The absolute dependence on China is something I'm surprised more companies haven't tried to combat. There's so many efforts to try and diversify to reduce risk, yet almost every hardware company remains at the whims of the Chinese government due to their dependency on Chinese manufacturers.
The idea that the Chinese government could present a material international threat to your business is really a relatively new one[1]. Immediately after PNTR in 2000 and before the installation of the current regime, it was a a more-or-less stable environment.
Today's uncertainty really only started to creep in around 2014[2], and in those 14 years the global supply chain concentrated so heavily in and around China that you need to overcome a lot of inertia to move elsewhere. Most attempts to do so until now have been either for low-value mfg - t-shirts or bicycles - or focused on relatively less complicated finishing and assembly stages.
1. What I mean here is that in earlier days, you were more likely to be concerned about access to the PRC market and making sure you had strong internal IP protections in place with your contract partners.
2. In addition to the politics, this is also around the time it became clear that the Chinese economy in general needed to change, because they were starting to lose out on low-margin products to lower-wage countries.
It was kind of inevitable that this would happen as China moved up the value chain and ever more of the American industrial supply chain came to rely upon it - especially hi tech.
In a way, it's better that this decoupling (which will not be a quick process) happens sooner rather than later, before that reliance can be used as an effective weapon against the US (turning off the industrial goods tap/sanctions could be pretty devastating).
It would be best that there be no decoupling. The decoupling is driven by a belief by some in the American government that they can somehow blunt the economic development of China and maintain American geopolitical hegemony into the foreseeable future. That's a very dangerous thing to attempt to do, because it sets the two countries on a definite path towards conflict. The question is really whether the United States is willing to accept its probable status as the #2 power in the world in a few decades, or whether it will make a serious attempt to retain its current position. Certain people who are influential with the current occupant of the White House, including Peter Navarro and Steve Bannon, truly believe that the latter option is possible, and are willing to enter into a major conflict with China.
> The decoupling is driven by a belief by some in the American government that they can somehow blunt the economic development of China and maintain American geopolitical hegemony into the foreseeable future.
You don't come out and say it, but your implication is that this is not possible.
It is not obvious to me that that is the case.
1. China is a low trust country. There is a deep culture of fraud and deceit. This will be a difficult thing to change, which I believe is a precondition to being a tier 1 super power.
2. People like to extend trends into the indefinite future, but macroeconomics is superstition at best. The stagnation of Japan caught just about everyone by surprise. I think there's at least a 30% chance this happens to China, based on some of the reports I've seen coming about of China related to debt and real estate.
I think there is a good chance for China to reach tier 1 status, but it doesn't seem like a foregone conclusion to me. Given this level of uncertainty, it seems reasonable that some powerful Americans might not want the US to go gentle into that good night.
> People like to extend trends into the indefinite future, but macroeconomics is superstition at best. The stagnation of Japan caught just about everyone by surprise.
Japan stagnated after reaching approximate parity with the US in GDP/capita. China only has to reach one quarter the productivity of the United States in order to surpass the US in nominal GDP. If China reaches half the productivity of the US, its economy will be twice as large as that of the US. These are relatively low bars.
> Given this level of uncertainty, it seems reasonable that some powerful Americans might not want the US to go gentle into that good night.
I wouldn't call it "reasonable," but I might call it "predictable." A policy of trying to sabotage China's economic development would put the US and China on a definite collision course, and I don't want to see what the world looks like after that. The most concerning aspect of this is the apparent widespread support for this course of action among both Democrats and Republicans. A lot of people don't know what they're careening into.
>1. China is a low trust country. There is a deep culture of fraud and deceit. This will be a difficult thing to change, which I believe is a precondition to being a tier 1 super power.
That's a low grade racism. China has issues, but is the #1 global manufacturer, and the biggest global companies (from Apple and BMW to Dell and Armani) rely on it for their production. That takes a lot of trust, not "fraud and deceit".
Sure there's "fraud and deceit" from small-timers, but then again the US cities also used to be full of small time crooks and hustlers in the better part of the 20th century, as people were getting out of poverty. In the case of China it's internal, not foreign immigrants, but the dynamics are the same.
>2. People like to extend trends into the indefinite future, but macroeconomics is superstition at best.
Well, the same argument could be said for the hegemony of the USA. Why would it extend to the "indefinite future" (especially since trends show the opposite)?
