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Steve Jobs was rarely happy when he called, but seldom was he this angry. When the phone rang, Ron Johnson, the senior vice-president in charge of Apple Retail, had already been reading the negative headlines emerging from China. A day earlier, on Friday, May 6, 2011, Apple Store outlets in the country had started selling the iPad 2, and the effect was like pouring fuel on a fire.

Hundreds of people had already been lining up outside each of the country’s four stores for the past week to buy the new, all-white iPhone 4. Now reports from China suggested that a riot had broken out following an altercation involving an Apple employee outside the Sanlitun store in Beijing. Apple staff had locked the store doors in response, heightening the tension and causing the likes of CNN to pick up the story. Jobs watched grainy video footage of the altercation, captured by Apple’s security cameras. It showed a young Chinese consumer get in the face of a tall American employee — a beefy guy wearing a blue company T-shirt — and the employee responded by shoving him to the ground. The young Chinese man writhed in pain, remaining on his backside and twitching. Chaos ensued as security forces defended the Apple employee and got him to safety, out of frame. A seething Jobs called up Johnson and delivered three choice words: “Fire that motherf—ker!”

Three months earlier, the Apple CEO had introduced the new iPad, a presentation best remembered today for how emaciated he looked, as Jobs battled cancer. Frailty aside, Jobs delivered a compelling presentation, saying the original iPad had sold 15 million units in just nine months — a faster start than the iPhone and more units than the entire tablet PC market had ever sold. Executives from Cupertino had eagerly looked forward to the iPad 2 launch in China to accelerate the momentum. Now that weekend had come and it was complete turmoil.

Calming down Jobs wasn’t an easy task in any situation, and this one was especially fraught. Johnson explained that the employee in the video wasn’t some random hire; it was Beijing store leader John Ford, de facto general manager for all of China retail. Ford had opened China’s first Apple Store ahead of the 2008 Olympics — when revenues in the country were negligible — and oversaw dramatic growth as China became Apple’s largest market outside of America. But it was difficult to placate Jobs given the current situation: Ford had been arrested after the confrontation.

Johnson didn’t have all the details. He’d spoken only with his deputy, Steve Cano, who’d received an unwelcome call from Ford in jail. Although Ford had said not to worry, Cano was stressed. How could he not worry? A story about the confrontation was being republished around the world, accompanied by the sort of photograph envisioned in PR nightmares: an injured young man lay on the ground; beside him, a sullen woman looked up toward the camera, her hands clasping tissue paper soaked in blood. Netizens took to Sina Weibo, a microblogging platform, with wild allegations that the foreign employee had “beat one Chinese man with an iron rod.”

The situation was fast-moving and complex. Ford, Cano learned, had been in touch with the office of the U.S. ambassador to China, Jon Huntsman Jr. The Apple Store in Beijing was closed for hours, upsetting people so much that they violently shook its glass doors until they shattered. That, too, was photographed and distributed around the world. In the telephone game that followed, panic ensued. Some executives in Cupertino had begun to fear the worst. There were murmurings that the Communist Party had sent Apple’s Beijing store leader to a gulag.

What made the euphoria outside the Apple Stores in China so different from that of other countries wasn’t just the size of the line-ups, but who was in them. These weren’t Apple fans in any ordinary sense. The lines were filled with rural villagers, who looked distinctly out-of-place queuing up at what was, even by America’s standards, a luxury store; alongside them were their quasi-gangster bosses, often donning gold chains around their necks and carrying themselves with an unusually confident swagger. Some carried Louis Vuitton bags stuffed to their immaculately hemmed brims with 100-yuan notes — only around $15 each, but these were the highest denomination bills in China.

These gangsters were known by the slang term yellow cows, referring to organized scalpers who find market inefficiencies and exploit them for profit. In the early 1990s, they established a lucrative trade in train tickets. As the economy boomed, authorities had been slow to expand rail car capacity. The yellow cows exacerbated the shortages by buying tickets in bulk at low fixed prices, then standing outside the stations hawking them for a small fortune. Some went further, printing forgeries with special presses, paper-cutting machines, and reams of cardboard.

