At the eve of Apple’s iPhone 11 launch, Professor Clinton Fernandes reminds us that, without US federal funding and government protection of Apple’s interests, iPhone’s touch-screen, LCD and even Siri would never have seen the light of day.
Next week, Apple is expected to announce three new iPhone 11 models. The breathless press coverage will likely focus on Apple’s technical wizardry and, perhaps, the genius of the late Steve Jobs. But two things probably won’t receive much attention — the massive public subsidy that created the iPhone in the first place, and the US government apparatus that constantly defends Apple’s interests.
In contrast to the doctrinal fantasy of individual genius and free markets, it was decades of public subsidy that made the smartphone smart. Indeed, the 12 major technologies that make the iPhone so distinctive were all developed by public investments backed by the American taxpayer.
Since Walter Isaacson’s acclaimed biography of Apple chief, Steve Jobs, makes no mention whatsoever about these public investments, I propose to outline a few of them.
As the economist, Mariana Mazzucato, notes in her book “The Entrepreneurial Estate”, Apple’s ingenuity comes not from developing new technologies and components but on integrating them into an innovative architecture. In a review of her book by The New York Times on March 23, 2014 (‘America’s Underappreciated Entrepreneur: The Federal Government’), Professor Mazzucato documents the leading role played by the government in, for example:
“… ‘all the technologies which make the iPhone smart,’ including the Internet, wireless systems, global positioning, voice activation and touch-screen displays. That is not to detract from Apple’s role, but to put it into context. Without government, the technological revolution that has allowed iProducts to exist would not have happened.”
Giant Magneto Resistance, or GMR, is a quantum mechanical effect observed in thin-film layered structures. The magnetic field sensors used in hard disk drives rely on GMR. Yet this technology from its origins to its current form has benefited from public subsidy, in the basic research as well as in commercialization.
Peter Grünberg, who shared the 2007 Nobel Prize in Physics for his work in developing GMR, benefited from the US Department of Energy’s largest R&D lab, Argonne National Laboratory, located in Illinois. The US Department of Energy gave him vitally important support before his discovery.
This is what allowed hard drive manufacturers like IBM and Seagate to translate the technology into successful commercial products.
Capacitive sensing is another smartphone technology used by Apple. It draws on the human body’s ability to act as a capacitor and store electric charge. Without capacitive sensing, there would be no click-wheel feature in the iPhone — the touch-based feature that allows you to use your finger to scroll quickly through your iTunes library.
The first resistive touch-screens were developed at Oak Ridge National Laboratory in Tennessee, better known as the site of the Manhattan Project to build the atomic bomb. Early touch-screen technologies could handle only single-touch manipulation.
But even more public subsidies funded the creation of multi-touch scrolling. Apple then acquired this publicly funded research and launched the first generation iPhone in 2007. Today, this technology lies at the heart of Apple’s iOS products, as Mariana Mazzucato observes.
SIRI, the iPhone’s virtual personal assistant, also relied on public subsidy. SIRI came about because American taxpayers funded a project at the Stanford Research Institute (SRI) to develop a “virtual office assistant” to assist military personnel. SRI developed the CALO project – the “Cognitive Assistant that Learns and Organizes.” SRI commercialized the technology by forming “SIRI” as a venture-backed start-up in the same year. Apple acquired SIRI in 2010.
The US Army funded almost the entirety of the iPhone’s liquid-crystal display (LCD) screen. The inventor, Peter Brody, then tried to obtain commercial support from Xerox, 3M, IBM, DEC and Compaq. They all refused.
They doubted his ability to build the manufacturing capability necessary to provide the product at a competitive price. Once again, American taxpayers stepped in, giving Brody a $US7.8 million contract, allowing him to develop the LCD. That’s the reason for the new generation displays for the portable electronic devices.
The same story applies to the entire semi-conductor industry, whose development was funded for decades by the American taxpayer. Once viable, it was transferred to the private sector. The politically correct term for this is capitalism. It’s more accurate to describe the system as socialization of the costs and risks, and privatisation of the profits.
Furthermore, US government protection is a constant presence, shadowing its corporations and defending them overseas. The diplomatic cables leaked to Wikileaks in 2010 provide important insights into this process. The cables show how US Embassies around the world protect Apple’s intellectual property.
In China, for example, the American Ambassador hosts roundtable discussions on intellectual property enforcement. Backed by the power of the American Embassy, US business sound out Chinese officials about the IP environment in China: what challenges they face, and how China can be more effective in enforcing intellectual property. Customs enforcement officials in the US Embassy with Chinese authorities to dismantle counterfeiting networks.
This work isn’t confined to Apple, of course. The Embassy in Beijing described Operation Ocean Crossing, a joint US–Chinese law enforcement operation targeting China-based transnational counterfeit pharmaceutical manufacturing and distribution. Operation Ocean Crossing resulted in the largest seizure of counterfeit pharmaceuticals in China’s history, with proceeds estimated in the millions of dollars.
The American government is sometimes more proactive than its corporations. “As amazing as it seems,” the Embassy in Beijing reported, “computer maker Apple Inc. had no global security team … until they hired away the team from Pfizer that formed and led a multi-year crackdown on counterfeit Viagra production in Asia.” The “global security team” is concerned about much more than industrial sabotage or threats to its executives. Its “security” function includes the security of profits.
Further afield, the leaked cables show the US Embassy in Oslo keeping a close watch on the Norwegian Consumer Council’s complaint that consumers couldn’t play music downloaded from iTunes on non-Apple media. Apple had opposed this argument, insisting its customers be restricted to the proprietary AAC file format.
The Embassy took a dim view of Norway’s ombudsman, who agreed that consumers should have the right to play music on any device. The leaked cables show the Embassy’s satisfaction with the Ombudsman’s capitulation. He “underwent a remarkable public transformation, now noting his willingness to cooperate with iTunes.”
Apple, the Embassy reported, “may reach out for our assistance” even if it wasn’t looking for immediate help. The Embassy’s discreet behind-the-scenes moves included approaches to a key diplomat in Norway’s World Trade Organization and OECD Sections in the Foreign Ministry.
The leaked cables remind us that lurking behind the publicity at next week’s iPhone launch is the full weight of the American diplomatic apparatus — and taxpayer-funded research.
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