"A low trust country" is maybe not the most elegant way of phrasing it. But China does not have the rule of law and long-term stability in politics, policies and enforcing contractual agreements, established historically or by implication, to nearly the same degree as most Western countries. The trend of rich Chinese investing in property in the West demonstrates that Chinese citizens are also well aware of this, and are hedging their bets.
This is an often underappreciated point regarding the industrial and innovative ability of Western society. It remains to be seen whether it's a precondition to being the most powerful nation in the world in terms of technological development and industrial capability. (In the same way as the question of democracy/freedom of speech in general being such a precondition).
>The trend of rich Chinese investing in property in the West demonstrates that Chinese citizens are also well aware of this, and are hedging their bets.
Or they might be simply diversifying because they've too much? It was not uncommon for Americans back in 80s to have a Holliday home in Europe for same reason.
We never say Apple manufacturing in China implies that Apple do not trust American government?
>....rule of law and long-term stability in politics, policies and enforcing contractual agreements, established historically or by implication, to nearly the same degree as most Western countries.
May be it is time to stop using the word Western, which is a word China likes to use. Both I don't see Japan, South Korea, Australia being in the West.
May be we should start using the world "International".
The original comment did not say that China is distrustful because they are of a different race or that their race makes them inherently distrustful. I think shutting down any argument with "that's racist" is disingenuous. If we go by your logic you can say "that's racist" to any criticism of China.
But China is mostly Chinese people, or you are suggesting he blames immigrants in china for fraud? I think he's justified on his part to take an offence when his country his mentioned with fraud, I've been duped more by New Yorkers than I've been duped in Beijing but I don't go around saying, all America is scam and built on blood and plundering.
>The original comment did not say that China is distrustful because they are of a different race or that their race makes them inherently distrustful.
It can still be racist if its counter-factual and driven by a dismissal of China itself. In fact it can be racist even if the same person accepts e.g. Japan, as Japan and Korea faced the same dismissals in the 60s to 80s (as copiers, second rate quality places, corrupt states, etc) before being accepted.
The fact is that China has been trusted by almost all major global companies for their manufacturing, so China can't be said to be a "low trust country" as a blanket statement.
Of course China can have low trust businessmen or low trust state officials, or they might be losing trust now (with the trade war and co).
But for decades they have had the trust of almost all western companies. Enough trust that they have been doing their manufacturing there (even exclusively there) for 2+ decades.
Trust has nothing to do with westerners reliance on China.
It’s the low cost of human capital, and now the realization of lost non-Chinese suppliers, that continues to keep China thriving.
One does business in China because it’s the only way (currently) to stay afloat.
And yes, corruption is inevitable in China because of its inconsistent rule of law and inability of dedicated journalists and grassroots movements to expose, uproot, and punish said corruption.
Edit: China is at a crossroads, but whether those in power will step-up to greatness and allow its greatest resource (its people) be more than puppets and slaves remains to be seen.
>In fact it can be racist even if the same person accepts e.g. Japan, as Japan and Korea faced the same dismissals in the 60s to 80s (as copiers, second rate quality places, corrupt states, etc) before being accepted.
They also had a democratic process, a lawful system ( bias or not ) in place where many of these issues can be solved diplomatically.
Not the same of China, everything is tangled together. CCP.
#1 global manufacturer for whom? If China manufactures products for America and the Americans are making sure the products pass quality control under American standards and you're buying the American product, not the Chinese one then clearly China can still lack trust despite being a #1 global manufacturer. The Chinese are absolutely awful at establishing brands and exporting their products directly under that Chinese brand but at the same time they are widely successful within their own country.
>#1 global manufacturer for whom? If China manufactures products for America and the Americans are making sure the products pass quality control under American standards and you're buying the American product, not the Chinese one then clearly China can still lack trust despite being a #1 global manufacturer
Not sure I follow. It's still China making those products, and American companies trust Chinese companies to make it under their (American) standards...
I think your point 2 is very true. And there are other things to worry about China: the prevalence of corruption, an aging population.
I think most of the growth from the 90s to 2008 was generated by the continuous flow of western companies outsourcing to China, investing in the economy and opening factories. That flow dried in 2008 because anything there was to outsource has been moved already and if anything automation will rather repatriate production. Then to compensate that and the collapse in global trade caused with the financial crisis, China embarked in a massive debt bubble. In less than 10 years the size of Chinese banks balance sheets went from nowhere to become the largest in the world, well over US giant banks. This fueled a real estate bubble. But this debt bubble is coming to an end, and what will fuel the growth for the next 15 years? The past 30 years are not reproducible.
