Tuesday was a product launch day for Apple.

In the normal course of business, I wouldn’t spend a single second covering the specifics of the company’s latest gadgets. I’ve been an Apple customer since the Classic, but even in pseudo-retirement, I’m far too “busy” for any proselytizing. And I anyway wouldn’t have much to offer readers when it comes to explaining the relative merits of titanium side rails versus stainless steel, or elaborating on camera improvements.

This time is different, though. I’m compelled to mention Apple launch day, but not because I’m upset about a charging port change or giddy over improved processing speeds for wrist-computers. Rather, because Apple is once again at the center of the fraught bilateral relationship between the US and China, where Xi Jinping is in the process of banning iPhones for employees of government agencies and state-linked enterprises. That’s in my wheelhouse, and I covered it pretty extensively here last week.

The crux of the issue, as expounded in “Apple Falls Far From The Xi,” can be summarized as follows:

At a very basic level, it’s perilous when the most important company for global equity markets is heavily dependent for growth on the would-be usurper in a clash with the incumbent economic and financial hegemon. That’s even more true when the company in question is an international symbol of the incumbent’s technological prowess, consumer appeal and commercial success.

Regular readers will forgive me for quoting myself again. I’ve used that passage at least four times in five days. The older I get, the more adept I am at suppressing the superciliousness which cost me so dearly in life, but it still manifests in a penchant for quoting my own writing.

Xi’s efforts may be limited in scope and therefore mostly immaterial for Apple. That’s what Wall Street generally believes. But you should read “believes” as “hopes.” Xi can do anything he wants. That’s what it means to be a dictator, and as emphasized here on numerous occasions last week, there’s a sense in which all enterprises in China are “state-linked.” When you think about US export controls and investment restrictions, you have to consider that angle. All businesses in China are ultimately beholden to the Party in the event the Party decides those businesses have something worth commandeering. Just ask Didi. There really isn’t a “private sector.” Only private companies whose businesses don’t have any overlap with politics. Or national security. Or the military.

Because Apple is an important “partner” for China, Xi probably won’t, but he could expand the iPhone ban to all manner of businesses and enterprises in China. The Party is a giant, sprawling red octopus with its arms in everything. That alone gives Xi virtually unlimited latitude to curtail iPhone use. I hesitate to use the mob analogy again, but it’s apt. A boss might ban something (drug use, for example) among his captains, on the excuse it’s bad for business. But he could also ban it among soldiers using the same rationale. And then he could ban it for associates too. And then for the owners of businesses beholden to the family’s protection racket. And then for everyone who works for those business owners. And on and on. It’s the same thing with Xi, the Party and the iPhones. If it’s a national security risk for a Party functionary at the local level to bring his iPhone to work, it’s not a giant leap (forward) to tell that person that having an iPhone at home is a security risk too. Or to say his wife’s iPhone is a security risk.

Again, Xi has an incentive not to do that. Apple employs a lot of Chinese. And the youth unemployment rate in China is so high that Xi stopped publishing it in July. Although he plainly wants to bolster Huawei and its sanctions-busting Mate 60 Pro, he doesn’t want to curb iPhone demand so much that the company dials back production. Because that production still takes place largely in China. That’s where the rubber really meets the road: China is both Apple’s largest production base and its largest single consumer market. Apple needs China, but China needs Apple too.

“China became the world’s largest iPhone market in the second quarter of this year, accounting for 24% of all iPhone shipments, despite a fall of 9.3% in iPhone sales YoY over the same period globally, hence the growing interest of industry analysts in how Apple will fare with the iPhone 15 in China,” SCMP wrote, of this week’s product launch. “The new [Huawei] Mate 60 Pro could disrupt the premium segment of the Chinese smartphone market.”

To be clear: Wall Street analysts predicting no material financial impact to Apple from the ban are probably right. But they operate with a very limited mental framework that assumes recent events are aberrations and not tectonic shifts. It’s probably not accurate to describe, as I did above, sanguine views among such people as an example of “hope.” Hope suggests you’re aware of the worst-case, but you’re an optimist nevertheless. Wall Street analysts are in many cases not apprised of the downside risks from geopolitics. For them, the notion that Xi would just ban iPhones for everybody in China, consequences be damned, is unthinkable. Because Wall Street analysts, particularly those under 50 (which is most of them), simply aren’t old enough to remember a time when ideology trumped economic concerns to such an extreme degree.

And it’s not all ideology. The pandemic underscored how naive the just-in-time religion really was. COVID was a clarion call for corporates on supply chain fragility. JIT depended on the completely unrealistic assumption that all would generally be “right” in the world in perpetuity. With the benefit of hindsight, corporates now see that assumption for what it was: A ridiculous pipe dream. That’d be terrifying enough on its own, but in 2023, CEOs like Tim Cook are grappling with the reality that the “world’s factory” is operating under a totalitarian dictatorship. And its growing consumer market is too.

On Apple launch day, I’d submit the important news wasn’t that the “side material” on the Pro versions of new iPhones will be titanium instead of “fingerprint-prone steel,” but rather that, as Bloomberg reported, Apple “plans to make the India-built iPhone 15 available in the South Asian country and some other regions on the global sales debut day” [my italics].

Obviously, most iPhones will still emanate from China, but as the same linked article pointed out, this will be “the first time a latest generation, India-assembled device is available on the first day of sale.”