies, and Washington insiders credit this to 0:04:06.440 --> 0:04:11.560 Cook's shrewd management, equally shrewd politicking, and zero reluctance to 0:04:11.560 --> 0:04:16.040 wield Apple's market power. Tim Apple, as Trump once called him, 0:04:16.320 --> 0:04:19.240 charmed and cajoled his way into the former president's good 0:04:19.240 --> 0:04:23.120 graces while keeping Beijing happy and finding ways to squeeze 0:04:23.160 --> 0:04:27.240 more revenue from the iPhone. Cook's handling of Trump suggests 0:04:27.240 --> 0:04:30.520 how Apple, which declined to comment for this story, might 0:04:30.560 --> 0:04:34.400 approach now President Biden. Over the next four years. His 0:04:34.440 --> 0:04:38.359 White House will continue pushing to increase US manufacturing and 0:04:38.440 --> 0:04:42.920 may support congressional scrutiny of potentially anti competitive practices egged 0:04:42.960 --> 0:04:46.440 on by Facebook and other companies that say Apple exercises 0:04:46.440 --> 0:04:50.520 too much power, but Cook has been counterpunching, broadening his 0:04:50.600 --> 0:04:54.159 influence over the mobile phone industry while marketing Apple's commitment 0:04:54.200 --> 0:04:57.240 to privacy as the antidote to the practices of social 0:04:57.279 --> 0:05:02.480 media companies. Moreover, Cook's unflappable temperament makes him well suited 0:05:02.520 --> 0:05:07.120 to the polarized political climate. Allies praised his operational skills 0:05:07.160 --> 0:05:10.960 and diplomatic instincts. Tim may not be able to design 0:05:11.000 --> 0:05:14.440 a product like Steve, says Warren Buffett, who knows Cook 0:05:14.480 --> 0:05:17.359 well and whose Berkshire Hathaway has a stake in Apple 0:05:17.440 --> 0:05:21.039 worth one and eleven billion dollars as of a September filing. 0:05:21.640 --> 0:05:24.400 But Tim understands the world to a degree that very 0:05:24.560 --> 0:05:27.719 very few CEOs I've met over the past sixty years 0:05:27.720 --> 0:05:35.039 could match. Cook came to Apple in after a dozen 0:05:35.120 --> 0:05:38.400 years at IBM and a six month stint at Compact, 0:05:38.800 --> 0:05:41.960 and seemed, at least to old Apple hands, devoid of 0:05:42.000 --> 0:05:46.479 any obvious personality. He'd work eighteen hour days and send 0:05:46.520 --> 0:05:49.400 emails all through the night when he wasn't in the office. 0:05:49.400 --> 0:05:52.320 He seemed to live at the gym. Unlike jobs, he 0:05:52.400 --> 0:05:56.120 had no pretensions to being an artist. Tim was always 0:05:56.160 --> 0:06:00.839 pure work, grind, grind, grind grind, says one former Apple 0:06:00.880 --> 0:06:03.200 executive who worked with Cook in his early years at 0:06:03.200 --> 0:06:06.360 the company and who, as with other sources in this story, 0:06:06.680 --> 0:06:09.560 spoke on the condition of anonymity because of non disclosure 0:06:09.560 --> 0:06:13.680 agreements and fear of corporate reprisals. I always found him 0:06:13.760 --> 0:06:19.200 exceptionally boring. Apple's turnaround in the ensuing years has generally 0:06:19.240 --> 0:06:22.359 been attributed to Jobs as product genius, beginning with the 0:06:22.400 --> 0:06:26.680 candy colored Imax that turned once beige appliances into objade 0:06:26.720 --> 0:06:30.560 to office. But equally important in Apple's transformation into the 0:06:30.600 --> 0:06:34.239 economic and cultural force it is today was Cook's ability 0:06:34.279 --> 0:06:38.440 to manufacture those computers and the iPods, iPhones and iPads 0:06:38.480 --> 0:06:43.160 that followed in massive quantities. For that, he adopted strategies 0:06:43.160 --> 0:06:47.360 similar to those used by HP, Compact, and Dell companies 0:06:47.400 --> 0:06:50.039 that were derided by Jobs but had helped usher in 0:06:50.080 --> 0:06:53.640 an era of outsourced manufacturing and made to order products. 