[ On Tuesday , Apple CEO Tim Cook spoke at the Goldman Sachs Technology and Internet Conference , where he was question on stage by Bill Shope , Goldman Sachs ’s IT hardware psychoanalyst . Here ’s an edited copy of what Cook had to say on a variety of topic , ranging from do work weather condition at Apple ’s Chinese supplier to Apple ’s culture and ethos . ]
On working conditions in China
The first thing that I would require everyone to know is that Apple choose working condition very , very seriously , and we have for a very farsighted time . Whether workers are in Europe or in Asia or in the United States , we like about every worker . I drop a circumstances of time in mill , in person , and not just as an executive . I work out in a newspaper publisher mill in Alabama and an atomic number 13 works in Virginia . Many of our top managers and executive inspect manufacturing plant on a unconstipated basis and we have one C of employee that are based there full - prison term . So we are very closely connect to the production physical process and we understand doer condition at a very granular point .
Now , I realize that the supplying chain is complex and I ’m sure that you realize this . And the result surrounding it can be complex , but our commitment is very , very simple : We believe that every worker has the right to a fair and safe work environs , free of discrimination , where they can earn competitive wages and they can voice their concerns freely . And Apple provider must live up to this to do clientele with Apple .
We also believe that education is the great equalizer , and that if citizenry are provided the skills and noesis , that they can better their lives . We put a quite a little of effort into allow for educational resource for prole throughout our supplying chain . We put up free grade in many of the locations in our supplying chain , and we partner with local colleges to ply courses like English , and entrepreneurship , and computing machine skills , and the like .
More than 60,000 employees have attend these classes , which is moderately awful when you retrieve about it . If you could take all of these employees and move them to one localization , it would be a campus population big than Arizona State , which is the turgid public university in the United States .
Many of these worker go on to clear companion ’s stage . So this is a very powerful step rock for people looking to gain ground their careers and their lives . In terms of problem that we are work to fix , you may read the detail on our website . But I would state you that no one in our manufacture is doing more to improve workings conditions than Apple .
We are always auditing facilities , work deep into the supplying mountain chain , look for problems , finding job , and fixing problems . And we report everything because we trust that transparency is so very of import in this surface area . I am so incredibly gallant of the work our squad are doing in this orbit . They focus on the most unmanageable problems , and they stay with them until they furbish up them . They are in truth a example for the industry .
Let me give you some examples , because I remember this is so important and this is so topical . It goes from heavy to small .
We think the use of nonaged labour is repugnant . It ’s extremely rarefied in our supply chain , but our top anteriority is to eliminate it totally . We ’ve done that with our final assemblage marketer and are now working down into the provision range of mountains . If we find a provider that advisedly rent minor labor , it ’s a firing offense .
We do n’t permit anyone reduce corners on safety . If there ’s a product process that can be made safe , we attempt out the world-class authority in the human race , the foremost experts , then cut in a new monetary standard and then take that and put on it to the entire supplying chain .
We focalize on the details . If there ’s a fire fire extinguisher overleap from the cafeteria kitchen , then that facility does n’t fleet inspection until that fire extinguisher is in blank space .
We ’re carry on to focus on the problem that our endemic disease to our industry , like undue extra time . Our code of demeanor has a ceiling of 60 hour for a work hebdomad , but we ’ve systematically line up violations to this codification over the course of our time . So at the beginning of this year , we announce that we ’re determined to repulse far-flung modification .
And we ’ve get down to wangle work out hours at a very micro groundwork . As an example , in January , we collected hebdomadal data on over half a million workers in our supply concatenation . And we had 84 percent compliance . Now this is importantly improved from the past , but we can do better . And we ’re take the unprecedented step of reporting this monthly on our website , so that it ’s sheer to everyone what we ’re doing .
Now as you believably know , the Fair Labor Association begin a major audit of our final fabrication vendor , at our request . We started working with the FLA last twelvemonth on an auditing project and just in January , we were the first engineering science company ever admit into their tie .
The audit that they ’re lead is probably the most detailed mill audit in the chronicle of mass manufacturing . In scale , in setting , and in transparency . And I ’m looking forward to seeing it resolved .
We know that people have a very high expectation of Apple . We have an even higher outlook of ourselves . Our client expect us to lead and we wil continue to do so . We are blessed to have the smart and most innovational people on Earth , and we put the same kind of effort and push into supply responsibility as we do with our Modern product . Thatis what Apple is all about .
