Apple’s “Made In China” Policy.

Apple New York.

At 5 O’clock eastern time, Tim Cooke CEO of Apple Computer will take to the podium and introduce the latest earnings conference call for the technology giant.

For 11 years Cooke has guided the companies through the ups and downs that come from being a multinational corporation, with operations that literally stretch around the world.

But seldom will he face, the challenges and questions that he’ll have today.

Cooke will want to spend lots of time, extolling the stunning second quarter of 2022 just completed. He will talk about wonderful sales and bountiful earnings.

And if my guess is correct, he will carefully avoid, to the extent possible any reference to the future of Apple. That will likely fall on the shoulders of Luca Maestri. Something that the seasoned Chief Financial Officer of Apple is more than used to.

And it’s the immediate future of Apple, that holds so many questions. Questions that arise directly from the Apple Business Model.

For four decades, Apple has operated with its marketing and design facilities here in the US. While it’s manufacturing plants, Apple calls these “assembly plants,” all located in Asia.

Now there’s no arguing with success. This model, combining first world, US technology, with the third world, Chinese production has created perhaps the most profitable company in the world over the past nearly 40 years.

But this reach for profits has also come at a price. Apple is no longer master of its own fate. Overseas production is performed by a series of vendors, of which the largest is Foxconn. The Taiwan headquartered, Chinese mainland based production factory.

This has relieved Apple of all of the compliance issues present in China. No worry about meeting a Chinese-based payroll. Or adhering to Chinese-based laws and regulations. Let Foxconn deal with all that.

As I say, this has been a strategy that has worked incredibly well, up until the outbreak of Covid-19, in 2020. And the Chinese willingness to shut down large swaths of their population to fight the spread of the disease.

Today Foxconn operates four plants in China, on behalf of Apple. These plants assemble such core products as the iPhone and iPad.

And Foxconn has gone to extraordinary lengths to isolate its workers from the general Chinese population. Went so far as to provide special quarantined dormitories for their workers. And busing them back and forth to work. Totally outside of Chinese society.

But that may not be enough for the Chinese authorities. Reports are that at least two and possibly all four of those Foxconn/Apple plants are now closed. Potentially shutting off the major source of Apple products worldwide.

For CEO Cooke and CFO Maestri this all presents an intractable problem, one that will be extraordinarily difficult to navigate. This is in spite of the fact that Cooke et al, has gone out of their way to maintain close relations with the CCP leadership, and most especially Chairman Xi Jinping.

Remember that quarter-billion-dollar, private deal between Cooke and Xi that made headlines about 6 months ago?

So here you have it. One of the world’s most powerful and influential multinational companies, Apple Computer. At the mercy of a ruthless Chinese dictatorship. Unable to predict just when their basic production facilities will be permitted to come back online.

And although Apple, in recent months has moved some production away from China. The question remains: is it enough to sustain Apple’s level of growth and profitability?

Many questions today for Tim Cooke, and the management team at Apple Computer. You can listen in at their Investor’s Relation’s Website beginning at 5 pm eastern time.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
David Reavill

David Reavill writer + finance +iconoclast + hiker + Pennsylvania #valueside daily podcast + medium + meditate valueside.com/links