0:06:54.360 --> 0:06:58.200 Back when Cook was managing Compacts hardware inventory, he became 0:06:58.240 --> 0:07:01.840 friendly with Fox confounder Terry Guo. According to two people 0:07:01.880 --> 0:07:05.720 who've worked closely with Cook, the Taiwanese company had started 0:07:05.760 --> 0:07:09.560 as a lower end manufacturer. Early products included the plastic 0:07:09.640 --> 0:07:14.080 channel changing knobs for televisions and connectors for Atari joysticks, 0:07:14.760 --> 0:07:17.800 but by the late nineteen nineties fox kN had graduated 0:07:17.840 --> 0:07:22.040 to more complex manufacturing, such as making computer chassis for Compact. 0:07:22.880 --> 0:07:26.120 Fox Con eventually moved on to other PC parts, which 0:07:26.160 --> 0:07:30.360 it produced in sprawling factories around Shunjn, near component suppliers. 0:07:30.920 --> 0:07:34.640 By the time Cook joined Apple, these centralized factory hubs 0:07:34.680 --> 0:07:38.120 were far more efficient than anything in the US. Apple 0:07:38.240 --> 0:07:42.600 sold off a huge Colorado plant in and after Cook arrived, 0:07:42.800 --> 0:07:47.200 he temporarily cut its Ireland based manufacturing workforce, closed what 0:07:47.320 --> 0:07:51.640 was then its only remaining American production line in Elk Grove, California, 0:07:51.760 --> 0:07:55.000 and outsourced more and more production to China, starting with 0:07:55.080 --> 0:07:58.960 laptops and webcams. The Elk Grove facility is now used 0:07:59.000 --> 0:08:03.720 for refurbishing and hairs. Cook's global supply chain greatly improved 0:08:03.760 --> 0:08:07.040 upon the fabrication approaches that Dell and Compact had developed. 0:08:07.560 --> 0:08:11.760 The big PC brands often outsourced both manufacturing and significant 0:08:11.840 --> 0:08:16.560 design decisions, resulting in computers that were cheap but not distinctive. 0:08:17.040 --> 0:08:20.120 Cook's innovation was to force fox Con and others to 0:08:20.160 --> 0:08:24.200 adapt to the extravagant esthetic and quality specifications demanded by 0:08:24.280 --> 0:08:28.880 Jobs and Industrial design head Johnny I've Apple engineers crafted 0:08:28.920 --> 0:08:33.920 specialized manufacturing equipment and traveled frequently to China, spending long hours, 0:08:33.920 --> 0:08:37.080 not in conference rooms as their PC counterparts did, but 0:08:37.200 --> 0:08:40.920 on production floors, hunting for hardware refinements and bottlenecks on 0:08:40.960 --> 0:08:45.400 the line. Contract manufacturers worked with all the big electronics companies, 0:08:45.720 --> 0:08:48.760 but Cook set Apple apart by spending big to buy 0:08:48.840 --> 0:08:53.520 up next generation parts years in advance and striking exclusivity 0:08:53.520 --> 0:08:56.640 deals on key components to ensure Apple would get them 0:08:56.679 --> 0:08:59.920 ahead of rivals. At the same time, he was obset 0:09:00.000 --> 0:09:04.720 best with controlling Apple's costs. Daniel Vidagna, then a supply 0:09:04.800 --> 0:09:10.160 management director, says Cook particularly fussed over fulfillment times. Faster 0:09:10.240 --> 0:09:14.079 turnarounds made customers happier and also reduced the financial strain 0:09:14.120 --> 0:09:18.520 of storing unsold inventory. Vidanna remembers him saying that Apple 0:09:18.559 --> 0:09:22.720 couldn't afford to have spoiled milk. Cook lowered the company's 0:09:22.760 --> 0:09:26.320 month's worth of stockpiles two days and touted, according to 0:09:26.360 --> 0:09:30.280 a former longtime operations leader, that Apple was out delling 0:09:30.520 --> 0:09:35.959 Dell in supply chain efficiencies, Guo always seemed