1
00:00:00,120 --> 00:00:03,920
Speaker 1: These sees Bloomberg Business Week with Carol Messer and Tim

2
00:00:03,960 --> 00:00:09,440
Speaker 1: Stenebeck on Bloomberg Radio. All right, I gotta say yeah,

3
00:00:09,840 --> 00:00:11,879
Speaker 1: see you later. We've been talking about this a lot

4
00:00:11,960 --> 00:00:15,200
Speaker 1: broadly and more specifically when what Apple is doing when

5
00:00:15,200 --> 00:00:18,560
Speaker 1: it comes to its relationship and reliance on China and

6
00:00:18,560 --> 00:00:22,040
Speaker 1: a story by Bloomberg Technology reporter Mark German, who's a

7
00:00:22,079 --> 00:00:24,599
Speaker 1: go to on all things Apple for us here at Bloomberg.

8
00:00:24,880 --> 00:00:28,040
Speaker 1: He gets into how Apple is specifically looking beyond China

9
00:00:28,120 --> 00:00:31,080
Speaker 1: to remake its supply chains, which have been the brainchild

10
00:00:31,200 --> 00:00:33,920
Speaker 1: of now CEO Tim Cook. This story in the new

11
00:00:34,000 --> 00:00:37,479
Speaker 1: issue of Bloomberg Business Week on newstands later this week tomorrow,

12
00:00:37,479 --> 00:00:40,400
Speaker 1: in fact, already online at Bloomberg dot com slash business weekend.

13
00:00:40,600 --> 00:00:42,720
Speaker 1: Of course, I'm the Bloomberg terminal, So let's get more

14
00:00:42,760 --> 00:00:45,479
Speaker 1: on what Apple and Tim Cook are up to. Delighted

15
00:00:45,479 --> 00:00:48,920
Speaker 1: to have with us Bloomberg BusinessWeek Technology editor Joshua Brustein

16
00:00:49,200 --> 00:00:51,880
Speaker 1: and the editor of Bloomberg Business Week, Joel Weber, both

17
00:00:51,960 --> 00:00:54,720
Speaker 1: here in our Bloomberg Interactive Brokers studio. I feel like

18
00:00:54,720 --> 00:00:57,880
Speaker 1: when Apple talks or when Apple moves, we all pay attention.

19
00:00:58,680 --> 00:01:03,600
Speaker 1: All right, No, doubt please. They are. They are the biggest,

20
00:01:03,760 --> 00:01:06,960
Speaker 1: most important tech company in the world, I think, and

21
00:01:07,480 --> 00:01:10,279
Speaker 1: so much of that has been built by Tim Cook.

22
00:01:10,440 --> 00:01:13,240
Speaker 1: And when Tim Cook builds something like that, it is

23
00:01:13,280 --> 00:01:16,720
Speaker 1: done at scale, and it is done in China. But

24
00:01:17,040 --> 00:01:19,759
Speaker 1: what we have witnessed over the past couple of years,

25
00:01:20,040 --> 00:01:23,600
Speaker 1: and elements of this we've reported about before, is that

26
00:01:23,720 --> 00:01:26,520
Speaker 1: Apple has sort of started to have a wondering eye

27
00:01:26,520 --> 00:01:30,040
Speaker 1: and looked outside the country. And I think a lot

28
00:01:30,080 --> 00:01:35,080
Speaker 1: of that has been just informed by the US China tensions.

29
00:01:35,480 --> 00:01:40,520
Speaker 1: And what we've reported before is that India is of interest.

30
00:01:40,800 --> 00:01:43,479
Speaker 1: But what we now know, based on Mark Grumman's reporting

31
00:01:43,480 --> 00:01:46,160
Speaker 1: in this story that Josh edited for the magazine, is

32
00:01:46,200 --> 00:01:49,360
Speaker 1: that it's not just India and that it perhaps it

33
00:01:49,600 --> 00:01:55,360
Speaker 1: is much bigger than Apple has previously indicated. Just how big, Josh, Yeah,

34
00:01:55,400 --> 00:01:58,800
Speaker 1: I think at the beginning of the pandemic, there began

35
00:01:58,840 --> 00:02:01,680
Speaker 1: to be some talk about, well, maybe Apple's reliance on