John Ford had first taken note of the yellow cows in October 2010, within days of the launch of the iPhone 4. That’s when organized scalpers first emerged in large numbers and caused an incident by throwing their elbows around at ordinary consumers. Line-ups around each Apple Store abruptly swelled to such an extent that Greater China revenues would shoot up by four times to $2.6 billion that holiday quarter, growth that future CEO Tim Cook would later call “absolutely staggering.”

At first unaware of just how lucrative the evolving gray market was, Ford experimented with a variety of tactics to get the resellers to go away. He tried requiring identification, or limiting sales to five per person, then two per person. In one instance he received approval to sell one scalper 2,000 iPhones, believing it would placate the man. The scalper readily complied — then showed up the next day for more. Nothing worked and Ford grew frustrated. The store sales were making him look good; the rowdiness of the lines wasn’t. He started seeking answers, wondering what sort of deal might be possible so the scalpers would stop clogging the lines.

The yellow cows’ responses astonished him. “You could never run me out of cash,” one told him. The reseller took him on a short walk to a room, roughly 2,000 square feet in size, empty but for piles of renminbi. The cash was in neat stacks so migrant workers could go buy iPhones in the tens of thousands. Ford was a savvy entrepreneur who’d played college football, studied marketing, audited factories around the world, and learned Mandarin as a Mormon missionary to Taiwan. But nothing in his experience prepared him for this. Looking at the tidy piles of renminbi before him, he estimated he was staring at a billion dollars. “I don’t know what the number is for a room that size, but it was more money than I’ve ever seen in one space,” Ford says.

He soon learned that the yellow cows advertised jobs in regional newspapers and then bused in migrant workers to fill the Apple Store. In a nation of 1.4 billion people but just four Apple Stores, the yellow cows were exploiting an opportunity of enormous proportions. These well-capitalized gangsters were amassing the world’s most iconic product by the thousands, then shipping them to another big city where they’d be the exclusive vendor. The opportunity was vast. America had only four cities with a population over two million at the time; China had at least 40.

A single iPhone in the grey market could earn several hundred dollars — a substantial sum when average urban wages were around 2,500 yuan a month, or $370. And demand was insatiable. The iPhone had become a status symbol just as the world’s most populous country lifted hundreds of millions of people from poverty and the first generation after Mao’s death entered the workforce.

Brady MacKay, a U.S. special agent living in Beijing as the U.S. ambassador’s attaché, recalls the “feverish pitch of the Chinese people” as thousands of consumers fought with each other in line. Apple staff, he says, used ropes and banisters to section off people and keep things orderly. “It was almost riotous, and John’s trying to keep a lid on this, trying to keep control of the masses, the crowds, the cheating, the dishonesty, and yet still selling the product,” MacKay says. “People would walk out with two new phones — they’d get mobbed. There’d be buses and people being dropped off to wait in line to buy their two phones. It was just an unbelievable circus.”

Apple’s top executives in Cupertino were delighted by Chinese demand, but also stunned and confused by it. As recently as 2008, Apple had categorized China as a “third priority” market, one step below “priority two” countries such as Argentina and Uruguay. But a small grey market for iPhones emerged in the summer of 2007, then expanded and became more sophisticated as demand swelled. Sneaking iPhones into China became lucrative enough that smugglers were caught “wearing” tens of thousands of dollars’ worth of them at the border. In one case, six men in Hong Kong used a crane to lift tote bags stuffed with iPhones and iPads, then sent the bags down a zip line into Shenzhen.

Consumers who couldn’t afford iPhones found ways to buy them anyway. Tens of thousands of students in Wuhan alone financed their purchase via loans with interest rates as high as 47 per cent. One 17-year-old even underwent black market surgery to sell his kidney in exchange for enough cash to buy a new iPhone and an iPad.

In Sanlitun, employees were often selling Apple products with the same conveyor-belt logic, efficiency, and monotony of their comrades 1,300 miles south in Shenzhen, who’d assembled and packaged the same units just days earlier at Foxconn. Demand was so great that Apple regularly closed the Genius Bar just to make room for cash registers, and at peak hours there were 30 registers running at once, each processing a transaction every two minutes.

