The Impact of Apple CEO Tim Cook’s Visit to China & Global Commodities Markets on World Affairs
This story was originally published in Areas & Producers
It’s Easter in the Western World, though not for the Orthodox Christians, as they will celebrate Easter on May 5. Meanwhile, the Islamic World is celebrating Ramadan during a serious time of fasting. This hasn’t stopped the war between Israel and Hamas from escalation. But what seems to have happened this week is that the media diverted the geopolitical risk perception from the Middle East Conflict to China.
Most people reading this probably already know about the recent tensions between China and The Philippines in the South China Sea. This has been simmering after China brought on some serious warnings to Taiwan along the maritime border between the Mainland and the Island a few weeks ago. This time around, China even rammed the side of a boat being operated by The Philippines — but that now sounds like a comedy event after what happened to the Francis Scott Key Bridge in Baltimore this week (sigh).
But forget about The Philippines and Taiwan for right now, because Apple CEO Tim Cook was in China recently! Along with other CEOs, of course, who got a lot less attention. For instance, CEO of global mining giant BHP Group, Mike Henry, gave a very insightful and interesting speech about how important China is to the company’s strategy going forward. As one of the largest metals and mining companies in the world, it is quite significant that a mining CEO and consumer tech CEO would be giving their full — and undivided — attention to China and the country’s Premier Xi Jinping.
Everyone should be focused on China’s relations with the world. The elections in Taiwan were critical to China-US relations, but also other factors in International Relations such as China’s Belt and Road Initiative (BRI). The China Rise theory has essentially transformed into a China Threat theory from most of the Western academia concepts of contemporary International Relations. How did we get here in the Western World?
Explore more content about the impact of Apple CEO Tim Cook’s visit to China & the global commodities markets on World Affairs in the publication Areas & Producers below.
Where else would Apple be able to go for microchips and lithium-ion batteries?
I found an op-ed piece on CNBC by Dewardric L. McNeal, Founder and Managing Director of Longview Global. Longview Global is an international and strategic consulting firm providing advice to companies on how to navigate geopolitical tensions.
In today’s world, this type of advice cannot be understated, as the US-China relationship is turning a tricky corner and the European Union heads for another full year of the Russia-Ukraine War on NATO’s doorstep. Here’s the op-ed piece by McNeal discussing Apple CEO Tim Cook’s visit to China this week, with an interview between McNeal and CNBC reporters.
Now, here are my thoughts about the article.
“For decades, the formula seemed straightforward: show up, show respect, and pledge high investment in China, and in return, hope to gain access to the perceived vast markets and manufacturing prowess.
Tim Cook’s recent sojourn in China, including pledges of increased investment and the expansion of research and development facilities, exemplify this tried and tested strategy. Tim Cook’s narrative of China as ‘critical’ to Apple, coupled with his admiration for the country’s advanced manufacturing capabilities, embodies the ethos of this engagement playbook.”
It’s an engagement playbook that has worked for Apple — the most valuable consumer tech company in the world. And of course the company will pledge to keep its strong presence in China; China is the cental hub for Industry 4.0 investments (aka: the Fourth Industrial Revolution). Anything that requires manufacturing and technological innovation is now being referred to as “advanced manufacturing”. These trends fall under the umbrella of Industry 4.0 investment strategies that prioritize research and development (R&D) capabilities over human labor and corporate management structures.
Even though many people in the US want to see the Made In China era come to an end, the fact is that Made In China is only just getting revamped under this Industry 4.0 era. And it’s going to be…big! All companies want to increase their profits, and return money to shareholders, all of which Industry 4.0 allows them to do, while cutting down significantly on global operating and labor costs (that’s right: hello AI; goodbye human labor).
“It can be argued that the turning point came long ago, with Google’s high-profile exit from China in 2010, despite previous attempts by its CEOs to engage with Chinese authorities. The challenges faced by Google underscore the complexities of operating in China under its stringent regulatory environment, regardless of adroit high-level CEO diplomacy.
The Facebook case is particularly instructive. Meta CEO Mark Zuckerberg went to notable lengths to court China, demonstrating a willingness to engage deeply with Chinese culture and business practices. He learned Mandarin and used it to communicate during public appearances and meetings in China.”
McNeal uses the examples of Google and Facebook to explain his theory about why China is no longer the best place for tech companies to invest in for the long-term. Well, Google and Facebook are not Apple! Apple relies on a just-in-time manufacturing strategy which relies on a cheap, efficient supply chain sprawling throughout China and other countries throughout Asia-Pacific, notably Taiwan.
Where else would Apple be able to go for microchips and lithium-ion batteries? It’s about the entire region for a company like Apple. Google and Facebook do not face the same predicament since they do not manufacture consumer tech products — even though Meta has tried to break into this space with AR/VR acquisitions and investments. But that’s not relevant in this case. What’s relevant is that Apple is an advanced manufacturing powerhouse, and so is China, with its cheap labor, efficient supply chains and geographical proximity to Japan, South Korea and Vietnam.