happy to accommodate, 0:09:36.320 --> 0:09:40.320 often building entire factories to handle whatever minimalist cheek design 0:09:40.360 --> 0:09:44.160 specs Apple through. At Fox Con, John Rubinstein, a senior 0:09:44.240 --> 0:09:47.760 vice president for hardware engineering during jobs second tour at Apple, 0:09:48.160 --> 0:09:50.960 recalls almost having a heart attack in two thousand five 0:09:51.320 --> 0:09:53.439 when he went with Guo to see a new factory 0:09:53.440 --> 0:09:57.520 in Shunjan for the iPod Nano, a tiny device smaller 0:09:57.520 --> 0:10:00.959 than Apple's original MP three player, only to find an 0:10:01.000 --> 0:10:05.560 empty field within months. Though a large structure and production 0:10:05.600 --> 0:10:08.640 line were in place in the US, you couldn't even 0:10:08.640 --> 0:10:11.280 get the permits approved in that time frame, he says, 0:10:12.160 --> 0:10:15.480 Jobs and I've had expensive tastes, which made it all 0:10:15.480 --> 0:10:18.120 the more crucial for Cook's team to be unforgiving. When 0:10:18.120 --> 0:10:22.400 negotiating with suppliers for a custom enclosure designed by Ive's 0:10:22.400 --> 0:10:25.679 team to elegantly hold the USB ports on a Mac laptop, 0:10:26.240 --> 0:10:29.720 the former longtime operations leader recalls the company paying roughly 0:10:29.760 --> 0:10:32.920 triple the five cents or so that PC rivals were 0:10:32.920 --> 0:10:35.360 spending for a generic version of the same basic part. 0:10:36.000 --> 0:10:40.160 This person remembers literally negotiating down to four decimal points 0:10:40.480 --> 0:10:44.360 to make it economic. A former product operations manager says, 0:10:44.440 --> 0:10:47.000 even if a supplier promised something as simple as a 0:10:47.040 --> 0:10:49.920 delivery date for a part, it was normal to press 0:10:49.960 --> 0:10:53.160 for the tracking number for each individual shipment as part 0:10:53.160 --> 0:10:57.160 of a litany of detailed logistics and pricing demands. Apple's 0:10:57.200 --> 0:11:00.360 power over suppliers grew after the release of the I phone, 0:11:00.640 --> 0:11:04.040 which Fox Con manufactured and which sold four million units 0:11:04.040 --> 0:11:07.360 in its first two hundred days. By two thousand nine, 0:11:07.679 --> 0:11:11.120 an iPhone supply manager says Apple increasingly took on a 0:11:11.200 --> 0:11:14.679 brute force approach to dealing with suppliers In Asia. I 0:11:14.679 --> 0:11:17.240 could say you do it this way, or your toast, 0:11:17.559 --> 0:11:20.839 this manager says, adding that Apple started to just beat 0:11:20.880 --> 0:11:23.839 the crap out of its vendors jobs as death two 0:11:23.920 --> 0:11:27.559 years later caused skeptics to predict Apple would stagnate without 0:11:27.559 --> 0:11:30.800 a steady stream of his inventions. In fact, the real 0:11:30.880 --> 0:11:34.839 challenge was keeping supply up. In China, operations managers were 0:11:34.880 --> 0:11:38.800 scrambling to buy enough computer controlled milling machines and laser cutters. 0:11:39.320 --> 0:11:42.599 Every millimeter was scrutinized for savings, as were even the 0:11:42.640 --> 0:11:46.760 seemingly least consequential parts. Three people familiar with the company's 0:11:46.760 --> 0:11:49.600 supply chain, say, there was an Apple employee whose job 0:11:49.679 --> 0:11:54.240 consisted of negotiating the cost of glue. In the post Jobs, 0:11:54.240 --> 0:11:58.120 Apple i've's influence began to wane, while Cook asserted a 0:11:58.120 --> 0:12:01.640 more cost conscious approach to new products. He ordered his 0:12:01.679 --> 0:12:05.160 operations team to work closely with the industrial design group 0:12:05.360 --> 0:12:08.720 from the earliest stages of the development