Speaker 1: These sees Bloomberg Business Week with Carol Messer and Tim
Speaker 1: Stenebeck on Bloomberg Radio. All right, I gotta say yeah,
Speaker 1: see you later. We've been talking about this a lot
Speaker 1: broadly and more specifically when what Apple is doing when
Speaker 1: it comes to its relationship and reliance on China and
Speaker 1: a story by Bloomberg Technology reporter Mark German, who's a
Speaker 1: go to on all things Apple for us here at Bloomberg.
Speaker 1: He gets into how Apple is specifically looking beyond China
Speaker 1: to remake its supply chains, which have been the brainchild
Speaker 1: of now CEO Tim Cook. This story in the new
Speaker 1: issue of Bloomberg Business Week on newstands later this week tomorrow,
Speaker 1: in fact, already online at Bloomberg dot com slash business weekend.
Speaker 1: Of course, I'm the Bloomberg terminal, So let's get more
Speaker 1: on what Apple and Tim Cook are up to. Delighted
Speaker 1: to have with us Bloomberg BusinessWeek Technology editor Joshua Brustein
Speaker 1: and the editor of Bloomberg Business Week, Joel Weber, both
Speaker 1: here in our Bloomberg Interactive Brokers studio. I feel like
Speaker 1: when Apple talks or when Apple moves, we all pay attention.
Speaker 1: All right, No, doubt please. They are. They are the biggest,
Speaker 1: most important tech company in the world, I think, and
Speaker 1: so much of that has been built by Tim Cook.
Speaker 1: And when Tim Cook builds something like that, it is
Speaker 1: done at scale, and it is done in China. But
Speaker 1: what we have witnessed over the past couple of years,
Speaker 1: and elements of this we've reported about before, is that
Speaker 1: Apple has sort of started to have a wondering eye
Speaker 1: and looked outside the country. And I think a lot
Speaker 1: of that has been just informed by the US China tensions.
Speaker 1: And what we've reported before is that India is of interest.
Speaker 1: But what we now know, based on Mark Grumman's reporting
Speaker 1: in this story that Josh edited for the magazine, is
Speaker 1: that it's not just India and that it perhaps it
Speaker 1: is much bigger than Apple has previously indicated. Just how big, Josh, Yeah,
Speaker 1: I think at the beginning of the pandemic, there began
Speaker 1: to be some talk about, well, maybe Apple's reliance on
Speaker 1: China could be a problem. What are the disruption is
Speaker 1: going to be like? At the time, CEO Tim Cook
Speaker 1: said any changes are going to be just adjusting a
Speaker 1: few knobs. And what we see now is those are
Speaker 1: maybe really big knobs, because there's to be fair, they
Speaker 1: might might still be knobs, but they are perfectly designed
Speaker 1: knobs though, just beautiful that Apple is looking increasingly to
Speaker 1: do iPhone production in India. This is not instead of China,
Speaker 1: it's an addition to But the most aggressive timelines would
Speaker 1: have about a quarter of all iPhones made there by
Speaker 1: twenty twenty five. And then you see also big knob,
Speaker 1: and it's showing that it's not like all the eggs
Speaker 1: in one basket, right in many ways exactly, I think
Speaker 1: the company just is seeing kind of the obvious risks
Speaker 1: here of having so much of your production focused on
Speaker 1: one geographic area, especially one whose relationship with US is
Speaker 1: so tenuous. Can we take a step back, Can just
Speaker 1: talk about Tim Cook? I mean he was the is
Speaker 1: the man of supply chains right ahead of before becoming
Speaker 1: CEO operations, mister ups. Yeah, absolutely, Yeah. Tim Cook is
Speaker 1: largely given credit for being the architect of Apple's China strategy,
Speaker 1: which is in large part, you know, part of the
Speaker 1: part of the reason for success. The fact that the
Speaker 1: iPhones are made so well and so smoothly is because
Speaker 1: of what Tim Cook has built in China. And now
Speaker 1: we see um you know, him undertaking the very large
Speaker 1: task of replicating that elsewhere. So one other company that's
Speaker 1: been absolutely instrumental to Apple's growth is Foxcon, which quietly
Speaker 1: actually does a lot of the manufacturing and assembling. How
Speaker 1: does Foxcon fit into this game that Apple seems to
Speaker 1: be playing. Yeah, absolutely, that's a great point. A lot
Speaker 1: of what's happening when we talk about Apple making phones
Speaker 1: is actually Apple working with Foxcon, a couple of other
Speaker 1: large suppliers, and then literally thousands of small suppliers to
Speaker 1: make to make all these plans. And Foxcon has been
Speaker 1: working in India on iPhones for about five years, maybe
Speaker 1: a little bit longer, and as well as some of
Speaker 1: its other large suppliers. But you see it really doubling down,
Speaker 1: opening new facilities and trying to ramp up the ones
Speaker 1: that are there. Is there a concern about retaliation from China?
