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- CBS News
The following is a script from "Inside Apple" which aired on Dec. 20, 2015. Charlie Rose is the
correspondent. Michael Radutzky, Andrew Bast and Glen Rochkind, producers.
Apple is one of the most interesting business stories in generations and it finds itself at the heart of
some of the biggest issues facing American companies today: the way terrorists may be using
encrypted technology to plot attacks, the battle over the corporate tax rate, and the challenges of
working in China. We talked about all of that with Apple CEO Tim Cook as part of a journey through
the world's biggest and richest company.
"This is Steve's company. This is still Steve's company. It was born that way, it's still that way. And
so his spirit I think will always be the DNA of this company."
Eddy Cue: It's amazing to be able to work in a place where you're building products that everybody
in the world uses. Whether it's a two-year-old or 100-year-old, they get to experience the products
that we're building and that's amazing.
Charlie Rose: Is the DNA of Steve Jobs baked deeply into everything just said?
Tim Cook: It is. It is. This is Steve's company. This is still Steve's company. It was born that way, it's
still that way. And so his spirit I think will always be the DNA of this company.
And if there was anyone at Apple who comes close to sharing Jobs' DNA it would be this man, Jony
Ive, Apple's chief design officer. He's considered by many at Apple to be the most important person
at the company. EveryAapple device on the market today was either created or inspired by this
reserved and polite son of a British silversmith. We met Ive in his design studio, but Apple's
preoccupation with secrecy allowed us to see only so much.
Jony Ive: You'd know what we're working on next. And so that's one of the reasons that, that, that it's
extraordinarily rare that people come into the design studio.
Charlie Rose: And that's why you don't like people in this room, period.
Jony Ive: That's right. We don't like people in this room, period.
Ive's team of 22 designers are a very close group --- in 15 years only two have left the company.
We noticed that Ive's studio is quiet and looks a lot like an Apple store. No coincidence, Ive designed
both around his signature wooden tables. Here, Ive and his team create prototypes of future
products before the specifications are sent overseas to be manufactured. With the iPhone 6 and 6
Plus, the design team made 10 different-sized models before deciding which worked best.
Jony Ive: And we chose these two because partly they just felt right, they somehow, not from a
tactile point of view. But just emotionally they felt like a good size.
Charlie Rose: Do you do this about every product, this amount of dedication to emotional context?
Jony Ive: This is the tip of the iceberg. Because we've found that different textures considerably
impact your perception of the object, of the product, what it's like to hold, and what it's like to feel.
So the only way that we know how to resolve, and address, and develop all of those issues is to make
models is to make prototypes.
Ive also showed us how he prototyped the Apple Watch. It begins with a sketch of the watch casing.
Then a computer-aided-design specialist transforms the sketch into a 3-dimensional electronic
blueprint. That is sent to this high-precision milling device known as a CNC machine.
Jony Ive: We attach to this fixture in there a block of aluminum. And the cutter that you can see
there in this CNC machine is now machining incredibly accurately-- the form-- at the back of the
watch-Charlie Rose: And creating the round edges.
Jony Ive: Yeah. And all of the tiniest details as well.
Once it's been carved, the prototype of the watch casing is sanded and polished by hand by veteran
craftsmen. Ive's team oversees every design detail, including testing hundreds of different hues and
shades of red, blue, and yellow for the watch bands.
Jony Ive: All of these things I think in aggregate, if we manage to get them right, you sort of sense
that it's an authentic, really thoughtfully conceived object.
Ive described the process that comes next --- turning a prototype into a working product requires a
high level of complex engineering. When he wanted to make the new Macbook Apple's thinnest and
lightest laptop ever, Ive worked with Apple's head of hardware engineering Dan Riccio to create a
battery powerful enough to last all day but also small enough to fit into Ive's slim case design.
Dan Riccio: Every tenth of a millimeter in our products is sacred.
Charlie Rose: Every tenth of a millimeter is sacred--
Dan Riccio: With this design, it involved, you know, mechanical designers, toolmakers chemists, and
it also involved software engineers to go off and design a pack that would fit within the surfaces
with-- of the product, but still work reliably.
One of the most complex engineering challenges at Apple involves the iPhone camera, the most used
feature of any Apple product. That's the entire camera you're looking at in my hand.
Charlie Rose: How many parts are in here?
Graham Townsend: There's over 200 separate individual parts in this-- in that one module there.