process, rather than 0:12:08.840 --> 0:12:13.240 joining months in, as had been the norm under Jobs. 0:12:13.240 --> 0:12:17.240 iPhone six was the poster child of this transformation, according 0:12:17.240 --> 0:12:20.200 to a person involved in the product's development, While the 0:12:20.240 --> 0:12:23.960 device had complex internal components and a larger screen, it 0:12:24.120 --> 0:12:27.600 dropped the diamond polished edges and the precisely cut glass 0:12:27.679 --> 0:12:30.320 parts of the back of the iPhone five and five s, 0:12:30.600 --> 0:12:34.280 which had been difficult to produce. Even the company's spaceship 0:12:34.480 --> 0:12:38.720 esque headquarters, The design of which Jobs had micromanaged, didn't 0:12:38.840 --> 0:12:42.400 escape the new financial discipline. According to a person familiar 0:12:42.440 --> 0:12:46.800 with its construction, Cook's allies tried to aggressively drive down 0:12:46.800 --> 0:12:51.240 extravagant expenses, including for the curved glass now surrounding the building, 0:12:51.640 --> 0:12:54.600 which The Wall Street Journal reported was originally expected to 0:12:54.640 --> 0:12:59.000 cost as much as one billion dollars. Meanwhile, Cook expanded 0:12:59.040 --> 0:13:02.760 the business in ways jobs used to resist Jobs. Loved 0:13:02.760 --> 0:13:05.960 to point out that Apple's product lineup was so unrelentingly 0:13:06.040 --> 0:13:09.160 spare it could fit on a small table. At the 0:13:09.200 --> 0:13:12.679 time of his death, Apple sold two iPhones and one iPad. 0:13:13.160 --> 0:13:17.720 Today it offers seven iPhones and five iPads. Cook also 0:13:17.760 --> 0:13:20.720 added high priced products that amounted to accessories for the 0:13:20.760 --> 0:13:24.800 flagship mobile devices, such as air pods and the Apple Watch. 0:13:25.720 --> 0:13:28.520 And yet, even as Cook transformed Apple into a more 0:13:28.559 --> 0:13:33.280 diversified company, its dependence on China grew. The only way 0:13:33.280 --> 0:13:36.840 to drive economies of scale and manufacturing consistency was to 0:13:36.920 --> 0:13:40.000 concentrate more and more of Apple's output in areas such 0:13:40.040 --> 0:13:43.199 as Shunjun. If you're talking about making a million a 0:13:43.280 --> 0:13:46.080 day of something launching on a dime and having the 0:13:46.120 --> 0:13:49.880 capacity to do that, every machine has to be precise, 0:13:50.440 --> 0:13:53.160 and to have that happening in multiple countries as challenging, 0:13:53.440 --> 0:13:57.280 says a former top executive, The question becomes, are you 0:13:57.360 --> 0:14:03.760 relying too much on one place. In November twenty nineteen, 0:14:04.160 --> 0:14:07.640 a year before the presidential election, Trump flew to Austin 0:14:07.720 --> 0:14:11.440 to meet Cook and tour Apple's mac pro factory in 0:14:11.520 --> 0:14:14.199 front of a gaggle of White House press, Cook called 0:14:14.200 --> 0:14:18.240 the Mac Pro a five thousand nine dollar computer aimed 0:14:18.280 --> 0:14:23.160 at creative professionals, an example of American design, American manufacturing, 0:14:23.400 --> 0:14:27.000 and American ingenuity. At another point, the pair leaned close 0:14:27.040 --> 0:14:30.240 together so Cook could show off the computer's components as 0:14:30.280 --> 0:14:34.600 Trump nodded approvingly. Many of the parts Cook noted came 0:14:34.640 --> 0:14:38.280 from places such as Arizona and Pennsylvania, key swing states 0:14:38.280 --> 0:14:42.280 where Trump had promised to bring more manufacturing jobs. Trump 0:14:42.320 --> 0:14:46.160 touted the plant as a campaign pledge fulfilled. I said 0:14:46.200 --> 0:14:48.960 someday we're going to see Apple building plants in our country, 0:14:49.080 --> 0:14:52.320 not in China, he told reporters. And that's what's happening. 