Speaker 1: I mean, I know the answer is yes, But to
Speaker 1: what extent is that concern plane into Apple and Tim
Speaker 1: Cook's decision making. Obviously that's a concern, and the story
Speaker 1: opens with Tim Cook actually making his first public trip
Speaker 1: to China since recently. This was yeah, just I think
Speaker 1: maybe about a week ago and surprising given what we've
Speaker 1: been talking about, you know, Ireland, India, other locations. Yeah,
Speaker 1: and he went there and sort of, you know, it
Speaker 1: felt very much like a diplomatic trip, smoothing things over,
Speaker 1: telling China how important it was, meeting with high level
Speaker 1: government officials. And I think Apple's plans, according to Mark's reporting,
Speaker 1: is to do this in a gradually enough way that
Speaker 1: will reassure China that, you know, Apple is still an
Speaker 1: important partner. You're still number one, and that number one
Speaker 1: still dating. We're okay, We're okay. You know, I think
Speaker 1: it is I'm tempted to joke there. But when you
Speaker 1: think about the geopolitical tensions here and the significance of Taiwan,
Speaker 1: which we have not talked about here, which is actually
Speaker 1: where much of China's chips come from, much of Apple's
Speaker 1: chips come from. Um, that's actually one of the things
Speaker 1: that really stuck out to me here because there's little
Speaker 1: minuscule things that I want to talk about, like the
Speaker 1: screws that go into phones that they have to actually
Speaker 1: just make sure that they have supplies for. But like
Speaker 1: you can probably find screws where where, we find screws wherever,
Speaker 1: but you can only really find chips in Taiwan. Right,
Speaker 1: And that's another ye actually not a huge part of
Speaker 1: this story, but I think a huge story to watch
Speaker 1: going forward. There's a little bit of reporting that Mark
Speaker 1: as that Apple is also exploring some alternatives to um,
Speaker 1: the chips that TSMC makes for in Taiwan. The problem
Speaker 1: is there, really, as Joe says, aren't any alternatives. This
Speaker 1: is such a that's such an immense undertaking that Taiwan
Speaker 1: is basically where you have to go for that. Well,
Speaker 1: if you think about it, if that supply chain is disrupted,
Speaker 1: you have no Apple products, right and in terms of
Speaker 1: the more than Apple but no fire Yeah, exactly exactly.
Speaker 1: But the quality like not all chips are the same
Speaker 1: and TSMC, right, that's another part of it. I mean, yes,
Speaker 1: you can maybe get chips elsewhere, but they're not going
Speaker 1: to ASSERTI meet the standards of what Apple needs for
Speaker 1: its products. Yeah, that's exactly right. That that is a
Speaker 1: major choke point for Apple and frankly, um, you know
Speaker 1: the world accur right, A Taiwan is something definitely to
Speaker 1: keep an eye on. Okay, So Apple on occasion has
Speaker 1: done this before, and we talked about India and there's
Speaker 1: other countries we should also talk about, because in addition
Speaker 1: to iPhones, there's this impacts other products in Apple's portfolio.
Speaker 1: But I also just want to drive attention to the
Speaker 1: fact that Apple has done this before, and there's been
Speaker 1: some efforts to even bring some of the productions back
Speaker 1: to the US, and it hasn't always gone well. So
Speaker 1: how is Apple attempting from what we know, because they
Speaker 1: also say that they're just playing with little knobs, But
Speaker 1: based on what we know, how are they attempting to
Speaker 1: make sure that the quality control of issues that they've
Speaker 1: sort of encountered before don't happen again. Yeah, I do
Speaker 1: think it's striking to see the difference between past manufacturing adventures,
Speaker 1: if you will, from Apple and what's going on in
Speaker 1: India in particular now. It has tried to set up
Speaker 1: some mac production in Brazil in the United States in
Speaker 1: the past, and those felt like tokens, token efforts. What
Speaker 1: you see in India is let's get all the suppliers
Speaker 1: to do the glass, to do the screws, as you say,
Speaker 1: to have like our BIGG assembly, our BIGG assembly firms,
Speaker 1: They're doing everything and really start from the ground up,
Speaker 1: like like Tim cooked it in China and it might
Speaker 1: take two decades to get there, but they were gone. Okay,
Speaker 1: So let's let's talk about some of these other countries
Speaker 1: that come up here, because India is one that I mentioned,
Speaker 1: But who who else and what else is getting get
Speaker 1: made here? It is part of this effort to to
Speaker 1: expand potentially be outside of China. Right Exactly. We've been
Speaker 1: talking about the iPhone a lot because that's most of
Speaker 1: what Apple makes. But it does make, you know, it
Speaker 1: makes product, it makes other products. It makes the Mac,
Speaker 1: which is being handled in both Vietnam and Malaysia in
Speaker 1: a little bit in Ireland. Um. And then when you
Speaker 1: get to other products, um, you'll see you know, I
Speaker 1: mean it has it has AirPods, it has iPads. Those
Speaker 1: things are also going to be spread about in different ways.