36
00:02:01,760 --> 00:02:04,200
Speaker 1: China could be a problem. What are the disruption is

37
00:02:04,240 --> 00:02:06,920
Speaker 1: going to be like? At the time, CEO Tim Cook

38
00:02:07,040 --> 00:02:10,400
Speaker 1: said any changes are going to be just adjusting a

39
00:02:10,400 --> 00:02:13,320
Speaker 1: few knobs. And what we see now is those are

40
00:02:13,360 --> 00:02:16,800
Speaker 1: maybe really big knobs, because there's to be fair, they

41
00:02:16,840 --> 00:02:19,720
Speaker 1: might might still be knobs, but they are perfectly designed

42
00:02:19,800 --> 00:02:25,520
Speaker 1: knobs though, just beautiful that Apple is looking increasingly to

43
00:02:25,639 --> 00:02:30,240
Speaker 1: do iPhone production in India. This is not instead of China,

44
00:02:30,320 --> 00:02:33,799
Speaker 1: it's an addition to But the most aggressive timelines would

45
00:02:33,840 --> 00:02:35,760
Speaker 1: have about a quarter of all iPhones made there by

46
00:02:35,760 --> 00:02:40,160
Speaker 1: twenty twenty five. And then you see also big knob,

47
00:02:41,560 --> 00:02:43,920
Speaker 1: and it's showing that it's not like all the eggs

48
00:02:43,960 --> 00:02:47,320
Speaker 1: in one basket, right in many ways exactly, I think

49
00:02:48,280 --> 00:02:51,920
Speaker 1: the company just is seeing kind of the obvious risks

50
00:02:52,000 --> 00:02:55,160
Speaker 1: here of having so much of your production focused on

51
00:02:55,160 --> 00:02:58,440
Speaker 1: one geographic area, especially one whose relationship with US is

52
00:02:58,440 --> 00:03:00,239
Speaker 1: so tenuous. Can we take a step back, Can just

53
00:03:00,280 --> 00:03:02,600
Speaker 1: talk about Tim Cook? I mean he was the is

54
00:03:02,680 --> 00:03:05,600
Speaker 1: the man of supply chains right ahead of before becoming

55
00:03:05,639 --> 00:03:09,799
Speaker 1: CEO operations, mister ups. Yeah, absolutely, Yeah. Tim Cook is

56
00:03:10,040 --> 00:03:13,600
Speaker 1: largely given credit for being the architect of Apple's China strategy,

57
00:03:13,680 --> 00:03:17,400
Speaker 1: which is in large part, you know, part of the

58
00:03:17,560 --> 00:03:19,760
Speaker 1: part of the reason for success. The fact that the

59
00:03:19,760 --> 00:03:23,680
Speaker 1: iPhones are made so well and so smoothly is because

60
00:03:23,680 --> 00:03:26,720
Speaker 1: of what Tim Cook has built in China. And now

61
00:03:26,760 --> 00:03:29,600
Speaker 1: we see um you know, him undertaking the very large

62
00:03:29,600 --> 00:03:33,720
Speaker 1: task of replicating that elsewhere. So one other company that's

63
00:03:33,720 --> 00:03:39,800
Speaker 1: been absolutely instrumental to Apple's growth is Foxcon, which quietly

64
00:03:39,840 --> 00:03:43,000
Speaker 1: actually does a lot of the manufacturing and assembling. How

65
00:03:43,000 --> 00:03:46,520
Speaker 1: does Foxcon fit into this game that Apple seems to

66
00:03:46,560 --> 00:03:48,720
Speaker 1: be playing. Yeah, absolutely, that's a great point. A lot

67
00:03:48,760 --> 00:03:51,040
Speaker 1: of what's happening when we talk about Apple making phones

68
00:03:51,120 --> 00:03:54,240
Speaker 1: is actually Apple working with Foxcon, a couple of other

69
00:03:54,320 --> 00:03:57,760
Speaker 1: large suppliers, and then literally thousands of small suppliers to

70
00:03:57,960 --> 00:04:02,240
Speaker 1: make to make all these plans. And Foxcon has been

71
00:04:02,280 --> 00:04:05,640
Speaker 1: working in India on iPhones for about five years, maybe

72
00:04:05,680 --> 00:04:08,480
Speaker 1: a little bit longer, and as well as some of

73
00:04:08,480 --> 00:04:11,400
Speaker 1: its other large suppliers. But you see it really doubling down,

74
00:04:11,520 --> 00:04:14,240
Speaker 1: opening new facilities and trying to ramp up the ones

75
00:04:14,240 --> 00:04:18,000
Speaker 1: that are there. Is there a concern about retaliation from China?