Trust is a two way street, you have to be willing to trust to find trust.
HN is not the forum for these types of discussions, there is a moral panic going on though and even the better educated are not immune to it. The same tropes get recycled until things we would never say about most countries are able to be said without supporting facts.
As per the comment guidelines some things just need to be flagged rather than flame-discussed. We went through the same phases with Japan, Korea and plenty other places. It is best to see the funny side of it and also tune in to the other side of the story.
>HN is not the forum for these types of discussions, there is a moral panic going on though and even the better educated are not immune to it.
It could even be said that the better educated have it worse. At least the less educated are fed some crappy fake news that are easy enough to see through.
The better educated are convinced they know the truth because they read fluff pieces in "trusted" newspapers and magazines (e.g. NYT, The Economist) promoting the financial and corporate interests du jour.
It's easier to trust this "high end" version of fake news (where the lies are told with nuance, and the pundits have been shown to be worse in predictions than random coin tosses).
Here's a study, "The Blue Book of Social Mentality", sponsored by the Chinese Academy of Social Sciences, replicating this finding that China is a low-trust society:
Taiwanese and Hongkongers agree & enjoy their freedom.
This "Western..." thing is something that is used often in Chinese PRC propaganda, to discredit free press and the rule of law as "Western" ideas. Yet, China has no problems following the "Western" idea of communism ;-)
>Yet, China has no problems following the "Western" idea of communism ;-)
Well, I couldn't care less what China does. Not to mention that their "idea of communism" has little to do with the indeed western ideas of Marx.
As for the "Taiwanese and Hongkongers", those are not the best examples of freedom one could find. One was a dictatorship up until the 90s (under martial law and everything), and the other was under British occupation (with full blown riots against that rule during the 60s and 70s)...
My understanding is that it is driven by belief that the pie has been unevenly divided, with China benefiting far more than the USA (I am not saying I agree with this) . China is investing its extra pie into expanding is global power (military power and soft power),while simultaneously becoming more aggressive (South China Sea).
The dragon is awake and it is natural for its competitors for resources to react.
The USA is not going to be #2 in 30 years. And to suggest the USA should sit back and passively accept that is will be is as crazy as suggesting China should stop expanding its economic power base and global influence because the USA doesn't like it.
These two behemoths will vye for power until an equilibrium is reached. If one wins its because the equilibrium was not in their favor, such as the USSR.
How and by what metric? China already has a larger GDP (PPP) than the US. And their economy has approximately doubled every decade for the past 3 decades.
There were worries that Japan would surpass the US and that didn't pan out. But Japan has 1/2 the US population. China has 4x the US population. This is also a big difference vs Russia.
I am sure the US does not want to "accept" a 4x bigger country ever having comparable influence. But does the US really have the power to keep China, another nuclear power, at 1/4 US GDP level forever?
You say accepting this is crazy, but escalating a conflict between two world powers in an attempt to permanently repress one of them seems a bit crazy to me (negotiating for a better trade deal is another matter).
There are plenty of countries that enjoy a high standard of living without being the undisputed #1 economic power. I'm skeptical that the US actually looking out for its own interests necessarily involves a big conflict with China, although I could easily imagine that outcome.
I think the pie between the US and China is fairly divided. However, greedy US cooperates get most of the US share whereas Chinese government at least spent a fraction of the trade profit to lift hundreds of millions people out of property. When US middle class look at their newly enriched Chinese counterpart, they feel they are raped off.
Well, it is true that globalization hurts the US middle class. Basically the argument in favor of globalization that economists use is that basically it is beneficial at a national level for the USA to exploit Chinese labor. The cost savings obviously go into the pocket of the executives. The people who lost their jobs get nothing. Obviously the same thing happens to every industry to varying degrees. Those who don't lose their jobs can still see their wages stagnate also known as deflation. The central bank then tries to combat the deflation by injecting money into the economy. It doesn't work: Inflation doesn't go up for anything other than housing, education or health insurance. That can only mean one thing. Prices that do not go up are not dictated by the local economy. If inflation would happen in the US and increase widget prices from $4 to $5 then production simply shifts to a country that can indeed produce the widget for $4.
