Tim Cook talked at the Goldman Sachs Technology and Internet Conference about working conditions in their manufacturing plants, the future of the iPhone, iPad and Apple TV, what Apple is going to do with their cash, and what he will do to leave his mark at Apple.
Cook was asked about the working conditions in Apple’s manufacturing plants and he answered that Apple has been concerned with this, not just in China but all over the world, for a very long time. Apple also thinks education is very important to improving the worker’s lives and provides free education to their workers and partners with local colleges to do so. Many people go on to attain associate’s degrees through the classes Apple provides. Apple constantly audits their supply chain to fix problems and they report everything because they believe transparency is very important.
One of the areas Apple has worked on is to prevent underage workers from being hired, and if someone is found doing so that the supplier is fired. Apple is also focused on safety, and if a plant fails their safety inspection then it won’t be used until they fix the problems. Apple also has a cap on people working 60 hours a week, but many companies were violating that so Apple is working harder to make sure this is stopped. Even though Apple had an 87% rate of plants following this guideline, they want 100%. The manufacturing plants are being audited, and Cook is looking forward to seeing the results.
The next question was about shipping, since Apple sold 37 million iPhone 4S units last quarter. Cook looks at this as 9 out of 10 people buying something else since he looks at the total number of handsets sold and how Apple fits into the big picture. He also views it as a great market to expand into and believes that if Apple continues to make a great product and develop the ecosystem around it they will continue to sell more phones.
The moderator asked about making the iPhone affordable to a wider number of people and to the people who buy minutes on their mobile phone. Cook said they’ve been focused on China, and in understanding the market there. He says there’s a lot of commonality in what people want around the world; they want the best product, not a cheap version of the best product.
Cook said the iPod created a halo around the Mac which led to an increase in Mac sales. This was created in developed countries (USA, Canada, Japan, etc.), but it didn’t work in other parts of the world because they were getting music from their phone. That changed when the iPhone was released because it introduced the Apple brand to people who hadn’t heard of it before. Last year, the Mac market grew 100% in China compared to other PC makers which grew only 10%. Now, the iPhone is creating a halo for the Mac and the iPad which has a synergistic effect.
In 2007 the revenue combined from greater China and other parts of Asia, Latin America, Eastern Europe, and Africa was 1.4 billion dollars. Last year for the same countries was 22 billion dollars, and Cook thinks there’s a lot of room to grow. Until now, Apple has been focused mainly on China, but now they’re working on other countries, such as Brazil, which Cook thinks is an untapped market.
The moderator asked about the iPad and how it was able to ramp up so quickly and about the long-term tablet market. Cook said the trajectory of the iPad is just going up and up, and the innovation developers are bringing to the iPad is incredible. He thinks the iPad is doing so well because it stood on the shoulders of what had already been developed, such as the Apple Store and people being used to touching the screen with the iPhone. It’s also very easy to use, and a wide range of businesses and people are using it for a variety of tasks. He said he gave his own mother an iPad and she was able to figure out how to work it just by seeing the commercial. The accessibility of the iPad is also part of why it’s popular.
Cook said they at Apple used the tablet internally before it was released, and he himself began to use the iPad for 80 to 90% of his daily tasks. He believes the tablet market will overtake the PC market very soon because there’s just not a lot of innovation on the PC. He loves the Mac, but thinks tablets will be used more often and more widely.
The moderator asked about other tablet manufacturers and how they have been getting the price down on their own tablets. Cook thinks lower-priced tablets won’t have much of an effect on the iPad because while people might feel good about getting a good deal on a tablet, they will grow to hate it because they can’t do much with it. Last year, other companies were trying to compete with the iPad 1 while Apple was working on the iPad 2, and with the iPad’s number of apps, the other products just can’t compete. However, he likes competition just as long as they develop their own stuff.
Cook said the iPad has cannibalized Mac sales, but Apple doesn’t mind because they’d rather people buy Apple products no matter what Apple product they end up getting. He said Apple won’t stop one of its product teams from making the best possible product just because people might buy that product instead of another. Cook also likes the competition between tablets and PCs because it forces everyone to innovate and do better. He thinks the PC market will still be around, it just won’t be as big as the tablet market.
The moderator asked about Apple’s large stash of cash and what they’re going to do about it, such as a stock buy-back or a dividend. Cook said they spent billions on the supply chain, billions on acquiring companies, billions on retail stores, and billions on infrastructure. It isn’t as if they’re just hoarding cash and not using it to improve Apple or the companies who supply them with parts. Even with that, they have a lot left, but are spending money as if each dollar is their last. Apple isn’t acting as if they’re rich and spending their money foolishly because the shareholders want Apple to use their money wisely. There are active discussions on the board level about what to do with the cash, and they want to be careful. Cook asked for some patience so they can make the best decision.
They then talked about Apple’s plans with the Apple TV and why it’s still considered a hobby. Apple sold just shy of 3 million Apple TVs last year and a million last quarter, so it’s increasing in popularity. It’s called a hobby because Apple doesn’t want people to think Apple TV is as important as the other areas of the company. Generally, Apple doesn’t work on hobbies because they like to focus on a few main products. Apple has kept the Apple TV because they think it could lead to a future big product, but Cook wouldn’t talk about the rumored Apple iTV. He did, however, urge people to buy the Apple TV several times, saying it’s a great product.
Next they talked about the iCloud and Siri and how important they are to Apple’s future. In the beginning, the Mac was considered to be the hub of a person’s digital life, but now people have many devices and they don’t want to have to sync everything to the Mac or PC. With the iCloud, everything is recognized and you don’t need to sync anything. They have 100 million users of the iCloud, and it was just introduced in October 2011. Cook thinks the iCloud is profound and is going to be the basis of technology for the next 10 years. Cook feels Siri revolutionizes how people interact with their mobile devices
The moderator asked how Cook thinks he’ll make his mark on Apple after becoming CEO. He replied that Apple has a unique personality in which he believes, and he doesn’t want to change it. Steve Jobs said Apple should revolve around great products, and they should focus on doing a few products well and only go into markets where they can make a significant contribution to society, not just sell a lot of products. Cook wants to focus on that because he thinks that’s what makes Apple a magical place to work. He likes seeing people use Apple products, and that’s what makes him happy. Apple has always remained focused on the future, and Cook will ensure it always does so.
All-in-all, it was an interesting discussion on what Apple has done in the past and where it could possibly go.