On growth opportunities for the iPhone
Yes , 37 million [ iPhones sold in the last quarter ] is a big routine . It was a decent poop . [ laughter ] It was 17 million more than we ’d ever done before . And so we were pretty happy with that . But let me give you a unlike — at least the way I look at the numbers , which is perchance a picayune differently than you do .
As I see it , that 37 million for last quarter represented 24 percent of the smartphone market . So there ’s 3 out 4 hoi polloi that bribe something else . And it represent less than 9 percent of the handset market place , so 9 out of 10 multitude are buying something else . The smartphone market last year was a half a [ billion ] units ; in 2015 , it ’s project to be a billion unit . The handset market place is projected to go from 1.5 [ billion ] to 2 billion units . And so when you take it in the context of these number , the true statement is that this is a jaw - sink manufacture . It has enormous chance to it , and so up against those , the numbers do n’t seem so large anymore .
What seems with child to me is the opportunity . So what we ’re focusing on is the same thing we ’ve always focused on , which is take a leak the world ’s best products . And we think if we outride laser - focused on that , and continue to develop to the ecosystem around the iPhone then we have a pretty ripe chance to take advantage of this enormous market .
On making iPhones more affordable, and appealing to developing markets
These market are — first of all , they ’re critical . To go back to something I said before , the smartphone market is fancy to be a billion units in 2015 , so just three years from now , and 25 per centum of that is projected to get along from China and Brazil . And so just two of the markets , 25 percent . And plainly , those are two very critical markets , but there are others as well .
We ’ve been very , very focussed on China . China , we ’ve had unbelievable winner with iPhone . Over the retiring few years , we ’ve blend from a few hundred million dollar of gross in greater China , to last yr $ 13 billion . So we really’ve been focused on trying to understand the marketplace there and then taking those eruditeness to other markets . As it turns out — and not very many people correspond with me on this , probably — but what I see is that there ’s a slew of commonality in what hoi polloi around the existence want .
Everyone in every country want the best product , as it turns out . They ’re not wait for a cheap interlingual rendition of the best product , they ’re look for the best intersection . And so that ’s the common yarn that bunk through .
Now , in the emerging marketplace , there are very big differences in the go - to market . For example , in most of the get markets , the mailman owns most of the distribution themselves , but in the come out market , the retailer has a pregnant dowry of the statistical distribution . And so , the whole go - to grocery has to be change significantly as you go in there .
Last year , as you sleep with , we cover cost points in the subsidized markets from zero on up . And of course , that does n’t render to 0 to prepaid market . But it does translate to lower in the postpaid market , and so we ’re address more price points there .
But I would total back to the preponderating matter is the ware . Itis the direction . And of course of instruction , distribution , we ’ve make out the difference there . We ’ve distinguish the difference in buy power . And , by the way , unlike probably many people , I do n’t sign to the premise that a prepaid grocery is a postpaid market is a postpaid market .
Because in China , one of the matter we did was we convinced China Unicom to try the postpaid business sector as well , and it really had n’t been tried very much in China before , but it was amazing what kind of transition that they go to the postpaid patronage with iPhone . And this is smashing for the customer , because they get the phone at a lower price ; it ’s bang-up for the carrier wave , because they lock in a customer for a longer period of prison term , and so everyone win from this . I ’m not saying that will work in every market ; it wo n’t . But it ’s a unlike way of life of looking at the upshot , and it ’s certainly been successful in China .
On the iPad and the Mac in emerging markets
As it turns out , when Apple introduced the iPod in 2001 , and then , after porting it to Windows and draw the iTunes Music Store up and porting the iTunes Music Store to Windows , the iPod create a halo for the Mac . And that kicked off a resurgence in the Mac that has now — for 23 straight quarters we ’ve outgrow the market on the Mac ; that ’s six years .
However , the halo that was create by iPod for the Mac , was created in developed market . It was create in the United States , it was created in Western Europe , it was make in Japan , it was make in Australia and Canada . It did n’t work most to the same level in Eastern Europe , Middle East , Africa , China , other section of Asia , Latin America . Because people were already get music from their phone .
However , the world alter for us , in many means , when the iPhone was launch . Because the iPhone start out to introduce Apple to literally C of jillion of masses — some that bought it , some that did n’t ; others that desired it . But it introduced our brand to people who had never met Apple before .
