How Apple Rules the World

Jobs, who championed firm control over Apple’s integrated hardware and software,4 was pushed out in 1985, the year of PageMaker’s release. When he returned 12 years later, he desperately needed developers to make things for the new iMac, and the company’s control stayed loose for a while. At an Apple event in New York a month before the iMac’s release in 1998, Jobs bragged that the company had amassed 177 third-party apps. By the standards of today’s Apple, this was minuscule; at the time, Jobs called it a “huge” milestone.

As the company’s products became more popular, its relationships with developers started to change. In the early 2000s, Apple thwarted other companies’ attempts to build their own digital stores to sell music directly to the iPod. This kept things simple for the customers buying songs from iTunes at 99 cents a pop and arguably helped make the iPod a hit. It also ensured that Apple collected about 30% of sales. The 30% “tax” became the norm in the iPhone era—not only for music, but also for any piece of software sold through the App Store. In Apple’s view, this commission was more than reasonable given the costs of running the vast marketplace. And Brainerd says 30% is a pittance compared with the cuts that physical retailers took on his packaged software back in the day.

With this virtual storefront, Jobs was able to make more of Apple’s guidelines mandatory. Starting in 2008, software creators had to submit every mobile app and update to Apple’s review team before they could offer it to iPhone users, a process Apple saw as key to maintaining the device’s quality and security. Large groups of employees sitting at iMacs were each expected to assess 30 to 100 apps a day, rejecting software that was crappy, scammy, obscene or otherwise objectionable. If they screwed up and approved something Jobs felt they shouldn’t, the CEO himself would scold the review team, according to its then-head, Phillip Shoemaker. Four former app reviewers who worked for Apple during the 2010s say its regulations seemed arbitrarily enforced and bent to suit its financial interests. Apple says that reviewers base decisions on Apple’s guidelines, not subjectivity, and that the App Store has dramatically lowered the barriers for developers to reach consumers and earn money.

As Apple’s lists of rules grew longer, training for new reviewers sometimes stretched to two months or more. They became oddly precise in certain ways (no more “fart, burp, flashlight and Kama Sutra apps,” the company ordered at one point, citing a glut) and vague in others (it frowned on apps that were “complex or less than very good”). Apple also barred novel ways to add in-app purchases or subscriptions that would have allowed developers to circumvent the 30% fee. Rejection emails to developers tended to be opaque, with scant information on how to correct software issues. Apple says that its review team fields more than 1,000 calls per week from developers to help them resolve compliance issues and that there’s an appeals process for those who feel they were unfairly rejected.

Jobs’ exacting standards and his penchant for showmanship—embodied by his ironic use of the phrase “one more thing” to tease the biggest news at launch events—led to results. By the time he died in 2011, the App Store was a massive economy unto itself. It listed more than 500,000 apps for the iPhone and iPad. That year, Apple sold 72 million iPhones and 32 million iPads, and its market value rose to about $400 billion, almost double that of Microsoft Corp. If you’re under 40, it’s tough to appreciate what a dizzying reversal that was. For a generation, Apple computers had been the underdog, the niche province of kids, graphic designers and Bill Gates haters. Five years before Jobs’ death, on the eve of the iPhone’s announcement, Microsoft was still worth four Apples. Now the underdog was king.

Jobs’ successor was chosen to lock in those gains. Tim Cook wasn’t a design guru, and he wasn’t seen as having much interest in the creative side of the business. He apparently hadn’t shared Jobs’ disdain for the beige sameness of the average PC, either. Cook was a process guy and a cutter of costs. He’d been the one in charge of Apple’s hardware supply chain, a role he’d trained for by doing the same at Compaq and, before that, at IBM, the computing superpower that Apple implicitly framed as Big Brother in its “1984” ad.

To Jobs and his lieutenants, Cook got results somewhere between genius and miracle worker. He slashed warehouse inventory from a month’s worth of stock to a day’s worth, eliminating the costly risks of overproduction. He transformed Apple’s supply chain into a built-to-order powerhouse that rivaled Dell, then the gold standard of efficiency. He negotiated with the Taiwan-based manufacturer Foxconn to assemble the company’s devices in China for far less money than they would have cost if they’d been made by Apple workers elsewhere.

All these things worked out for Apple, allowing it to manufacture high-end phones cheaply while it effectively swallowed the majority of global smartphone-industry profits. The company’s suppliers, on the other hand, experienced something akin to the “Walmart effect”—the term coined to describe the dislocation created by dumping an enormous amount of business on a small company or community, sometimes with disastrous results. Foxconn employees, most of them young migrants, decried exceedingly low wages and long hours in what they and human-rights advocates described as labor camps where workers slept 10 to a room. During the first half of 2010, at least 10 Foxconn workers took their own life. “I feel empty inside,” a worker told Bloomberg News at the time. “I have no future.”

Foxconn raised salaries, created a hotline and installed suicide prevention nets, and Apple proclaimed the crisis resolved. In the years that followed, though, criticism from labor activists became a regular occurrence.5 Apple’s defenders argued that the complaints about Foxconn may have said less about Apple than about life in China for poor workers. On the other hand, Apple wasn’t always so obsessed with paying the lowest possible wages. The original Mac was assembled in Fremont, California.

Foxconn and its shareholders have found the Apple partnership tremendously profitable,6 though less important suppliers have griped about tactics they consider indifferent at best and predatory at worst. The most infamous of these was GT Advanced Technologies Inc. In 2013 it signed a deal with Apple to open a factory in Mesa, Arizona, to manufacture sapphire as part of an effort to make iPhone screens ultradurable. Within a year, the company was broke. In a bankruptcy declaration, a GT Advanced exec blamed Apple for a “classic bait and switch strategy” and dictatorial pricing that left it bearing all the risk, allegedly once demanding that the team put on their “big boy pants and accept the agreement.” The sapphire screens never came, and Apple, which disputed GT Advanced’s characterization and blamed the company for mismanagement, moved on. (GT Advanced later settled, without admitting wrongdoing, an SEC lawsuit that charged it with misleading investors. Apple settled a class action brought by GT investors while denying wrongdoing.)

In the decade that followed, a pattern emerged. Apple would sign a long-term deal with the supplier of a key component while working, in secret, to design an in-house replacement that would eventually render that supplier irrelevant. In 2017, for instance, the company told Imagination Technologies Ltd., which provided designs for iPhone graphics processors, that it was now building its own version of the chip, known as a graphics processing unit, or GPU. Imagination claimed the substituted chip infringed on its patents and amounted to theft. Apple eventually agreed to a new license deal, but by the time that happened, Imagination’s share price had collapsed and it had been sold to a China-backed private equity firm.

Three years later, Apple revealed it was winding down a long-term partnership with Intel Corp., choosing instead to use what it called “Apple silicon.” These chips were designed in-house and manufactured by Intel’s rival, Taiwan Semiconductor Manufacturing Co. The decision was understandable, and other big tech companies were taking similar steps. Intel had repeatedly delayed its next-generation chip and fallen behind TSMC. But Apple’s move coincided with a tailspin from which Intel has yet to fully recover.

This chain of events had geopolitical implications. Intel is the last American semiconductor company that makes its own state-of-the-art chips rather than outsourcing production to factories in Taiwan or South Korea. So Apple wasn’t simply imposing its supply chain methods on its partners. It was, to some degree, imposing its model on the US semiconductor industry, a key component of America’s economy and its national security.