76
00:04:18,120 --> 00:04:19,880
Speaker 1: I mean, I know the answer is yes, But to

77
00:04:19,880 --> 00:04:23,240
Speaker 1: what extent is that concern plane into Apple and Tim

78
00:04:23,279 --> 00:04:28,440
Speaker 1: Cook's decision making. Obviously that's a concern, and the story

79
00:04:28,520 --> 00:04:31,479
Speaker 1: opens with Tim Cook actually making his first public trip

80
00:04:31,800 --> 00:04:35,960
Speaker 1: to China since recently. This was yeah, just I think

81
00:04:35,960 --> 00:04:38,520
Speaker 1: maybe about a week ago and surprising given what we've

82
00:04:38,560 --> 00:04:42,239
Speaker 1: been talking about, you know, Ireland, India, other locations. Yeah,

83
00:04:42,279 --> 00:04:44,479
Speaker 1: and he went there and sort of, you know, it

84
00:04:44,560 --> 00:04:47,440
Speaker 1: felt very much like a diplomatic trip, smoothing things over,

85
00:04:47,560 --> 00:04:50,560
Speaker 1: telling China how important it was, meeting with high level

86
00:04:50,600 --> 00:04:55,560
Speaker 1: government officials. And I think Apple's plans, according to Mark's reporting,

87
00:04:55,680 --> 00:04:59,840
Speaker 1: is to do this in a gradually enough way that

88
00:05:00,040 --> 00:05:03,320
Speaker 1: will reassure China that, you know, Apple is still an

89
00:05:03,320 --> 00:05:06,600
Speaker 1: important partner. You're still number one, and that number one

90
00:05:09,160 --> 00:05:15,560
Speaker 1: still dating. We're okay, We're okay. You know, I think

91
00:05:15,720 --> 00:05:18,600
Speaker 1: it is I'm tempted to joke there. But when you

92
00:05:18,640 --> 00:05:23,080
Speaker 1: think about the geopolitical tensions here and the significance of Taiwan,

93
00:05:23,160 --> 00:05:24,960
Speaker 1: which we have not talked about here, which is actually

94
00:05:24,960 --> 00:05:28,479
Speaker 1: where much of China's chips come from, much of Apple's

95
00:05:28,560 --> 00:05:31,880
Speaker 1: chips come from. Um, that's actually one of the things

96
00:05:31,880 --> 00:05:34,480
Speaker 1: that really stuck out to me here because there's little

97
00:05:34,520 --> 00:05:36,920
Speaker 1: minuscule things that I want to talk about, like the

98
00:05:37,040 --> 00:05:40,920
Speaker 1: screws that go into phones that they have to actually

99
00:05:41,000 --> 00:05:43,800
Speaker 1: just make sure that they have supplies for. But like

100
00:05:44,200 --> 00:05:48,440
Speaker 1: you can probably find screws where where, we find screws wherever,

101
00:05:48,560 --> 00:05:51,160
Speaker 1: but you can only really find chips in Taiwan. Right,

102
00:05:51,200 --> 00:05:54,440
Speaker 1: And that's another ye actually not a huge part of

103
00:05:54,440 --> 00:05:56,479
Speaker 1: this story, but I think a huge story to watch

104
00:05:56,520 --> 00:05:59,839
Speaker 1: going forward. There's a little bit of reporting that Mark

105
00:06:00,040 --> 00:06:05,760
Speaker 1: as that Apple is also exploring some alternatives to um,

106
00:06:05,800 --> 00:06:09,359
Speaker 1: the chips that TSMC makes for in Taiwan. The problem

107
00:06:09,440 --> 00:06:12,600
Speaker 1: is there, really, as Joe says, aren't any alternatives. This

108
00:06:12,720 --> 00:06:16,880
Speaker 1: is such a that's such an immense undertaking that Taiwan

109
00:06:17,000 --> 00:06:18,680
Speaker 1: is basically where you have to go for that. Well,

110
00:06:18,720 --> 00:06:21,440
Speaker 1: if you think about it, if that supply chain is disrupted,

111
00:06:21,520 --> 00:06:25,080
Speaker 1: you have no Apple products, right and in terms of

112
00:06:25,120 --> 00:06:29,920
Speaker 1: the more than Apple but no fire Yeah, exactly exactly.

