The student has become the master.
That was what I was thinking as I was about two-thirds of the way through Apple in China, a book highly recommended by the author of Stratechery as possibly one of the best books on the tech industry—ever written. In a nutshell, the book chronicles the hardware evolution of the company since the late 90s, after Steve Jobs’s return to the company, and how its core manufacturing shifted from local factories in America, to disparate manufacturing facilities around Asia, to eventually settling around the Shenzhen region in China.
The story told here holds a lot more depth and nuance than the commonly accepted thinking behind Apple’s manufacturing concentration. The popular narrative is that Chinese labor was cheap, so hardware companies—not only Apple, but Dell and IBM and Compaq and many others before them—shifted their factories overseas to a number of East Asian countries. In fact, the early waves of outsourced manufacturing weren’t concentrated in China; these factories were built in smaller countries like Taiwan, Malaysia, and Singapore. It was specifically Apple’s partnership with Foxconn that charted a path that would have both countries invest their technology and people, respectively, into the Middle Kingdom.
The key point, though, is that Apple didn’t enter China with just dollar signs in mind. Their close partnership with Foxconn, combined with the company’s culture of pushing the limits of hardware manufacturing, meant that they were continually inventing new techniques for building phones and tablets while training their Chinese counterparts to build their devices at scale. At the peak of the iPhone’s global popularity, this meant buying billions of dollars’ worth of equipment to supplement their partners’ supply chains, regularly flying engineers over1 to collaborate and debug assembly lines, and employing millions of manual laborers working around the clock for every fall iPhone launch.
Along the way, Apple squeezed its suppliers for thin profit margins. Foxconn was the first to accept these terms, correctly betting that the partnership would succeed from their eventual scale. Other local manufacturers like Lens Technology hesitantly followed, but they soon learned that the lack of profit was a worthwhile tradeoff for absorbing Apple’s innovations around materials science and engineering. It was this tradeoff that explains how iPhones manage to consistently garner 80% of smartphone profits while commanding less than 20% market share; low supplier costs kept iPhone profit margins high, but those suppliers would offer their newfound manufacturing capacities to other phone makers at more sustainable prices.
Customers saw this dynamic play out annually in the 2010s: the new iPhone would introduce some new form factor or materials breakthrough or components packaging, and inevitably, the same features would show up on other phones in a few months. They weren’t just copying Apple’s industrial design; they needed their suppliers to be capable of manufacturing those designs at scale, and those suppliers often only had breathing room for these other orders after the initial rush of iPhones subsided. Apple’s innovations in smartphone hardware powered an entire generation of electronics manufacturing, from top to bottom.
The Chinese government eventually caught on to what was happening and realized this was a great arrangement: Apple could take the short-term profits, but China would use this knowledge to propel itself up the value chain. Apple in China spends a few chapters chronicling the frenzy around Apple hardware in the early 2010s—the “yellow cows” reselling iPhones in the gray markets, scamming Apple’s repair and return policies, and people going to extreme lengths to make enough cash to afford their products. But Chinese phone makers are quick studies, and they went from copying to matching to now exceeding the innovation in hardware that had been defined by Apple engineering. Case in point, the Huawei trifold phone released last year pushed the envelope on foldable screens even as iPhones retain their slab form factor for yet another year.
Buried as an aside through this retelling of the smartphone era was how this playbook was reenacted—for EVs. This was in late 2018, early 2019, just as the company was ramping up its Model 3 sedan, and its business needed both the manufacturing scale and customer demand that China offered. Having learned from what Apple’s technical expertise could do for phones, the Chinese government welcomed Tesla into the country with open arms, breaking ground on their Shanghai Gigafactory in January 2019. The Chinese government forwent its usual demand of requiring Tesla to partner with a local state-owned or state-favored corporation to assert control, betting that the nascent Chinese auto industry would stand to gain more by learning how Tesla manufactures their vehicles.
We can see what has happened in only a few years: the Chinese EV industry has blossomed, with so much capacity and selection that they’re outcompeting American, European, and other Asian auto manufacturers not only domestically but also in foreign markets as well. And whereas Apple enjoyed a decade of being at the forefront of smartphone innovation and mindshare in China, Tesla’s entry into the country never won it the same cachet and brand value. Once Tesla’s battery technology and manufacturing innovations were absorbed by the local talent, companies like BYD and XPeng have been able to iterate faster and more aggressively, churning out a wider range of vehicles more quickly.
Apple in China feels like a niche book at times, but it tells an important and perhaps foreboding tale of globalization. The tech industry is hardly the first to succeed in outsourcing labor-intensive manufacturing to lower-cost regions of the world, but the ecosystem that China has built out to support Apple’s product lines is unique in its breadth and longevity. Since this book was published in 2025, the technical innovations of this arrangement have been deemphasized, overtaken by the unstable geopolitical tension between the US and China, while the company is actively and explicitly moving out of the country. It’s a fascinating story, living up to the cliché that the greatest strength begets—the greatest weakness.
Enough to convince United Airlines to start a new direct route, and when COVID hit, chartering private jets for these trips.↩
