- Apple’s campus search, which concluded earlier this week, was conducted fairly quietly, especially compared to rivals like Amazon.
- That’s because Apple’s main goal wasn’t to gain the maximum incentives from local governments.
- Instead, it wanted to portray itself as a job creator and American company for two reasons: To repay Trump for tax reform, and to protect the iPhone from Trump’s tariffs and trade wars.
Earlier this week, Apple made a big announcement, saying that it planned to open a new campus in Austin, Texas, as well as expand operations in Seattle, Los Angeles, and San Diego.
The announcement landed in the middle of the night: at 12 p.m. Pacific Time, or when most of the East Coast should be sleeping.
Even Apple CEO Tim Cook was probably sleeping when it crossed. He famously gets up at 4:00 a.m. and tries to get seven hours of sleep. It wasn’t quite a news dump, but 3 a.m. ET isn’t the best time to announce news if you want to make headlines.
Apple got the headlines anyway with its announcement, but the way it was rolled out reveals a core motivation behind Apple’s public expansion – one that has far different aims than Amazon’s HQ2 contest. Whereas Amazon was looking for public subsidies and information from its campus search, Apple’s aims were political.
In fact, Apple’s announcement ultimately had an audience of one: President Donald Trump.
Sure, the announcement means a lot to Apple employees, Texans, and people in any number of the cities where Apple is expanding. And Apple did get some financial incentives from the state of Texas as part of its search. But more than sharing the news, Apple’s announcement was meant to underscore the fact that it’s an American company, with lots of American employees – even if the iPhone is largely manufactured in China.
Apple doesn’t usually talk about expansion plans or the number of people it plans to hire. So why did it put out a press release in the middle of the night?
A fraught relationship
The fraught relationship between the President and the CEO of the country’s often-most-valuable company started in 2016.
Cook supported Hillary Clinton in the presidential election, and held a fundraiser for her in Palo Alto, California. He even made it onto Clinton’s shortlist for vice president.
Cook’s political leanings are not public, and he’s been supportive of both Democrats and Republicans, including Paul Ryan. But as a gay CEO in Silicon Valley, where most people supported Clinton – and given Trump’s campaign talking point that he’d like Apple to make iPhones and other computers in the United States – the support for Clinton made sense.
Plus, at the time, Clinton was projected to win by nearly every major poll. Supporting her was business as usual.
Then Trump won.
A month later, Cook – along with top leaders from Google, Facebook, Amazon, and other big tech companies – went to Trump Tower to meet with the then-president-elect in person.
You’ve probably seen the photos from that meeting. Cook doesn’t look very happy. But he needed to do it to support Apple’s two major policy goals.
Corporate tax reform
Apple had two things it wanted from the Trump administration.
Most importantly, it wanted corporate tax reform. Cook laid out Apple’s goals in this area in an interview with the Washington Post in 2016 before Trump was elected.
“I think it’s in the best interest of the US to have corporate tax reform, regardless of which political party is in charge of the White House,” Cook said.
“The tax law right now says we can keep that in Ireland or we can bring it back. And when we bring it back, we will pay 35% federal tax and then a weighted average across the states that we’re in, which is about 5 percent, so think of it as 40 percent. We’ve said at 40 percent, we’re not going to bring it back until there’s a fair rate,” Cook continued.
Apple had collected more than $250 billion in cash and marketable securities on its books. All that money was technically on the books of an Irish subsidiary, and Apple wanted to bring it back to the United States so it could return it to shareholders in the form of dividends and share buybacks.
In December 2017, Apple got what it wanted. A tax bill backed by Republicans and Trump was passed, bringing widespread changes to the US tax code, including a carve-out allowing for a one-time repatriation of corporate cash held abroad at a lower tax rate than previously possible.
A month later, Apple put out a press release that said it planned to bring all of its overseas cash back to the US, saving it tens of billions of dollars in tax implications. That announcement was also when it first said it would build a new campus.
Trump noticed. “I promised that my policies would allow companies like Apple to bring massive amounts of money back to the United States. Great to see Apple follow through as a result of TAX CUTS,” Trump wrote on Twitter.
Big, beautiful plants
But saving billions on taxes was only one of Apple’s two goals with its Trump administration outreach. The second policy goal was to prevent Trump’s penchant for tariffs from affecting the iPhone, which is primarily manufactured in China, although there are some US-made components.
Trump had said before the election that he wanted Apple to do manufacturing in the United States, which most experts say is impossible for a product like the iPhone. Too much of the supply chain is based in Asia.
Trump had also gone on the record multiple times saying that Apple planned to build “three big plants” in the United States – a claim that Apple has never confirmed nor denied, although it does not make sense. Apple doesn’t build factories; it contracts with companies like Foxconn to build its products.
So while Apple couldn’t say it was building manufacturing plants, like Trump wanted it to say, it could do the next best thing: tout new high-quality jobs and offices it was creating.
Otherwise, Trump could put a tariff on the iPhone – as he threatened in November.
Apple has grown prodigiously over the past decade. It probably would have needed 20,000 new employees anyway. But Apple cast itself as a job creator – it wasn’t just hiring, it was creating new jobs. And these jobs aren’t the kind where workers screw a single screw into the iPhone over and over, they were good “middle skill” jobs, like call center employees.
Thus the press release on Thursday, basically confirming much of what Apple said back in January about its planned expansion. It highlighted how many Americans Apple employ, and how many states it’s based in. And ultimately, it gave Trump an opportunity to claim credit for the jobs Apple is hiring for.
Of course, Trump noticed the announcement. After all, it was basically targeted directly at him.
“Thank you to Tim Cook for agreeing to expand operations in the U.S. and thereby creating thousands of jobs!” Trump tweeted.
Source: Business Insider
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