0:14:52.600 --> 0:14:56.440 It's all happening. It's all the American dream. Cook looked 0:14:56.480 --> 0:14:59.640 on soberly and didn't mention what was obvious to factory 0:14:59.640 --> 0:15:03.720 employ ease Trump was lying. The facility had been in 0:15:03.760 --> 0:15:08.520 operation for Apple for six years. During Trump's time in office, 0:15:08.640 --> 0:15:12.400 he and Cook forged an unlikely friendship that upset liberal 0:15:12.520 --> 0:15:17.240 leaning Apple veterans, who couldn't imagine Cook's infamously temperamental predecessor 0:15:17.520 --> 0:15:20.680 tolerating any co option of Apple's brand name by someone 0:15:20.760 --> 0:15:24.400 as boorish as Trump. Cook, who supported Hillary Clinton in 0:15:24.440 --> 0:15:29.680 the presidential campaign, voiced disagreement over Trump's approach to immigration, 0:15:30.120 --> 0:15:33.880 racial unrest, and climate change, but he also attended the 0:15:33.880 --> 0:15:37.360 president's CEO summits, as well as dinners at the White 0:15:37.360 --> 0:15:40.720 House and at the President's golf club in Bedminster, New Jersey, 0:15:41.200 --> 0:15:43.720 and bonded with his daughter Ivanka and his son in 0:15:43.800 --> 0:15:50.160 law Jared Kushner Gary Kohene, Trump's chief economic advisor until estimates, 0:15:50.160 --> 0:15:53.120 Cook came to Washington every four to six weeks, far 0:15:53.200 --> 0:15:56.960 more frequently than other Texi eos. He made it part 0:15:56.960 --> 0:15:59.320 of his agenda to figure out where we could work together, 0:15:59.480 --> 0:16:03.200 says Own. Our dinners weren't talking all about Apple, tariffs 0:16:03.280 --> 0:16:07.960 and technology, I'd say sev was talking about life. To 0:16:08.040 --> 0:16:10.880 be a good CEO, to get things accomplished, you have 0:16:10.960 --> 0:16:13.600 to be personable, you have to be a good communicator 0:16:13.600 --> 0:16:16.360 and a good listener. And Tim was all of those things. 0:16:16.960 --> 0:16:19.640 Cook was willing to do what was necessary to protect 0:16:19.720 --> 0:16:23.200 Apple's China centric supply chain, even if that meant letting 0:16:23.200 --> 0:16:26.760 Trump spin falsehoods. Trump told The Wall Street Journal in 0:16:26.760 --> 0:16:31.240 mid that Cook personally promised to build three big plants, 0:16:31.320 --> 0:16:34.960 beautiful plants in the US, which was false as well, 0:16:35.360 --> 0:16:38.760 and which Apple declined to correct. After the photo op 0:16:38.800 --> 0:16:42.240 in Austin, Trump tweeted today I opened a major Apple 0:16:42.280 --> 0:16:45.600 manufacturing plant in Texas that will bring high paying jobs 0:16:45.600 --> 0:16:49.880 back to America. Apple let that one slide to. Current 0:16:49.920 --> 0:16:53.400 and former employees familiar with the Mac pros development say 0:16:53.440 --> 0:16:57.040 the Texas event was an embarrassment. The factory had undergone 0:16:57.080 --> 0:16:59.520 some remodeling since it was first used to assemble the 0:16:59.560 --> 0:17:06.040 Mac pro, but again, it wasn't new. Moreover, Flex Limited, 0:17:06.320 --> 0:17:09.919 the contract manufacturer that operates the Austin plant, prepped for 0:17:09.960 --> 0:17:12.359 the event by manicuring the production floor as if it 0:17:12.400 --> 0:17:15.640 were a stage set. New computers were put on display 0:17:15.920 --> 0:17:18.920 to look like we're selling these things like hotcakes, recalls 0:17:18.960 --> 0:17:22.639 one engineer. Many employees were given the day off and 0:17:22.720 --> 0:17:25.760 the select few allowed to stay. We're mostly pretending to 0:17:25.800 --> 0:17:28.879 work in the background in their blue uniforms. According to 0:17:28.920 --> 0:17:33.119 