113
00:06:30,000 --> 00:06:32,039
Speaker 1: But the quality like not all chips are the same

114
00:06:32,040 --> 00:06:35,200
Speaker 1: and TSMC, right, that's another part of it. I mean, yes,

115
00:06:35,279 --> 00:06:36,960
Speaker 1: you can maybe get chips elsewhere, but they're not going

116
00:06:37,000 --> 00:06:38,960
Speaker 1: to ASSERTI meet the standards of what Apple needs for

117
00:06:38,960 --> 00:06:41,880
Speaker 1: its products. Yeah, that's exactly right. That that is a

118
00:06:41,920 --> 00:06:45,039
Speaker 1: major choke point for Apple and frankly, um, you know

119
00:06:45,080 --> 00:06:48,159
Speaker 1: the world accur right, A Taiwan is something definitely to

120
00:06:48,200 --> 00:06:51,839
Speaker 1: keep an eye on. Okay, So Apple on occasion has

121
00:06:52,160 --> 00:06:55,520
Speaker 1: done this before, and we talked about India and there's

122
00:06:55,560 --> 00:06:58,560
Speaker 1: other countries we should also talk about, because in addition

123
00:06:58,560 --> 00:07:02,560
Speaker 1: to iPhones, there's this impacts other products in Apple's portfolio.

124
00:07:02,920 --> 00:07:04,560
Speaker 1: But I also just want to drive attention to the

125
00:07:04,560 --> 00:07:07,279
Speaker 1: fact that Apple has done this before, and there's been

126
00:07:07,600 --> 00:07:11,160
Speaker 1: some efforts to even bring some of the productions back

127
00:07:11,200 --> 00:07:14,720
Speaker 1: to the US, and it hasn't always gone well. So

128
00:07:14,840 --> 00:07:19,400
Speaker 1: how is Apple attempting from what we know, because they

129
00:07:19,440 --> 00:07:21,760
Speaker 1: also say that they're just playing with little knobs, But

130
00:07:21,800 --> 00:07:23,520
Speaker 1: based on what we know, how are they attempting to

131
00:07:23,560 --> 00:07:26,160
Speaker 1: make sure that the quality control of issues that they've

132
00:07:26,200 --> 00:07:28,680
Speaker 1: sort of encountered before don't happen again. Yeah, I do

133
00:07:28,760 --> 00:07:33,360
Speaker 1: think it's striking to see the difference between past manufacturing adventures,

134
00:07:33,360 --> 00:07:35,480
Speaker 1: if you will, from Apple and what's going on in

135
00:07:35,360 --> 00:07:39,160
Speaker 1: India in particular now. It has tried to set up

136
00:07:39,200 --> 00:07:41,840
Speaker 1: some mac production in Brazil in the United States in

137
00:07:41,880 --> 00:07:45,760
Speaker 1: the past, and those felt like tokens, token efforts. What

138
00:07:45,800 --> 00:07:48,840
Speaker 1: you see in India is let's get all the suppliers

139
00:07:48,880 --> 00:07:51,560
Speaker 1: to do the glass, to do the screws, as you say,

140
00:07:51,880 --> 00:07:55,160
Speaker 1: to have like our BIGG assembly, our BIGG assembly firms,

141
00:07:55,160 --> 00:07:57,640
Speaker 1: They're doing everything and really start from the ground up,

142
00:07:57,680 --> 00:07:59,680
Speaker 1: like like Tim cooked it in China and it might

143
00:07:59,680 --> 00:08:03,040
Speaker 1: take two decades to get there, but they were gone. Okay,