Graham Townsend is in charge of a team of 800 engineers and other specialists dedicated solely to
the camera. He showed us a micro suspension system that steadies the camera when your hand
shakes.
Graham Townsend: This whole sus-- autofocus motor here is suspended on four wires. And you'll see
them coming in. And here we are. Four-- These are 40-micron wires, less than half a human hair's
width. And that holds that whole suspension and moves it in X and Y. So that allows us to stabilize
for the hand shake.
In the camera lab, engineers calibrate the camera to perform in any type of lighting.
Graham Townsend: Go to bright bright noon. And there you go. Sunset now. There you go. So,
there's very different types of quality of lighting, from a morning, bright sunshine, for instance, the
noonday light. And then finally maybe-Charlie Rose: Sunset, dinner-Graham Townsend: We can simulate all those here. Believe it or not, to capture one image, 24 billion
operations go on.
Charlie Rose: Twenty-four billion operations going on-Graham Townsend: Just for one picture-The company is known for focusing as much energy on how products are marketed and sold as it
does on the way they're designed and built. We weren't sure what to make of it when Apple took us
to this unmarked warehouse off the main campus. Inside we found yet another prototype --- a mock
store where Apple's head of retail Angela Ahrendts is continually refining new designs for Apple's
469 stores worldwide.
There is intense speculation about everything Apple does, including that the watch may not be the
breakout product Apple had hoped. It has been on the market for eight months, but Apple has not
released any sales figures.
Charlie Rose: You think it's a product that needs improvement?
Tim Cook: I think all products are--going to be-Charlie Rose: I know that. Of course I know that.
Tim Cook: Yeah. And-- I think the watch is no exception to that, is we're-- we're gonna--continue to
fine tune-Charlie Rose: So you're disappointed--in some of the things.
Tim Cook: I'm not disappointed in it. It's every par-Charlie Rose: But you saw room to improve it?
Tim Cook: Charlie, when we launch a product, we're already working on the next one. And possibly
even the next, next one. And so yes, we always see things we can do.
[Tim Cook: This is the future of television, coming now.]
And then there is Apple TV and suggestions that Apple wants to do much more in the television
business... as well as speculation about Apple developing a car. But Tim Cook is keeping that a
secret too.
Charlie Rose: How hard is it to say Apple will be in the car business?
Tim Cook: (Laughs)
Charlie Rose: But OK, how hard is it to say yes we've done this, we're looking it, we may very well go
there, how hard is that?
Tim Cook: One of the great things about Apple is probably have more secrecy here than the CIA.
Whatever secret products Apple may be working on, no one feels the pressure to deliver more than
Jony Ive.
Charlie Rose: Is there any possibility that Apple can get too rich and too fat and too complacent?
Jony Ive: That possibility absolutely exists. I think one of the things that characterizes the way that
we work is that our heads tend to be down at these tables worrying about what we're doing. And our
heads don't tend to be up, looking around at what we've-Charlie Rose: Thinking how great we are, what we achieved?
Jony Ive: Yeah. And we're more aware of the distance between us and the perfection that we're
chasing than ever before.
Apple has one million people manufacturing its products in China. Why doesn't it bring those jobs
home? That part of the story when we return.
Apple is based in Cupertino, California, but the vast majority of its revenue, workers, and customers
are overseas. That raises a number of issues for the world's biggest company. Why won't Apple bring
home more manufacturing jobs from China? Why doesn't Apple pay U.S. taxes on the nearly $200
billion it keeps overseas? But perhaps the most pressing issue facing Apple today is encryption. It is
believed that the terrorists in last month's attacks in Paris used encrypted apps to avoid
surveillance. U.S. law enforcement immediately renewed its calls for Apple and other companies to
provide access to its customers' encrypted texts and emails. Apple CEO Tim Cook has refused to do
so. And though we interviewed him prior to the attacks, Cook has since told us that Apple is
cooperating with authorities to combat terrorism, but he has not changed his position on encryption.
Charlie Rose: In the government, they say it's like saying, you know, you have a search warrant, but
you can't unlock the trunk.
Tim Cook: Here's the situation is on your smartphone today, on your iPhone, there's likely health
information, there's financial information. There are intimate conversations with your family, or your
co-workers. There's probably business secrets and you should have the ability to protect it. And the
only way we know how to do that, is to encrypt it. Why is that? It's because if there's a way to get in,
then somebody will find the way in. There have been people that suggest that we should have a back
door. But the reality is if you put a back door in, that back door's for everybody, for good guys and
bad guys.