another staffer, it was very much a show. This person, says, 0:17:33.760 --> 0:17:36.840 Cook seemed to understand that though Apple was vulnerable to 0:17:36.880 --> 0:17:40.560 Trump's anti China belicocity, he also could use the company's 0:17:40.600 --> 0:17:44.320 reputation and his glad handing as enticement for a president 0:17:44.359 --> 0:17:48.800 who craved mainstream business validation. Tim was very good at 0:17:48.840 --> 0:17:52.800 giving the President optics because Apple is an iconic consumer brand, 0:17:53.240 --> 0:17:56.800 says a former senior Trump administration official. You've got their 0:17:56.840 --> 0:18:00.359 CEO working with the White House, sitting in meetings, traveling 0:18:00.359 --> 0:18:03.399 with Ivanka. You always want to attach yourself to a 0:18:03.440 --> 0:18:07.840 good brand. The Texas factory itself had long been a disappointment, 0:18:07.960 --> 0:18:10.879 according to former employees who worked on the project since 0:18:10.880 --> 0:18:14.359 its Obama era inception. It was an experiment to prove 0:18:14.440 --> 0:18:17.320 that the US supply chain could work as good as China's, 0:18:17.359 --> 0:18:21.320 and it failed miserably, says a former senior manager. Apple 0:18:21.400 --> 0:18:24.119 chose to produce the first iteration of its assembled in 0:18:24.280 --> 0:18:28.960 USA mac Pro in Austin because it was expensive and 0:18:29.040 --> 0:18:32.240 sold in low volume, which allowed more margin for cost 0:18:32.320 --> 0:18:36.520 overruns while ensuring that any losses wouldn't be disastrous. According 0:18:36.560 --> 0:18:39.399 to people familiar with the matter, the mac Pro is 0:18:39.480 --> 0:18:42.879 also much bigger than a smartphone, meaning that in theory, 0:18:43.000 --> 0:18:45.280 it should have been easier to make than something as 0:18:45.320 --> 0:18:49.480 compact and exacting as an iPhone or Apple Watch. But 0:18:49.640 --> 0:18:52.560 then supply chain managers saw an early mock up of 0:18:52.600 --> 0:18:56.400 the cylindrical design that Ive's team had created which made 0:18:56.440 --> 0:18:58.880 the Mac Pro look like something out of Star Wars. 0:18:59.520 --> 0:19:02.120 Apple's partners in Asia had been able to handle such 0:19:02.119 --> 0:19:05.600 oddball design specs, but employees involved with the U S 0:19:05.640 --> 0:19:08.639 Flex factory, who had been expecting a boxy shape that 0:19:08.720 --> 0:19:13.040 resembled previous versions of the device, were alarmed. They initially 0:19:13.119 --> 0:19:16.440 worried about having to fit square parts in a circular case, 0:19:16.800 --> 0:19:20.639 according to a former senior level Apple employee, When Apple 0:19:20.680 --> 0:19:24.840 engineers started setting up manufacturing in Texas, sources familiar with 0:19:24.880 --> 0:19:28.040 the matter say they had a difficult time finding local 0:19:28.080 --> 0:19:31.560 suppliers willing to invest in retooling their factories for a 0:19:31.600 --> 0:19:35.240 one off Mac project. According to a former Apple supply 0:19:35.320 --> 0:19:38.760 chain worker, huge quantities of certain components needed to be 0:19:38.800 --> 0:19:42.280 imported from Asia, which caused a domino effect of delays 0:19:42.320 --> 0:19:46.480 and costs. If a shipment arrived with defective parts, For example, 0:19:46.840 --> 0:19:49.040 the Texas factory had to wait for the next air 0:19:49.119 --> 0:19:53.159 cargo delivery. At factories in Hunjun, supply replacements were a 0:19:53.160 --> 0:19:56.520 short drive away. It felt like the opposite of Wuoes 0:19:56.680 --> 0:20:00.480 ultra efficient all in one Fox con hubs. We really 0:20:00.520 --> 0:20:03.520 emphasized with the suppliers to triple check their product before 0:20:03.520 --> 0:20:05.960 