America’s tech sector is in its first crisis in a long time. Nearly 230,000 jobs have been eliminated since the beginning of 2022, and there are additional layoffs announced daily. Even the big corporations are stumbling: Google, Amazon and Meta have recently made the biggest mass layoffs since their inception.
The world’s largest tech company in terms of stock market value, however, is missing from all this news. Apple has amazingly avoided mass layoffs so far. And the Cupertino-based company is also doing much better on the stock market than its competitors. For several months, Apple was worth as much as Alphabet, Amazon and Meta combined. What is Apple doing better than anyone else?
The company has, for a start, been hiring more cautiously. Growing cautiously is part of the company’s culture – the last mass layoffs happened in 1997, when Steve Jobs returned to Apple and let go a third of its then 14,500 employees. Over the past three years, Apple’s workforce grew by 20%, matching the growth trend of previous years.
The competition, on the other hand, hired more people during the pandemic than ever before: Amazon’s workforce doubled, Meta’s grew by 94%, and that of Microsoft and Google each grew by more than 50%. Today, 164,000 employees work for Apple, a good 40% of them in retail. Instead of having to lay off masses of employees, Apple has so far been getting by with hiring fewer new people and not refilling newly vacant positions. Similarly, individual expiring contracts with external service providers are not being renewed.
However, Apple is not only generally cautious when it comes to new hires. The company also offers comparatively fewer perks, that is, special benefits for employees. At the company headquarters in Apple Park, there is no canteen with free food like at Google and Meta. A free cleaning service like the one offered by fintech startup Stripe is also nowhere to be found. Likewise, salaries are generally not as exorbitant as those of the competition. It is well known among techies in the Valley that they cannot necessarily expect to make the most money at Apple – Meta frequently has that reputation.
Tim Cook is considered by many to be a boring CEO – which benefits Apple
In addition, Apple is led by a CEO who is considered boring by many in the Valley.
Unlike Mark Zuckerberg or Elon Musk, Tim Cook avoids controversy. When Musk recently went on a rampage on Twitter to express his outrage at Apple – he was annoyed by the high fees in the App Store – Cook did not fire back in 160 characters. He also did not respond in the style of the comic gifs Musk has previously sent. Rather, he quietly invited Musk to Cupertino the following week and personally showed him around Apple Park. No details emerged from the conversation, but at the end of the day, Musk tweeted like a purring kitten, «Thanks, Tim Cook, for taking me around Apple’s beautiful HQ. Good conversation.»
«Cook is the most pragmatic of the tech CEOs,» Gene Munster of Loup Ventures told «Business Insider». «He’s the most risk-averse, and I think that plays into how they’ve been doing their hiring.»
Cook’s performance at Apple is particularly remarkable when one looks back 12 years and considers the shoes he had to fill. When Cook succeeded Steve Jobs as CEO in 2011, the world could not imagine the company without the iconic co-founder Jobs. But under Cook’s leadership, its stock market value has increased from $300 billion to a recent $2.3 trillion, making Apple the most valuable company in the world. «No CEO in history has created so much value,» says business book author and former investment banker William Cohan. According to him, Cook is celebrated far too little.
Apple does not earn its money with customer data and advertising
However, the biggest difference between Apple and the rest of the big tech companies is arguably their business model. Unlike Meta and Google, who ultimately rely on advertising, Apple does not primarily earn its money with customer data, but with hardware and software. This not only makes Apple less dependent on cyclical fluctuations in advertising budgets, as we are currently experiencing. Instead, the company is in the driver’s seat when it comes to shutting down access to customer data – as in 2020, for example. Since the iPhone software update iOS 14, users first have to explicitly consent to allow apps like Facebook to access their data in the background. Many say no to this, and Facebook, Google and Co. are thus lacking the data basis for their advertising business. This is one of the reasons why they have been suffering from a weakening advertising market for months.
In recent years, Apple has also better managed to base its business model on several pillars than its competitors. Of course, its mainstay is still the iPhone, which, even after 15 years, accounts for around half of all sales. For a long time, analysts and journalists have been asking, «What’s next for Apple after the iPhone?» A look at the company’s sales provides the answer: the iPhone. In a remarkable way, Apple has managed to reinvent its flagship product time and again.
But the company generates a good quarter of its revenue with its other hardware, such as the iPad and Mac computers – and another quarter with its constantly growing services segment: from fitness to streaming to finance, there is now hardly a service sector in which Apple is not active. Apple has created its own «metaverse,» says Cohan – a universe where customers like to hang out, spend a lot of time and pay handsomely for it.
The company is also vertically integrating more and more parts of the value chain, most recently the production of the ultra-fast chips that run its computers and smartphones. This allows Apple to optimize the interaction of hardware and software down to the last detail and further reduces its dependency on external chip manufacturers. The problems with the latter became evident, for instance, in the chip shortage during the pandemic. Wedbush Securities analyst Dan Ives recently told the news website Business Insider that he is convinced that Apple is still in a remarkable growth mode even after 47 years.
The company is also working on other «moonshots», that is, ambitious projects for the future – such as a mixed reality headset and a car. But here, too, Cook is investing conservatively. At Apple, these playgrounds do not devour enormous sums of money like at Alphabet or Meta, where Mark Zuckerberg seems to be getting lost in the metaverse.
The greatest danger for Apple is in China
However, even Apple is not immune to problems, which has become particularly evident in recent months. The biggest threat to the world’s largest tech company is the dependence of its supply chains on China, which is more intense than its competitors. «Designed in Cupertino, manufactured in China» is now written on almost all Apple products. Cook has built up a unique network of suppliers in China: 85% of Apple’s most important product, the iPhone, is manufactured in a single Foxconn factory in China – a cluster risk that is atypical for Apple.
Last quarter, this dependency took its toll when «iPhone City» in Zhengzhou came to a standstill for an extended period of time. Due to China’s rigid «zero-COVID» policy and employee strikes, the production of the new iPhone 14 came to a forced halt – in the middle of the Christmas shopping season, the most important time of year for Apple. The company experienced its most serious supply problems to date. This could also be the reason why Apple might report its first quarterly sales decline in three years on Thursday.
Cook seems to have realized that China has become his Achilles heel, and is trying to put the global supply chain on a broader footing. Vietnam and India in particular are expected to play a greater role, and production is also being increased in Mexico. Soon, not 5%, but a proud «25% of Apple’s global production will come from India,» the Indian Minister of Commerce recently rejoiced.
The fact is, however, that it will probably take Apple a long time to reduce its links to China, because they are more tightly meshed than those of other tech corporations. Experts also believe that Apple will never completely leave China – and yet the company is now likely to lead the «no longer made in China» movement.
A second danger lurks on the legal side. From Brussels to Washington, numerous regulatory authorities have accused the company of having established a monopoly with its App Store. They are particularly annoyed by the high commissions of up to 30%. But here, too, it is becoming clear how pragmatic Cook is as CEO: According to media reports, Apple is already tinkering with ways to enable its users access to alternate app stores, at least in Europe, in order to escape a possible billion-dollar fine from the EU.
