Arguably more than any time in the past decade, the political pressure is on for Apple (NASDAQ:AAPL) to bring back at least some of its manufacturing jobs from overseas. Beyond overtures from President-elect Donald Trump himself, his victory in November shows a resurgence of a nationalist mentality across large swaths of the U.S. population. The company is now tasked with navigating an increasingly complex political landscape while balancing its financial and operational needs, including the massive globalized supply chain infrastructure that it has built over the years.
Apple can't just come out and say "no," even if it wants to. Yesterday, The New York Times published a thorough investigative report on Zhengzhou, China, known as "iPhone City." It's a great read for Apple investors, but if you read between the lines, you may notice the possibility that Apple could be subtly pushing back on the current political pressures.
Pressure pushing down on me
One of the ways that Apple has changed under CEO Tim Cook is that it is much more engaged with the media. Trading access for positive coverage is one of the oldest tricks in the media playbook, and Apple long played this game in spades under Jobs. But Cook implemented a major shift in communications strategy, hoping to make Apple more approachable. While Jobs used to hog the spotlight, Apple now regularly grants executive interviews with media outlets.
Even if outright positive coverage isn't part of the deal, companies also often grant access in order to have at least some influence on the direction or tone of a story. That's why it jumped out to me that COO Jeff Williams was quoted directly in the report. "I was impressed," Williams said when discussing the early evolution of Apple's partnership with Foxconn. "They were very focused."
It's a tiny snippet -- just seven words -- but that's not the point. The point is that Apple made Williams available, and in exchange was potentially able to have a say in how its China operations were portrayed. For the most part, the report is mostly descriptive, detailing the wide range of incentives that Foxconn scored to set up shop on Apple's behalf, as well as just how complex and developed the whole operation is. You get a sense that this is a massive machine that hums along, churning out one of the world's most popular products at mind-boggling volumes -- because it is. The tone is almost reverential.
Compare that to the harshly accusatory tone that the Times took in 2012 in its iEconomy series, for which the publication won a Pulitzer Price for in 2013. For instance, even the headlines alone for some of the parts were fiercely critical:
- In China, Human Costs Are Built Into an iPad
- How Apple Sidesteps Billions in Global Taxes
- Apple's Retail Army, Long on Loyalty but Short on Pay
If the headlines were that damning, you can only imagine how negatively the articles themselves portrayed Apple. (You should read the whole series if you haven't already.) Note that the reporter for yesterday's story, David Barboza, contributed to the iEconomy series.
That brings a building down
This is conjecture on my part, but it seems quite possible to me that Apple was able to favorably sway the tone of the report by contributing to it and granting executive access. There was no discussion about human rights concerns, which used to be an easy weakness to call out (even though Apple has made progress on that front since 2012). There's some discussion of tax avoidance near the end, but that part is mostly more of the same. Apple is extremely thoughtful, deliberate, and intelligent when it comes to influencing the media, so it's hard to chalk it up to coincidence.
That's especially relevant if the takeaway is that Apple's manufacturing infrastructure is simply too massive and entrenched to move anywhere else. That fact may be obvious to most investors, but promoting the public perception (via a high-profile report at a reputable media outlet) that this is true could relieve a tiny bit of that political pressure.