they put it on a plane to Texas. This worker 0:20:06.040 --> 0:20:10.720 says it was a pain. Recruiting was another challenge. Skills 0:20:10.760 --> 0:20:13.439 common at fox Con were harder to find in the US, 0:20:13.840 --> 0:20:16.399 where new hires might have worked previously at a cost 0:20:16.400 --> 0:20:20.280 co rather than at a different electronics factory. An ex 0:20:20.320 --> 0:20:23.800 Apple product engineer remembers the team struggling to determine why 0:20:23.880 --> 0:20:27.000 circuit boards coming off the assembly line were crooked. They 0:20:27.080 --> 0:20:30.119 ultimately traced the problem to a single worker who was 0:20:30.160 --> 0:20:33.600 inexplicably screwing in parts from left to right instead of 0:20:33.640 --> 0:20:37.800 by the numbered order. Flex provided. Scrap was high at first, 0:20:38.160 --> 0:20:41.320 and several sources say the teams missed their initial delivery 0:20:41.359 --> 0:20:46.240 and cost targets. Once the products assembly stabilized, Apple employees 0:20:46.240 --> 0:20:49.680 moved on to other more pressing supply chain projects, such 0:20:49.720 --> 0:20:54.320 as manufacturing the Apple Watch, which inevitably was made in China. 0:20:54.600 --> 0:20:57.880 Demand for the cylindrical mac pro was weaker than anticipated, 0:20:58.280 --> 0:21:03.200 and layoffs eventually followed. Flex. Whatever the Austin Plants problems, 0:21:03.440 --> 0:21:08.320 it's political benefits were tremendous. In September, the U S 0:21:08.359 --> 0:21:12.080 granted exemptions on tariffs for importing multiple parts key to 0:21:12.160 --> 0:21:15.919 the macpros future. Days later, Apple said it would make 0:21:15.960 --> 0:21:18.800 a new version of the computer, which the company redesigned 0:21:18.800 --> 0:21:23.040 into a simpler, boxy case, in Texas. During his November 0:21:23.480 --> 0:21:26.640 nineteen factory tour, Trump said he'd be looking into more 0:21:26.800 --> 0:21:29.720 terror for leaf for Apple, which it received in subsequent 0:21:29.760 --> 0:21:34.000 months on the iPhone, iPad, and Apple Watch. Cook later 0:21:34.080 --> 0:21:37.360 gave Trump the first of the new MacPro model produced 0:21:37.359 --> 0:21:41.600 at the Austin factory, according to a White House disclosure form. Still, 0:21:41.800 --> 0:21:44.840 a person familiar with the Austin plant says it struggles 0:21:44.840 --> 0:21:48.800 even today. In a statement, Flex says it is very 0:21:48.880 --> 0:21:53.159 proud of our excellent production capabilities and sustainable innovative supply 0:21:53.240 --> 0:21:57.720 chain solutions. Meanwhile, Apple has moved some production of air 0:21:57.800 --> 0:22:01.679 pods to Vietnam and iPhone to India, where the company 0:22:01.680 --> 0:22:05.560 has run into scale and quality issues too. More significant 0:22:05.600 --> 0:22:09.880 manufacturing diversification is likely to take years, even as Cook 0:22:09.920 --> 0:22:15.000 faces pressure to decouple from China over censorship, human rights violations, 0:22:15.040 --> 0:22:18.639 and criticism about labor conditions at mainland factories. In an 0:22:18.640 --> 0:22:22.560 all hands meeting last year, an employee asked Dan Richio, 0:22:22.640 --> 0:22:26.119 than Apple's hardware chief, why the company continues to build 0:22:26.119 --> 0:22:31.719 products in China given these ethical problems, the crowd cheered, Well, 0:22:31.920 --> 0:22:35.280 that's above my pay grade, he responded, before adding that 0:22:35.320 --> 0:22:39.640 Apple was still working to expand its manufacturing presence beyond China. 