144
00:08:03,280 --> 00:08:06,840
Speaker 1: So let's let's talk about some of these other countries

145
00:08:06,920 --> 00:08:09,280
Speaker 1: that come up here, because India is one that I mentioned,

146
00:08:09,320 --> 00:08:12,200
Speaker 1: But who who else and what else is getting get

147
00:08:12,280 --> 00:08:14,600
Speaker 1: made here? It is part of this effort to to

148
00:08:14,640 --> 00:08:17,440
Speaker 1: expand potentially be outside of China. Right Exactly. We've been

149
00:08:17,440 --> 00:08:19,280
Speaker 1: talking about the iPhone a lot because that's most of

150
00:08:19,640 --> 00:08:21,800
Speaker 1: what Apple makes. But it does make, you know, it

151
00:08:21,840 --> 00:08:24,120
Speaker 1: makes product, it makes other products. It makes the Mac,

152
00:08:24,880 --> 00:08:27,640
Speaker 1: which is being handled in both Vietnam and Malaysia in

153
00:08:27,680 --> 00:08:31,000
Speaker 1: a little bit in Ireland. Um. And then when you

154
00:08:31,000 --> 00:08:34,120
Speaker 1: get to other products, um, you'll see you know, I

155
00:08:34,120 --> 00:08:36,800
Speaker 1: mean it has it has AirPods, it has iPads. Those

156
00:08:36,800 --> 00:08:39,559
Speaker 1: things are also going to be spread about in different ways.

157
00:08:39,640 --> 00:08:43,040
Speaker 1: But Southeast Asia for the Mac and India for the

158
00:08:43,160 --> 00:08:45,360
Speaker 1: phones is kind of the basic way to think about Ireland.

159
00:08:45,440 --> 00:08:48,200
Speaker 1: Ireland was a surprise there for me. Wasn't expecting them

160
00:08:48,240 --> 00:08:49,839
Speaker 1: to double down there. Yeah, you mean in terms of

161
00:08:50,040 --> 00:08:52,360
Speaker 1: what because there's a little technic goes though, I mean

162
00:08:52,440 --> 00:08:56,040
Speaker 1: clearly in manufacturing. My question on a place like Ireland

163
00:08:56,440 --> 00:08:59,280
Speaker 1: is the cost of the labor and how do you

164
00:08:59,440 --> 00:09:02,319
Speaker 1: not end up passing that cost down to the consumer,

165
00:09:02,520 --> 00:09:04,840
Speaker 1: Like I have a double question here of how it's

166
00:09:04,840 --> 00:09:10,920
Speaker 1: going to impact my iPhone bill. Bad questions. Yeah, but yes, consumer,

167
00:09:11,200 --> 00:09:13,600
Speaker 1: I think they I think they pick the things that

168
00:09:13,640 --> 00:09:17,040
Speaker 1: they manufacture there, and it's probably more of an assembly

169
00:09:17,120 --> 00:09:20,760
Speaker 1: role than a manufacturing one, if I'm if I understand that.

170
00:09:21,480 --> 00:09:23,719
Speaker 1: My understanding is in other places, like for instance, in

171
00:09:23,720 --> 00:09:26,760
Speaker 1: the United States, where some macs are assembled, it is

172
00:09:26,840 --> 00:09:31,880
Speaker 1: the very final assembly. It's it's smaller runs, and obviously labor.

173
00:09:32,040 --> 00:09:35,000
Speaker 1: You can just look at where they're doing manufacturing and production,

174
00:09:35,080 --> 00:09:38,199
Speaker 1: and labor costs clearly factor and they're they're targeting lower

175
00:09:38,320 --> 00:09:41,000
Speaker 1: labor costs. So I talked about the screws for a second.

176
00:09:41,040 --> 00:09:44,560
Speaker 1: But Apple does have teams that they are embedding there.