“Nobody had seen that kind of volume in retail before,” says another Apple executive. “It just happened. There were massive growing pains.”

Apple ran in-store interviews to surveil sentiment and ask customers directly about their wages, but the answers failed to help them accurately forecast demand. Average reported incomes were lower than Apple anticipated, but somehow this had no significance in terms of sales. One time a post office worker had used 30 per cent of his entire annual salary to buy an iPhone. “When people see me with the iPhone,” he told Apple researchers, “I’m not just a mailman.”

Demand could be so overwhelming that Apple staff would take breaks to relieve tension and cry. The worst incident occurred in late 2010 at Apple’s Pudong location in Shanghai, where consumers pass through a cylindrical glass entrance before heading down a spiral staircase. There, an enormous crowd of more than 7,000 villagers waited in line for hours and then got angry when Apple ran out of inventory. When Apple staff tried to close the store, the villagers wouldn’t let them. Some grew violent: one threw a stool at an employee; others made death threats.

For hours, the villagers staged a sit-in. Security guards present to maintain order couldn’t get them to leave. Local police arrived, to no avail. An armed division was equally ineffectual. Even the mayor of Pudong showed up and was largely ignored.

The villagers had a reason for being stubborn. Some of the yellow cows paying them were linked to violent criminal organizations, the Triads. They were far more worried about retaliation from these bosses than about the police. The sit-in escalated until, after 11 p.m., central authorities in Beijing called in an elite special unit of police — 100 guys wearing all black with expressionless faces that, according to a person present, handled security for senior members of the Chinese Communist Party. Another person present calls them “the SWAT team.”

This elite unit directed Apple store managers to cut the security cameras, cordon off the staff, and isolate the whole area. The black-clad cops told the villagers: “You’re either going to leave voluntarily or leave in body bags.” As the size of the crowd dwindled to under 1,500, a young female villager pulled out her smartphone to snap a photo. A member of the elite unit of enforcers knocked her to the floor, grabbed her by the scalp, dragged her behind the Genius Bar and beat her. “She was screaming in pain,” says a person who still has nightmares about it.

For the next 45 minutes the other villagers were beaten one by one, leaving some of tiled floor so bloodstained that Apple had to replace the Italian stones. Employees present had their phones wiped. No record of the event exists. “It shows you how quickly the Chinese can brush everything under the carpet,” says a person present. “It was like a mini–Tiananmen Square.”

If the security footage that had outraged Steve Jobs leaked, it almost certainly would’ve been John Ford’s last day at Apple and his family’s last week in China. Yet what really happened that day was less dramatic than what the grainy security video appeared to show. Ford had been walking among the crowds outside the Apple Store, speaking to people in Mandarin and trying to create a more relaxed atmosphere. At the back side of the glass building — far from the main entrance where the press was set up — a woman became aggressive, grabbing Ford’s arm and digging in her fingernails as she begged to jump the queue. Ford manoeuvred away from her, only to be confronted by a young man, who came inches from his face. To create some distance, Ford pushed him back. “The guy just collapsed,” says an Apple retail manager who watched the video. The young man flailed to the ground dramatically, like a professional athlete knowing the referee was watching.

“It was complete set-up,” says another witness. The young man’s performance became more emphatic on the ground as he bellowed in pain and quivered. “I barely touched the kid,” Ford says. “But I’m a big guy, I’m not small. So I don’t doubt that he got a shove, but he overplayed it.”

Several people were injured in the ensuing chaos. The U.S. publication The Week headlined its story: “China’s Bloody Apple Brawl.” But the reality wasn’t so intense: when the crowds shattered the glass door, they didn’t yell with delight and try to break the next thing; they fell silent. They hadn’t meant to break anything, and now they were worried they might be arrested by the district’s police chief, Mr. Du, who was right there. Ford knew the incident would be deeply embarrassing to Mr. Du, whom he’d known for more than three years. “His only job is to keep the peace,” Ford says. “I mean that literally: ‘Don’t cause waves in my community and my bosses won’t fire me.’ That’s what the Chinese police system is built for.”