0:22:39.920 --> 0:22:44.160 Not even the COVID pandemic, which temporarily shuttered Fox confactories 0:22:44.160 --> 0:22:47.680 in early could loosen China's grip on the bulk of 0:22:47.720 --> 0:22:51.080 Apple's iPhone production. While commercial flights in and out of 0:22:51.160 --> 0:22:54.919 China were suspended, Apple chartered private jets to fly hundreds 0:22:54.920 --> 0:22:57.840 of employees to the country to oversee production and testing 0:22:58.240 --> 0:23:00.600 and ensure the new models hit before with a critical 0:23:00.640 --> 0:23:04.480 holiday season. According to a person familiar with Apple's logistics, 0:23:04.920 --> 0:23:08.280 A long time Apple operations manager also notes that Fox 0:23:08.359 --> 0:23:10.879 Con was still able to produce early versions of the 0:23:11.600 --> 0:23:15.159 iPhone even at the height of the pandemic. There is 0:23:15.200 --> 0:23:18.320 no way you can just move away from China, especially 0:23:18.359 --> 0:23:26.479 at Apple's volumes, this person says. On January seven, Apple 0:23:26.520 --> 0:23:29.800 announced there are now more than one billion active iPhones 0:23:29.840 --> 0:23:32.879 in the world. It's a stellar achievement for cook to 0:23:32.920 --> 0:23:37.080 have navigated these unprecedented times for Apple supply chain, with 0:23:37.160 --> 0:23:40.160 a cold tech war between the US and China. If 0:23:40.160 --> 0:23:42.960 you look back at the last few years, many investors 0:23:42.960 --> 0:23:44.600 were betting that it was going to blow up and 0:23:44.640 --> 0:23:48.360 be a huge black cloud over Apple, says Wedbush Securities 0:23:48.400 --> 0:23:51.600 analyst Dan Ives, who believes the company, which had a 0:23:51.640 --> 0:23:54.080 market cap of two point three trillion dollars as of 0:23:54.119 --> 0:23:57.280 early February, could hit three trillion dollars in the next 0:23:57.280 --> 0:24:00.720 twelve months. He's done a great job being an unofficial 0:24:00.760 --> 0:24:04.440 ambassador between the Beltway and China. Even with Trump out 0:24:04.440 --> 0:24:07.920 of the White House, Cook's tight rope tiptoeing isn't finished. 0:24:08.480 --> 0:24:11.840 Two days before Apple's earnings report, Biden announced a Buy 0:24:11.880 --> 0:24:15.679 American initiative to boost US production. I don't buy for 0:24:15.800 --> 0:24:18.840 one second that the vitality of American manufacturing is a 0:24:18.880 --> 0:24:22.359 thing of the past, he said. In many ways, Cook 0:24:22.480 --> 0:24:25.359 is now applying the lessons Apple learned building its China 0:24:25.440 --> 0:24:29.640 manufacturing network to other parts of the business. Its operational 0:24:29.640 --> 0:24:33.040 prowess has enabled it to churn out more product permutations 0:24:33.040 --> 0:24:36.800 and accessories, and just as Apple uses its awesome buying 0:24:36.840 --> 0:24:40.719 power to extract concessions from suppliers, it's now using its 0:24:40.760 --> 0:24:44.879 control over an equally impressive digital supply chain, which includes 0:24:44.920 --> 0:24:48.200 the company's own subscription services as well as third party 0:24:48.200 --> 0:24:52.280 apps to generate greater revenue from customers and software developers. 0:24:52.920 --> 0:24:55.879 In an October report on the tech industry, the House 0:24:55.920 --> 0:24:59.480 Antitrust Subcommittee said this influence of its app store amounted 0:24:59.520 --> 0:25:02.919 to monopo Holly power and recommended that regulators step in. 0:25:03.359 --> 0:25:08.679 Apple disputed the characterization, but software developers including Spotify, Epic Games, 0:25:08.680 --> 0:25:13.520 and Facebook made similar allegations. Facebook CEO Mark Zuckerberg in 0:25:13.600 --> 0:25:17.439 January accused Apple of using their dominant platform position to 0:25:17.520 --> 0:25:22.840 interfere with apps and targeted advertising. In August, Epic sued Apple, 0:25:23.119 --> 0:25:26.480