Take China , as an example , because I ’ve talked about that . Last year the Macintosh in China grew over 100 perent yr over year . Not on a giving base , but 100 percent is passably sound . The market grew 10 percentage , so it outgrew the market 10 [ times ] . What is clearly happening now is that the iPhone is creating a halo for the Macintosh . The iPhone has also create a halo for iPad . So you may in spades see the synergistic impression of these intersection , now not only in the develop markets , but in those emerging market where Apple was n’t really nonmigratory to any arcdegree for most of its life story .
Just to give you some numbers to put it in setting : If I bet back at 2007 — I’m pick that because we did n’t found the iPhone outside the United States until 2008 . In 2007 , the taxation fuse from greater China , several other parts of Asia , India , Latin America , Eastern Europe , Middle East , Africa was $ 1.4 billion . The revenue last yr for that same mathematical group of country was $ 22 billion . And we ’re only on the control surface . That ’s how I feel , because we ’ve focused mainly in China and last class we began to concenter increasingly more on Brazil , and on some stratum in Russia . But there ’s lots more opportunity out there , and so I think this is very , very profound and very cock-a-hoop for us .
On the demand for iPad
This 55 [ million ] is something no one would have guessed . Including us . To put it in context , it took us 22 years to betray 55 million Macs . It take us about 5 years to deal 22 million iPods , and it took us about 3 years to sell that many iPhones . And so , this thing is , as you allege , it ’s on a trajectory that ’s off the charts .
And so , why is this ? Well , the product is utterly incredible . And the gait of introduction on the product has been incredible . And so , we ’ve proceed from iPad 1 to iPad 2 in fairly inadequate club . And the ecosystem that developer have help oneself us build out — there ’s a 170,00 apps that are optimize for iPad — and so this is unbelievable . But the reason that it ’s so big , in my scene is , one : The iPad has stand up on the shoulders of everything that come before it . The iTunes Store was already in play . The App Store was already in looseness . hoi polloi were train on iPhone , and so they already knew about multitouch . And so there was muckle of matter that became so intuitive when someone begin to use a pill , that — I mean , I give one to my mother and she knew how to use it like this [ snap ] from just watch the commercial .
It ’s awful how the product has captured so many people — you’re using one , my mother ’s using one , my seven - twelvemonth - quondam nephew utilize one . I to go the gym in the morn , the flight simulator ’s using one . At Starbucks , I look around — everybody has one , reading their newspaper or whatever . In didactics , it ’s being used ; in the enterprise , it ’s being used in gravid numbers . From my point of view , it ’s the fastest borrowing across a wide of the mark compass that I ’ve ever seen before .
On competition in, and the future of the tablet market
You cognise , we started evidently in Apple using the iPad well before it was launched . Of of course , we had our shades pulled and everything so nobody could see us . What I go notice about my own personal behavior , it cursorily became 80 to 90 percentage of my use and workplace was done on the iPad .
Honestly , from the first sidereal day it shipped , we think — not just me , many of us think at Apple — that the tablet market would become larger than the personal computer market , and it was just a matter of the time that it took for that to occur . And I feel that stronger today than I did then . Because as I look out and I see all of these incredibly use for it , and I see the incredible slipstream and pace of innovation , and the developers .
If we had a meeting today in this hotel and we invited everybody that ’s working on the coolest PC apps to come to the meeting — you might not get anybody in the meeting ! But if you did that same thing for iOS or that other operating organisation , and said everybody that ’s working on this come , you could n’t get everybody in those hotel . You ’d have somebody covering every hearty inch here . That ’s where the innovation here . That does n’t mean the PC is going to die ; I have sex the Mac ! And the Mac is still spring up , and I think it can still get .
But I strongly believe the tab marketplace will stand out the unit sales of the personal computer marketplace , and it ’s just a subject of the rate and focal ratio and time that that happens . It ’s too much of a heavy change in things not to , I think . Anyway , that ’s my notion — people can always take issue . I find strongly about it , if you ca n’t tell .