177
00:09:44,960 --> 00:09:47,760
Speaker 1: And I found this to be fascinating too, because there's

178
00:09:47,800 --> 00:09:50,760
Speaker 1: all these like almost like little pieces that they have

179
00:09:50,800 --> 00:09:53,200
Speaker 1: to account for as things get made, that they have

180
00:09:53,280 --> 00:09:56,440
Speaker 1: to make sure that if they were to change supply chains,

181
00:09:56,640 --> 00:09:59,600
Speaker 1: are these little invisible pieces accounted for too, right, Like,

182
00:09:59,760 --> 00:10:03,000
Speaker 1: so talk to us about how focused on the minuscule

183
00:10:03,080 --> 00:10:05,400
Speaker 1: stuff Apple has become. Yeah, these are the these are

184
00:10:05,400 --> 00:10:08,240
Speaker 1: the Tiger teams that Mark mentions in the story. And

185
00:10:08,400 --> 00:10:12,680
Speaker 1: this is another interesting point inside the company, inside Tiger

186
00:10:12,679 --> 00:10:15,400
Speaker 1: teams within Apple. Yeah, and this is another interesting point

187
00:10:15,440 --> 00:10:19,360
Speaker 1: about whether Apple makes these phones or someone else is

188
00:10:19,400 --> 00:10:22,720
Speaker 1: making them. You know, Tiger teams are oftentimes going into

189
00:10:22,840 --> 00:10:26,200
Speaker 1: supplier companies, but these are Apple employees who are They're

190
00:10:26,520 --> 00:10:28,960
Speaker 1: trying to make sure suppliers are sourcing things in the

191
00:10:29,040 --> 00:10:31,920
Speaker 1: right way, the most efficient way, getting the right parts,

192
00:10:32,600 --> 00:10:35,760
Speaker 1: resilient against any disruptions, and really kind of helping them,

193
00:10:36,080 --> 00:10:37,480
Speaker 1: you know, turn the knobs if you will, Maybe you

194
00:10:37,520 --> 00:10:39,920
Speaker 1: turn the knob a little, maybe turn it a lot knobs.

195
00:10:39,960 --> 00:10:42,640
Speaker 1: We're going to be talking about. NASA really want like

196
00:10:42,640 --> 00:10:44,839
Speaker 1: a big Apple knob. That would be great. I mean,

197
00:10:44,920 --> 00:10:48,000
Speaker 1: thirty seconds left here, I mean how I just feel

198
00:10:48,000 --> 00:10:50,040
Speaker 1: like this is just a moment in time where I

199
00:10:50,040 --> 00:10:52,040
Speaker 1: feel like it's the beginning. I'll give you a big change.

200
00:10:52,080 --> 00:10:54,280
Speaker 1: I'll give you Mark's big takeaway, I think, which is,

201
00:10:54,320 --> 00:10:58,640
Speaker 1: look like Tim Cook built this once. Yeah, if anybody

202
00:10:58,640 --> 00:10:59,960
Speaker 1: can do it again, it's going to be him, right,

203
00:11:00,760 --> 00:11:02,480
Speaker 1: like the right person to figure it out. Right. But

204
00:11:02,559 --> 00:11:04,680
Speaker 1: I just optimistic view. I just look at that delicate

205
00:11:04,679 --> 00:11:06,520
Speaker 1: balance because I remember when he was in China because

206
00:11:06,520 --> 00:11:08,520
Speaker 1: we've been starting to hear stories about them changing their

207
00:11:08,520 --> 00:11:10,360
Speaker 1: supply chain, and I thought, wow, that was a big,

208
00:11:10,440 --> 00:11:13,720
Speaker 1: powerful visual of Okay, everything's okay. We're still in China.

209
00:11:13,800 --> 00:11:17,120
Speaker 1: But it's such a delicate balance. Yeah, there you go.

210
00:11:18,440 --> 00:11:20,240
Speaker 1: I'll give you a perfect little boat. I know, and

211
00:11:20,280 --> 00:11:23,040
Speaker 1: I screwed it out. That's what I do. Joe Webber,

212
00:11:23,240 --> 00:11:25,400
Speaker 1: editor of Bloomberg. This is why you're the editor Bloomberg

213
00:11:25,400 --> 00:11:28,160
Speaker 1: Business Week. Here and I'm in here this scene Joshua Brustein,

214
00:11:28,200 --> 00:11:30,280
Speaker 1: Technology Editor, Bloomberg Business Week. It is in the new

215
00:11:30,320 --> 00:11:31,560
Speaker 1: issue of Bloomberg Business Week.