So Ford made a major concession: he offered to be arrested. “In case the story got bigger, Mr. Du needed protection from his people, because he needed to show that he did something,” Ford says. “And the easiest thing he could show was that he’d put the big powerful American executive into his jail cell.”

Uncertain how long the media cycle would take, Ford stayed in jail for four days. The stunt, he says, “scared the crap out of my wife and a few other people.” Conversations with Apple weren’t exactly smooth. In Ford’s mind, he’d preemptively de-escalated a chaotic situation and got the local authorities on his side. Here he was, just sitting in a room, hanging out, and making calls from his iPhone to inform his network of political connections not to worry if they read that he’d been arrested. But back in Cupertino, executives were losing trust.

For a time, the yellow cows were seen by Apple executives in Cupertino as helpful. Their service of distributing products around the country cost nothing and offered the tech giant time to build more stores. But just as the yellow cows in the 1990s train-ticket scheme progressed from cornering the market to engaging in fraud, so, too, did the grey market for iPhones grow more nefarious. Huge sums of money were involved as the number of iPhones sold in China expanded from hundreds of thousands in 2009 to more than 20 million in 2012.

Some of the yellow cows found ways to acquire iPhones in large quantities and at less than $100 each. Using fake IDs at T-Mobile or Verizon in the United States, they could acquire new iPhones with just a down payment on a 24-month contract — with zero intention, of course, of ever paying the next 23 installments. The problem with these iPhones is that they were carrier-locked; that is, they were restricted to a specific U.S. network and wouldn’t function in China. But as the yellow cows elevated their tactics and grew more cunning, they developed technical know-how through factory connections.

At these factories they found ways to “burn out” the main computer chip within the iPhone. They were deliberately breaking the unit, but in the process, masking its retail market country of origin. Upon smuggling the units into China, they began paying migrants to show up at the Apple Store and complain that their new iPhone didn’t work. Genius Bar employees were at first oblivious of the scheme. Using special tools, they’d confirm the iPhone to be brand new, but with the processor zapped. In some instances they reported to their bosses that the returned phones had existing customers’ details attached to them — U.S. names and addresses — which flummoxed them because that wasn’t possible for a new phone. Uncertain what was going on but wanting to provide Apple’s famously courteous customer service, the staff gave some customers brand-new iPhones — a delight to the reseller bosses who’d devised the scheme. “This was like cocaine to the yellow cows,” says a former Apple executive. “They were making a fortune.”

As the scheme went on, customers had to wait as Apple sent the burned-out units to a logistics hub in Singapore, where a special team could replace the chip and send the phone back to China. For an ordinary customer, this would’ve been a perfectly fine outcome; but the migrants and their yellow cow overlords were anything but ordinary. They needed mint condition iPhones in a sealed box to attain the highest possible price in the grey market. A “refurbished” unit wasn’t good enough.

Upset, they began to complain about Apple, saying the arrogant Western company was treating Chinese customers differently than others around the world by repairing, rather than replacing, broken units. Apple’s reputation deteriorated as real customers who needed help with their phones found that Genius Bar appointments were constantly booked. The resellers were using mainframe computers to reserve all the spots or crash the system. Then they’d stand outside the stores selling the appointments. “It was much more sophisticated than you could possibly imagine,” a former Apple executive says.

The challenge was exacerbated even further when customers took broken iPhones for repair to fake Apple Stores that had no interest helping them. These stores could appear so genuine that the employees themselves thought they were real. The phony stores often sold real goods, but it was a grift — they had no interest in replacing defective or broken hardware.

By late 2012 it was becoming increasingly clear that Apple was in over its head in China. The tech giant was experiencing unprecedented financial success in the country, but behind this was a dizzying array of problems, and the tech giant had far too few people on the ground with the cultural and political acumen to address them. Then, as complaints about Apple made their way up the various political channels, a new risk emerged that threatened Apple’s operations and its surging retail growth in the country: Xi Jinping was named General Secretary of the Communist Party.

From “Apple in China: The Capture of the World’s Greatest Company” by Patrick McGee. ©2025. Reproduced with the permission of Simon & Schuster, 2025.