Charlie Rose: But does the government have a point in which they say, "If we have good reason to
believe in that information is evidence of criminal conduct or national security behavior?"
Tim Cook: Well if, if the government lays a proper warrant on us today then we will give the specific
information that is requested. Because we have to by law. In the case of encrypted communication,
we don't have it to give. And so if like your iMessages are encrypted, we don't have access to those.
Charlie Rose: OK, but help me understand how you get to the government's dilemma.
Tim Cook: I don't believe that the tradeoff here is privacy versus national security.
Charlie Rose: Versus security.
Tim Cook: I think that's an overly simplistic view. We're America. We should have both.
National security isn't the only battle Tim Cook has been fighting with Washington. Apple earns twothirds of its revenue overseas. Rather than bring it back and pay hefty U.S. taxes, Apple, like many
U.S. multinationals, parks billions of dollars in overseas income in subsidiaries in countries like
Ireland. The practice is not illegal, but it's at the heart of a battle that has been unfolding in
Washington to reform the corporate tax code and bring that money home.
Charlie Rose: How do you feel when you go before Congress and they say you're a tax avoider?
Tim Cook: What I told them and-- what I'll tell you and-- and the folks watching tonight is we pay
more taxes in this country than anyone.
Charlie Rose: Well, they know that. And you should because of how much money you make.
Tim Cook: Well, I don't deny that. We happily pay it.
Charlie Rose: But you also have more money overseas, probably, than any other-Tim Cook: We do.
Charlie Rose: --American company?
Tim Cook: Because as I said before, two-thirds of our business is over there.
Charlie Rose: Yeah, but why don't bring that home, is the question?
Tim Cook: I'd love to bring it home.
Charlie Rose: Why don't you?
Tim Cook: Because it would cost me 40 percent to bring it home. And I don't think that's a
reasonable thing to do. This is a tax code, Charlie, that was made for the industrial age, not the
digital age. It's backwards. It's awful for America. It should have been fixed many years ago. It's past
time to get it done.
Charlie Rose: But here's what they concluded. Apple is engaged in a sophisticated scheme to pay
little or no corporate taxes on $74 billion in revenues held overseas.
Tim Cook: That is total political crap. There is no truth behind it. Apple pays every tax dollar we owe.
Tim Cook has spent much of the last decade expanding Apple's reach around the world, nowhere
more than in China.
In October, Cook made his ninth trip there since becoming CEO four years ago. In the last year,
Apple's sales in china have doubled.
Charlie Rose: Will there be, at some point in the near future, a bigger market than the United
States?
Tim Cook: Yes. I am as certain as I can be of that.
Charlie Rose: The numbers simply tell you that?
Tim Cook: The numbers tell us-- tell me that. And not just the numbers of people, but the numbers of
people moving into the middle class. That, for a consumer company is the thing that really begins to
grow the market in a big way.
And most Americans would be surprised to know that nearly all Apple products are manufactured by
one million Chinese workers in the factories of Apple contractors, including its largest: Foxconn. Yet
Tim Cook insists that China's vast and cheap labor force is not the primary reason for manufacturing
there.
Foxconn
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Charlie Rose: So if it's not wages, what is it?
the minority. And you begin to look at things from different point of views. And I think it was a gift
for me.
Charlie Rose: Why didn't you come out earlier?
Tim Cook: Well, I, honestly, I value my privacy. I'm a very private person. But it became increasingly
clear to me that if I said something, that it could help other people. And I'm glad because I think that
some kid somewhere, some kid in Alabama, I think if they just for a moment stop and say, "If it didn't
limit him, it may not limit me." Or this kid that's getting bullied or this kid that's co-- worse, I've
gotten notes from people contemplating suicide. And so if I could touch just one of those, it's worth
it. And I couldn't look myself in the mirror without doing it.
Before we finished reporting our story, Cook wanted to show us "one more thing," as Steve Jobs
used to say --- a glimpse of Apple's future. So we packed into four-by-fours and with cameras,
drones, and technicians supplied by GoPro we ascended this giant mound of dirt that has been
excavated during the construction of Apple's new corporate headquarters. It is the company's
biggest project ever.