“Strategic alignment with China’s market and technological ambitions risks ensnaring companies in the crossfires of the escalating trade and technology wars between the U.S. and China. This battleground, marked by efforts to control emerging technologies with potential military applications, presents a perilous terrain for companies caught between nationalistic policies and their own global market aspirations.”
Finally, I agree. But this has already been a tested point during the infamous trade war carried out by China’s President Xi Jinping and former US President Donald Trump in 2018. I was in Shanghai during the trade war. I didn’t notice any less people going to the Apple Store at their local mall. Shanghai has hundreds of malls, and most of them, at least the mid-sized ones, have an Apple store in them. Everytime I went to a mall in Shanghai, I saw loads of people at the Apple store. Anytime, any day, people in Shanghai were hunting for a new Apple phone.
However, my thoughts changed when I went to Beijing in 2019. I had just spent a few years in Shanghai, thinking that Apple was king in the China market. But there was a different mood among the people in Beijing. I noticed people were paying very close attention to my phone at the time, which was not an Apple; it was a Hisense phone. I was proud of it, though not because it was a Chinese brand, but because I got a good deal on it. I also noticed right away that Baidu and other popular Chinese internet companies had a much larger presence throughout the city. I guess the trade war meant more in Beijing than it did in Shanghai.
Oh, where were the CEOs this week? They were not in Beijing, which is where they ought to be. They were in Hainan, an island located in the southern part of China, and very close to the South China Sea. My point is that most of the CEOs do not know what is going on in Beijing because they spend most of their time in cities like Shenzhen, Shanghai and Hangzhou, without knowing the mood in China’s capital city. Politics in China will dictate future economic policies, regardless of thriving tech cities.
ESG & Production Issues Are Taking Hold of Commodities Markets This Week
It has been widely reported today that the global cocoa prices hit $10,000 per metric ton of cocoa beans. According to a report by CNBC, global cocoa prices on the Futures for May delivery registered at $10,030 per metric ton on 26 March 2024.
The price surge caused Hershey CEO Michele Buck to tell CNBC reporters:
“As we look at those record cocoa prices, certainly it’s a dynamic market and those are a challenge but we have lived through market volatility and fluctuation in input costs before. We have a good hedging strategy and we have really good price visibility on those inputs into 2024.”
The Hershey CEO wants to sound confident to investors, of course, but the company will need to do a lot more than just hedge their investments — the key issue is that production coming out of West Africa’s Ivory Coast and Ghana are causing long-term problems for the cocoa crop.
In an article by Business Insider on the global cocoa market, analysts have attributed these concerns to supply chain disruptions as well:
“These supply disruptions generate a significant imbalance in the global cocoa market, as the world is consuming much more cocoa than it can produce, leading to a sharp increase in prices.”
This all sounds to me like a disastrous concoction of production inefficiencies leading to higher supply chain costs. Plus, there’s the looming specter of climate change issues and West Africa politics — did you hear about the various military coups and violent protests there?
I am bullish on agricultural commodities, however, since the world needs to eat and countries like Ivory Coast and Ghana will make it plain-and-simple for companies to invest in their production capacity. One of the advantages given to these countries during rising cocoa prices is that companies like Hershey and Cargill will be more than willing to invest more of their precious funds into the production capacity for cocoa.
Without confidence in West Africa production investments, there wouldn’t be much of a need to ensure investors that these companies can continue to satisfy global consumer demand for the rich, dark chocolate products on the global markets. Pinching pennies on a chocolate bar is not the same thing as cutting back on fuel consumption. Chocolate is more like cigarettes for consumer behavior.
It’s important to know how the world’s largest agriculture companies are playing a role in food systems of the future. Read more about the global agriculture trends in Areas & Producers.
In a surprising development for the future of liquified natural gas (LNG) supplies, Reuters reported that the French bank Credit Agricole has decided to withdraw support for two key LNG projects in Mozambique and Papua New Guinea.
It is unclear whether the decision was made for economic or political reasons, but some of the comments from the public suggest that the projects are likely to go on without Credit Agricole’s financial support. Here’s what a spokesperson for Friends of the Earth France said:
“Credit Agricole must now show consistency, and stop supporting the Mozambique LNG project that TotalEnergies is currently seeking to relaunch.”
The LNG projects in Mozambique and Papua New Guinea are designated as key supplies for natural gas in the future. There’s already a lot of controversy surrounding natural gas supplies due to the Russia-Ukraine War and the US policies toward LNG exports. Read more on the US LNG export policies with this story about New LNG Export Projects in the USA Will Go Under Review by Biden Administration.
Over the last two years there’s been a lot of fears surrounding energy security. Even while prices were going up, OPEC+ decided to start voluntarily cutting oil output among its members. Meanwhile, LNG as a energy transition fuel is getting a lot of attention of global energy markets.
The biggest story for LNG in 2022 was the China-Qatar supply deal — touted as the world’s largest-ever LNG supply deal at $60 billion over a total of 27 years. This is probably why global energy producers are pointing to China’s mad rush for LNG as a key indicator of global energy market demand.
Read more about global LNG demand and security dynamics in this edition of [Industry Talk Time] by Areas & Producers.