On product pricing
Price is seldom the most authoritative thing . A cheap product might sell some units and somebody may get it home and you have it away , they palpate great when they pay from their pocketbook , but then they get it home and use it , and the joy is go . And the joyfulness is gone every day that they apply it and that ’s why they ’re not using it anymore ! [ laughter ] You do n’t keep remembering “ Oh , I got a unspoiled muckle , ” because you detest it ! [ laugh ]
So what happened last yr , everybody that was in the PC industry and everybody that was in the phone industry , everybody decided they had to do a tablet . By some estimates , there were a hundred pill put on the market last year . Everybody was kind of aiming at iPad 1 , and we were trying to innovate quick to get to iPad 2 . So , by the time they had something that they think could compete with iPad 1 , we were on iPad 2 . We wound up with 170,000 apps , and I ’m not sure there ’s 100 yet on the other platform .
I consider people at the remainder of the day , they need the great product . Amazon is a different kind of competitor . They have different strength , and so forth . And I think they ’ll sell a mountain of unit — I opine they have and they will . But the customer that we ’re designing our ware for , are not conk out to be satisfied with a special function form of product . I think the literal catalyst to the tablet securities industry will be innovation and push the next frontier . Honestly , we ’ll contend with everybody . I love contention . As long as people invent their own stuff , I sleep with competition . [ laugh ]
On the cannibalization of Mac sales by the iPad
I recollect that iPad has cannibalise some Mac sales . And the room that we always see cannibalization is , we prefer we do it than have somebody else do it . And so we never desire to hold back one of our squad from building the absolute greatest matter , even if it take some sales from another production country . Our high - order tender is , we want to please customer , we ’d like them buy Apple stuff .
But I intend what it will do largely , as prison term goes on , is , you make love , when you ’re vie with someone — maybe politicians do this , I do n’t know anything about politics — but I believe it pull you to focalise your content and distinguish who you are . And so , I imagine it ’ll be unspoiled for the PC industriousness , because they ’ve catch this unassailable contender ; and I think it ’ll be good for pad , because they ’ll introduce like crazy over here ; and customer will decide what to buy at the ending of the mean solar day . And I do think that , out of that , there will still be a substantial PC manufacture . I just think the pad diligence is going to be larger in units than the PC industry .
On Apple’s cash holdings, spending, and returning money to shareholders
Well , let me first verbalise about your exercise of the word “ sparingly ” because this one I do n’t agree with . Or at least , I would n’t use the word in the same circumstance . We ’ve actually spent trillion in the supply chemical chain . We ’ve spent billions on acquisitions and including the acquisition of [ intellectual property ] . We ’ve spent billions on retail . We ’ve spent trillion on the substructure , the caller , data centers and so off for the App Store and iCloud , etc . , but yes we still have a peck . I guess I ’m just signal that out to say — I would say that we ’re heady ; we ’re deliberate . We pass our money like it ’s our last cent . I think shareholders want us to do that . They do n’t need us to act like we ’re rich , and we ’ve never felt that way honestly . That may sound bizarre , but it ’s the truth .
Now , in terms of our approach on cash , I ’ve sound out since becoming CEO , I ’m not religious about this . I ’m not religious about holding it or not holding it . And we ’re in very active discussions at the board grade on what we should do . But I think everyone would require us to be deliberate and really think through , and that ’s what we ’re doing . We ’re not move to go have a toga party or do something eccentric , and so people do n’t have to worry it ’s going to burn a hole in our scoop .
[ Our Johnny Cash position ] was always discussed . It ’s not newfangled that we ’re discussing it . It is being discussed more , now , and in nifty detail , and that ’s because the balance has risen to the point that you ’ve already made . And I believe it ’s vindicated to everyone , and I ’d be the first to admit , we have more cash than we need to go the byplay on a daily basis . I ’m sure everyone would agree with that in here . And so we ’re actively hash out it . I only ask for a bit of patience , so that we can do this in a very deliberate style and make the best decision for the shareowner .
On Apple TV, and the future of the living room market
Well , I would n’t desire to go into item about future stuff , obviously , or make any input that people would misconceive along those lines . In terms of our existing production , we sold just shy of 3 million Apple TVs last class . If you do n’t have one , you should go out and get one ; it ’s a very cool product , and I could n’t live without it — just as a short promotional break .
We sold 1.4 million last quarter . It ’s clearly rage . But the realism , the reason we call it a hobby , is that we do n’t want to send a message to you or our shareholder that we think that the mart for it is the size of it of our other businesses , the size of the earpiece clientele , the size of the Mac business , the size of the iPad business concern , or the iPod business . We do n’t want to send the signal that we think the wooden leg of that stool is of adequate length as those others . And so that ’s the rationality we message it as a spare-time activity .
