How Apple came to be the first company worth a trillion dollars and the role Jersey played

Ollie Taylor
Aug 19, 2018 · 5 min read
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Photo via: William Warby

Apple just became the first corporation ever to reach a market valuation of a trillion dollars, a watershed moment. So how does a company go from struggling to survive to become more powerful than most countries in as little as under three decades?

Firstly, they had major help from the public. The majority of the technology used in their groundbreaking iPods, iPhones, and iPads was not actually developed by Apple but by the US military, therefore, paid for by the public through government-funded research and development. This includes the US Department of Energy (DoE) developing the batteries and contributing to the hard drive and the Department of Defence (DoD) contributing to the touch screen, liquid crystal display and hard drive. The Defense Advanced Research Projects Agency or DARPA, an agency of the DoD, helped develop the microprocessor and the internet, as well as Siri.

Other government-funded entities involved in the development of Apple technology include the US Navy, the Army Research Office, the National Science Foundation, the CIA and The European Organization for Nuclear Research or CERN. By relying on publicly funded research and development Apple has been able to save time, effort and the cost of having to develop that technology themselves.

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Globalisation has meant that Apple has been able to move its production lines from America to locations with far weaker regulations and labour rights, thus considerably reducing its production costs. This includes using assembly factories in China where one factory employee in 2010, Tian Yu, after working more than 12 hours a day, six days a week and skipping meals to do overtime, threw herself out a fourth-floor window permanently paralysing herself after finding out she had not been paid due to an administration error. She was owed around a quarter the cost of an iPhone 5 at the time. That same year 14 other factory workers also committed suicide with photos of suicide nets put up outside the factory to catch jumpers making the news.

Apple has also benefited from the use of child labour in countries such as Bolivia, Indonesia and the Congo which supply key minerals for the iPhone. Amnesty International stated last year that, despite efforts by Apple since 2016 to “lead the way” in dealing with child labour in the supply chain, the corporation has not publicised the risk assessments of its Cobalt smelters, which Amnesty says makes it: “impossible to say whether they are fulfilling their human rights responsibilities”.

Apple has been able to use its monopoly position to undermine the global tax system by negotiating a special deal with the Irish government. The EU Commission charged that Apple had received illegal state aid through tax concessions to the tune of €13 billion. So in 2015 Apple restructured its tax affairs utilising Jersey to maintain its low tax rate. This tax move has been labelled as the “Green Jersey” in a June report looking into Apple’s tax affairs. In the report, it states that Apple relocated its overseas cash to Jersey via a: “massive outflow of capital from its Ireland-based subsidiaries to its Jersey-based subsidiaries in the form of expenditure on intellectual property (IP) and debt”.

The “Paradise Papers” leak in November last year revealed Jersey’s role in Apple’s tax affairs, forcing the local financial regulator, the JFSC, to issue a statement at the time saying that the two Apple subsidiaries referred to in the media were “not Jersey-registered companies” and that they understood Apple funds relating to the entities were not “remitted to or held in the Island”, yet Apple themselves later acknowledged that they had used Jersey in its tax restructuring. One has to ask what were the Jersey authorities aware of when it came to Apple?

The Jersey government has recently been in talks with the EU over tax requirements for locally based companies to have “economic substance” after Jersey was put on the so-called “grey list”. A consultation has gone out to the finance industry this month detailing how Jersey companies can demonstrate substance and specifically refers to enhanced requirements where IP is involved. Companies which holds IP that was acquired through a related party and is licensed to foreign related parties — like in Apple’s case — will now automatically be seen to fail the economic substance test unless they can demonstrate otherwise to the Jersey authorities.

Apple also limits the life of its products.

Last year the corporation was forced to admit it deliberately slowed down its iPhones as they got older, something it kept secret from its customers. Couple that with a general inability to upgrade equipment, constant design changes, cables and chargers that easily break and you can see why people keep buying more.

Finally, Apple spent $23.5 billion buying back its own stock in the first quarter of 2018 as part of a $100 billion share buy-back program, making it the biggest quarterly buyback in US corporate history. This boosted its share value by nearly 2%, along with the fortunes of its CEO and shareholders at a time when the broader market declined. To date, Apple has returned $275 billion to shareholders since it began its capital return program in 2012.

It would be unfair to say that Apple hasn’t been inventive outside of its tax planning, or that it hasn’t revolutionised the tech industry, it clearly has. And typing this on my iMac I also know that Apple is not the only corporation to be exploiting and using these monopoly methods gaining an unfair advantage over other businesses, they’re just the first to reach a trillion dollars.

This new wave of oligopolist corporations and their leaders have become the modern day versions of the late 19th Century US “robber barons” that were eventually broken up by antitrust lawsuits. But rather than criticised, today they are lavished with praise for their market successes, their leaders are regularly quoted by the business community and lauded for their genius, hard work and entrepreneurial spirit.

As the technology pushed by these monopolist corporations becomes ever more pervasive (and invasive) the question one has to ask is: are we willing to step forward once again and take on such concentrated wealth and power?

Nine by Five Media

Nine by Five Media is a new platform to highlight the…

Ollie Taylor

Written by

Jersey (UK) Evening Post columnist and founder of Nine by Five Media. Always looking for the local angle. Views are all mine and not that of any employer.

Nine by Five Media

Nine by Five Media is a new platform to highlight the diverse range of voices and views from the Island of Jersey. We go beyond the facts to analyse, contextualise and reflect on current affairs so we can ultimately help generate positive change.

Ollie Taylor

Written by

Jersey (UK) Evening Post columnist and founder of Nine by Five Media. Always looking for the local angle. Views are all mine and not that of any employer.

Nine by Five Media

Nine by Five Media is a new platform to highlight the diverse range of voices and views from the Island of Jersey. We go beyond the facts to analyse, contextualise and reflect on current affairs so we can ultimately help generate positive change.

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