Apple in China and How Countries Can Learn

One thing that struck me while reading Apple in China is that the lesson is not really “Asia had manufacturing capability.”

That is too simple.

In the book, the early factories Apple worked with were often rough. Korea was described as bare-bones and scrappy. A senior Apple engineer thought the systems were crude, with very little high-quality automation. Taiwan was not magically ready either. Quanta’s early quality and development capability were subpar, and one engineer described the experience with words like treachery, ineptitude, sloppiness, and negligence.

Shenzhen was the same. Fast, enormous, hungry, but the quality was horrendous by Western standards. Buildings were handmade and slapdash. Speed and scale came before quality.

So the interesting point is not that Apple discovered fully formed manufacturing excellence in Asia.

The interesting point is that capability was created.

Apple brought impossible product specs. It brought volume. It embedded engineers directly inside suppliers. Apple veterans said nobody else was sending dozens of engineers into Taiwanese suppliers and pushing what was possible in that way. Chris Novak was sent to Taiwan to help bring up quality and called one factory pretty deplorable.

That is the mechanism.

Demanding customer + embedded engineers + hard product specs + volume + supplier reinvestment = capability creation.

But China was not passive in this.

That is also important. The government did not just wait for Apple and Foxconn to show up and magically create capability. It made the whole thing easier.

Taiwanese contract manufacturers basically understood that you would be an idiot not to be in China. The labor pool was enormous. Local governments were hungry. Government employees even had quotas to source migrant labor. They helped with land, equipment, permits, infrastructure, and whatever else made scaling faster.

So the incentives were huge, but it was not only about incentives. The state was actively trying to remove friction. It made China easier to operate in, easier to expand in, easier to hire in, easier to build in.

That matters because supplier development needs an environment around it. Apple could pressure suppliers, but China made it possible for suppliers to absorb that pressure at insane scale.

This also connects to something Dan Wang writes about in Breakneck, which I totally recommend. China has an engineering mindset. When the goal is clear, that mindset can be extremely powerful.

If the objective is to build factories, move labor, expand infrastructure, reduce bottlenecks, increase output, and optimize for a concrete result, China can be terrifyingly good. The system is built to ask: what is the outcome, and what do we need to do to get there?

But that same strength can become dangerous when the goal itself is wrong, illogical, or politically distorted. If the target is bad, an engineering state may still optimize very efficiently toward it. That is the uncomfortable part.

This is an important distinction. A country or company does not need to begin with world-class capability. It needs the right slope. It needs customers who demand more than it can currently do. It needs people willing to sit inside the factory and transfer knowledge. It needs volume large enough to justify reinvestment. And it needs suppliers hungry enough to absorb the pressure instead of rejecting it.

That is how Korea, Taiwan, and China learned.

I think about this now with Vietnam.

Samsung has been in Vietnam for years, and it clearly matters. There are supplier-development programs. Some capability does transfer. People learn. Managers learn. Local suppliers get pulled into the orbit of a world-class company.

But I am not sure it is the same as Apple’s historical role in China and Taiwan.

The question is how deep the transfer goes. Are Vietnamese suppliers being forced into hard, high-precision, high-volume components? Or is Samsung keeping the highest-value knowledge inside its own system while Vietnam mostly hosts assembly and supporting work?

Luxshare raises an even harder question.

Luxshare is already a Chinese Apple-trained supplier. If it moves production to Vietnam, does Vietnam learn? Or does Vietnam simply host Chinese-managed assembly?

That difference matters enormously.

Foreign direct investment is not automatically capability creation. A factory can employ people without teaching the country very much. A supply chain can move geographically without transferring its real knowledge locally.

The deeper question is not: are factories coming?

The deeper question is: who is learning?

That is what Apple seems to have done in China. It did not just buy from suppliers. It helped create them. It forced them up the learning curve, one impossible product after another.

That may be the real development lesson.

And maybe one has to ask, from the US perspective, whether it was positive in the end that Apple did this. It was certainly positive for Apple shareholders. But a lot of know-how was transferred, and even in the book, Foxconn has Apple train its engineers and then rotates them.

So is Korea or China making the same mistake now? I do not know, but it is an interesting question.

It is also interesting because people often think FDI is what grows an economy and enables technology transfer. But Apple was not really doing FDI at all. It was doing something stranger and maybe more powerful: supplier development through relentless pressure.