Apple does n’t do by-line , as a general rule . We believe in nidus and only figure out on a few things . With Apple TV , however , despite the barriers in that market , for those of us who utilise it , we ’ve always thought there was something there . And that if we kept following our hunch and proceed pulling the chain , then we might find something that was larger . For those people that have it right now , the client sat[isfaciton ] is off the chart . But we postulate something that could go more main market for it to be a serious class . But if you do n’t have one , you should get one , because it ’s a really cool product .
On Siri and iCloud
I recollect Siri and iCloud are sound . If you take iCloud ; if you dial back 10 years , 12 years , Steve [ Jobs ] annunciate a strategy for Apple that positioned the Mac or PC as the hub of someone ’s digital spirit . And out of that . Apple grow a whole retinue of apps called iLife , and you could tie in many convenience off of this and synchronize all of your music or photograph , you could edit your pic , you could edit movie , and so onward . But the approximation was that the personal computer or Mac was the monument .
iCloud turns that on its head . It recognizes that across that decennary , peculiarly the last two or three eld , you and I live off of multiple machine . It ’s no longer a great customer experience to have to sync your iPad to your Mac , and then your iPhone to your Mac , and then resync your iPad because there was something on your iPhone — this is a hair - pull physical exertion . iCloud recognizes the Mac or PC as another equipment , and all of the sudden your life has just capture so much easier . We now have 100 million user of iCloud . We just launched it in October . 100 million . This is unbelievable . And there ’s obviously more we can do with it .
I would reckon iCloud not as something with a year or two intersection life ; it ’s a strategy for the next decade or more . I think it ’s truly profound .
On Siri . You know , for year , if you were a microcomputer or Mac substance abuser , you used a physical keyboard , and you used a computer mouse for comment . And you pretty much did that for a farsighted , foresightful time . And there was n’t a great deal of — there was phylogeny in that place , but not a luck of revolution , really .
And then all of a sudden Apple comes out with multitouch on the [ MacBook Pros ] , and this was really cool , and then extend that into phones and tablets . So this has totally has commute those industries in totality . But Siri is another unplumbed variety in input , and it ’s something that we ’ve always dreamed of . I remember all of us want this to work . It ’s sort of like stimulate a telecasting call with FaceTime — it was “ aha , it can work ! ” Siri , it ’s hard to imagine it ’s jut a beta product . I ’ve never mat up I could n’t live without a beta intersection before , but now I feel like I ca n’t experience without one .
I call back these two are both unsounded ; they ’re not thing where we course disjoined [ profits and losses ] on , because we do n’t do that — we do n’t trust in that . We manage the company at the top and just have one [ net and loss ] and do n’t care about the iCloud squad piss money and the Siri team making money . We need to have a great customer experience , and we think measuring all these matter at that story would never reach such a affair . But I do think that both of these go in the sound category ; they ’re not these things that will not mean anything a twelvemonth or two from now . They ’re things that you will appear back at , that you ’ll talk to your grandkids about , that were profound change .
On Apple’s culture and strategy
Apple is this unique company , unequaled civilization that you ca n’t replicate . And I ’m not going to see or permit the slow undoing of it , because I believe in it so profoundly .
Steve grilled in all of us , over many twelvemonth , that the company should orbit around great products , and that we should stay extremely focused on few thing . Rather than attempt to do so many that we did nothing well . And that we should only go into market where we can make a significant contribution to society , not just sell a batch of products in a market .
So , these things , along with restrain excellence as an expectation of everything at Apple , these are the things that I focus on , because I reckon those are the matter that make Apple this wizardly situation that really smart people need to work in and sort of do not just their life ’s work , but their life’sbestwork .
There ’s no unspoilt thrill than to look out at an audience and see mass using iPhones , or go to the gym and see hoi polloi using iPods , or go to Starbucks and take care multitude habituate the iPad . These are the thing that work a smile to my face , and there is no surrogate , or no substitute , for that .
And so we ’re always focused on the future . We do n’t sit and think about how groovy thing were yesterday . And I jazz that trait , because I mean it ’s the things that drive us all forward . So those are the thing I ’m holding onto , and it ’s a privilege to be a part of it .
