Author Patrick McGee Talks Apple in China

Apple

Across the shows: 23 speakers in other episodes, 14 bullish and 7 bearish calls, past 30 days

• Patrick McGeeBearish

  Apple's China dependence leaves it existentially vulnerable; buybacks should have funded a plan B.

  Since 2013 Apple has spent more than $100 billion a year on buybacks and dividends, more than the seven largest Wall Street banks combined. McGee argues that spending even half of that on supply chain resilience and a plan B outside China would have protected Apple. Its China-centered supply chain now leaves Apple in an existentially vulnerable position. This is McGee's view on Apple's strategic exposure, not on its near-term stock price.

  “I think if they had spent, let's say, half of that [buybacks and dividends], some fraction of that on supply chain resiliency and making sure they really had a plan b outside of China, I don't think Apple would be in the sort of existential vulnerable position that they're in today.”at 14:03

Tariffs & trade policy

• Patrick McGee

  US–China trade decline is rerouting through India and Vietnam; China's global trade surplus keeps growing.

  Since Trump's first-term policies targeted China, China's trade surplus with the US has fallen. But its surplus with the rest of the world rose to about $1.2 trillion last year and grew another roughly 15% in the first three to four months of this year. McGee argues the bilateral decline is because China routes products through India or Vietnam before shipping to the US. The iPhone is still principally made in China, but final assembly in Karnataka earns a 'made in India' label, so the bilateral data looks like rebalancing while nothing has changed. He therefore sees no statistical evidence for the reindustrialization narrative.

  “You have had a decline in the trade surplus that China has with The US. But China's trade surplus with the world has gotten far far larger.”at 20:28

• Patrick McGee

  Trump administration is overlearning the deindustrialization lesson and resists deeper ties with Mexico and India.

  McGee argues the US's real advantage is its network of allies and interdependence. He says the Trump administration is overlearning the lesson of deindustrialization and is not in favor of deeper relationships with Mexico or India, the countries that could absorb supply chains moving out of China. He wants an expanded NAFTA, which he says the MAGA base does not want.

  “I feel the Trump administration is often overlearning the lesson of how things have been deindustrialized, and they're not in favor of more and more relationships with Mexico or India... I want an NAFTA on steroids.”at 24:48

China's economy

• Patrick McGee

  Apple's supply-chain investment built Chinese industrial clusters that now fuel Chinese rivals, so China wouldn't be China without Apple.

  McGee says Apple's China investment was a nation-building effort. Apple's machinery purchases for Chinese factories ran about $55 billion a year, excluding components, and paid wages for up to 3 million workers. In 2016 Apple pledged $275 billion over five years. McGee says that is more than double the Marshall Plan's inflation-adjusted $131 billion over four years. The effort trained millions of workers and formed industrial clusters. Those clusters then supplied Xiaomi, Huawei, Oppo and Vivo, which collectively hold almost 60% of global phone share, so the iPhone build-out also strengthened China's domestic electronics industry.

  “I actually argue that China wouldn't be China without Apple.”at 2:10

US–China AI & chip race

• Patrick McGee

  China will use AI to supercharge factory production and could reach 45% of global manufacturing by 2030.

  McGee says China's AI spending is practical, not hype: 3% to 5% gains on production lines across hundreds or thousands of factories. China's existing production-line advantage is measured in years for an optimist and decades for a pessimist. Combined with AI, it is already on a trajectory toward 45% of global manufacturing production by 2030, a United Nations projection made before AI was considered. He worries that US frontier-model leads, which he says David Sachs would measure in months, are less durable than China's manufacturing dependence is growing.

  “And once they supercharge that with AI, they're already on a trajectory to have 45% of global manufacturing production by 2030, according to the United Nations.”at 22:05

Manufacturing & industrial policy

• Patrick McGee

  The US cannot replicate China's manufacturing model; its edge is allies and interdependence, not factory scale.

  McGee argues each obstacle to copying China's industrial policy is insurmountable. China has more than 300 million migrant workers who move between factory towns for years at a time, a labor pool larger than America's working population, and they fill factories and service jobs. He compares it to Steph Curry facing a twin-tower team: the US should play its own game rather than try to match China's industrial policy. The US's lasting advantage is its alliance network built after World War Two, while China has one formal ally, North Korea.

  “China has more than 300,000,000 migrant workers who go from factory town to factory town for a defined period maybe of a couple years... I mean, we're just not going to compete in the way that China competes.”at 23:36