Speaker 1: But Southeast Asia for the Mac and India for the
Speaker 1: phones is kind of the basic way to think about Ireland.
Speaker 1: Ireland was a surprise there for me. Wasn't expecting them
Speaker 1: to double down there. Yeah, you mean in terms of
Speaker 1: what because there's a little technic goes though, I mean
Speaker 1: clearly in manufacturing. My question on a place like Ireland
Speaker 1: is the cost of the labor and how do you
Speaker 1: not end up passing that cost down to the consumer,
Speaker 1: Like I have a double question here of how it's
Speaker 1: going to impact my iPhone bill. Bad questions. Yeah, but yes, consumer,
Speaker 1: I think they I think they pick the things that
Speaker 1: they manufacture there, and it's probably more of an assembly
Speaker 1: role than a manufacturing one, if I'm if I understand that.
Speaker 1: My understanding is in other places, like for instance, in
Speaker 1: the United States, where some macs are assembled, it is
Speaker 1: the very final assembly. It's it's smaller runs, and obviously labor.
Speaker 1: You can just look at where they're doing manufacturing and production,
Speaker 1: and labor costs clearly factor and they're they're targeting lower
Speaker 1: labor costs. So I talked about the screws for a second.
Speaker 1: But Apple does have teams that they are embedding there.
Speaker 1: And I found this to be fascinating too, because there's
Speaker 1: all these like almost like little pieces that they have
Speaker 1: to account for as things get made, that they have
Speaker 1: to make sure that if they were to change supply chains,
Speaker 1: are these little invisible pieces accounted for too, right, Like,
Speaker 1: so talk to us about how focused on the minuscule
Speaker 1: stuff Apple has become. Yeah, these are the these are
Speaker 1: the Tiger teams that Mark mentions in the story. And
Speaker 1: this is another interesting point inside the company, inside Tiger
Speaker 1: teams within Apple. Yeah, and this is another interesting point
Speaker 1: about whether Apple makes these phones or someone else is
Speaker 1: making them. You know, Tiger teams are oftentimes going into
Speaker 1: supplier companies, but these are Apple employees who are They're
Speaker 1: trying to make sure suppliers are sourcing things in the
Speaker 1: right way, the most efficient way, getting the right parts,
Speaker 1: resilient against any disruptions, and really kind of helping them,
Speaker 1: you know, turn the knobs if you will, Maybe you
Speaker 1: turn the knob a little, maybe turn it a lot knobs.
Speaker 1: We're going to be talking about. NASA really want like
Speaker 1: a big Apple knob. That would be great. I mean,
Speaker 1: thirty seconds left here, I mean how I just feel
Speaker 1: like this is just a moment in time where I
Speaker 1: feel like it's the beginning. I'll give you a big change.
Speaker 1: I'll give you Mark's big takeaway, I think, which is,
Speaker 1: look like Tim Cook built this once. Yeah, if anybody
Speaker 1: can do it again, it's going to be him, right,
Speaker 1: like the right person to figure it out. Right. But
Speaker 1: I just optimistic view. I just look at that delicate
Speaker 1: balance because I remember when he was in China because
Speaker 1: we've been starting to hear stories about them changing their
Speaker 1: supply chain, and I thought, wow, that was a big,
Speaker 1: powerful visual of Okay, everything's okay. We're still in China.
Speaker 1: But it's such a delicate balance. Yeah, there you go.
Speaker 1: I'll give you a perfect little boat. I know, and
Speaker 1: I screwed it out. That's what I do. Joe Webber,
Speaker 1: editor of Bloomberg. This is why you're the editor Bloomberg
Speaker 1: Business Week. Here and I'm in here this scene Joshua Brustein,
Speaker 1: Technology Editor, Bloomberg Business Week. It is in the new
Speaker 1: issue of Bloomberg Business Week.