If what I explained above is true, then it's time to rejoice. It means that the problems the middle class suffers from are temporary until every other country has been lifted out of extreme poverty. All we have to do is wait until the race to the bottom is over.
However if what I said is wrong, then it's time to be sad. There is no easy solution and the middle class might never get back on track.
Deflation and wage stagnation are not the same thing, indeed sometimes they are opposite. And I don't think their is a clear way to measure what potentially low percentage of the cost savings go to executives' pockets.
But certainly true that American workers are being squeezed, having to compete against more and poorer workers because of globalization and free trade policies.
> Chinese government at least spent a fraction of the trade profit to lift hundreds of millions people out of property
I was under the impression that those people were lifted out of poverty due to working higher-wage jobs in manufacturing rather than due to explicit wealth redistribution by the government.
While direct wealth redistribution isn't significant, huge spending on infrastructure on roads, railways, telecoms and education certainly helped. Without these infrastructure, people won't be able to build factories and work on higher-wage jobs.
Yes and he'd be right. Making the transition violent is... unwise. China isn't Germany, this conflict will become hot only after China is convinced it can win. Sun Tzu was Chinese, after all :)
I think China underestimated the readiness of Western companies to move out. The notion has been that these big companies are locked into these big Chinese factories and can't leave.
But the reality is that these factories, often as the insistence of the Chinese government, are merely contract manufacturers. If another factory can be located somewhere else at a competitive price, moving production isn't as big a deal as if the company actually owned the factory.
It's my understanding that the combined capabilities in China's major manufacturing cities is unique in the world, and no other place can so readily spin up a new factory.
It's my understanding that the combined capabilities in China's major manufacturing cities is unique in the world
Unique today. But what about tomorrow? It's not like another country can't do the same thing. There's nothing inherently Chinese about opening a factory quickly. Another country or two will learn how to do it, just as the Chinese did.
>There's nothing inherently Chinese about opening a factory quickly.
I'd say there is one, the available population to work. India is really the only country that could come close just based on pure population and I don't see there being a drive to do that.
Rather anything that came close would have to be a combination of Indonesia, Malaysia, Vietnam, Cambodia, etc. all working to grow their manufacturing bases to come anywhere close to what China can do when it comes to setting up factories in the near future. Longer term maybe some African countries will industrialize that way, but I don't see a place meeting the scale of Shenzhen/Dongguan manufacturing ever again.
I recently got back from visiting a factory in SEA, and spoke quite a bit with the people there about how the area is growing from a manufacturing standpoint. They have definitely taken notice of what is going on with China at the moment and are trying their best to take advantage of it, but it isn't even close to what I've seen in China.
> I'd say there is one, the available population to work.
There's also the infrastructure. In china it's very easy, fast and cheap to get anything you need for a factory, and get it quickly, be it specialized CNC machines, parts for a mechanical crane, a truckload of leds, - or really anything in the whole chain of running and operating a factory - including expertise people at every level.
According to [1] about 80 million Chinese are employed in the manufacturing sector. That is not an insurmountable amount of employment for many countries, especially when you consider that Chinese production largely is based on cheap labor rather than heavy automation.
Exactly, Thailand and Vietnam are already on the ramp up phase and they've gotten sophisticated enough for companies like Intel to establish a manufacturing facility in Vietnam. Evidently, training the labor and building infrastructure is possible, albeit not as competitive as China, and it is only a matter of time for others to follow.
Lower cost manufacturers are already migrating away from SE Asia because of rising labor costs, driven in large part by competitors expanding into the area for the local market (e.g., auto manufacturers) or moving away from China.
The climb up the value ladder is very real, and it's only partially being driven by the political climate in China.
Thailand and Vietnam are not replacements for China, though. They're simply too small. There are provinces in China with a larger population than Vietnam, and there are about 25 Chinese provinces with a larger GDP than Vietnam.
Thailand and Vietnam together are larger than France and Germany combined.
They're not a replacement for China, obviously, but they don't have to be. A large part of China's role in global high-tech manufacturing is final assembly, which can and increasingly is being done everywhere.
Plus if you add India and Indonesia to the mix, there is a very large pool of reasonable stable, cheap labour countries that could provide a more suitable alternative if their government apply their mind to it.
Nothing says all this factory capacity needs to move to the same country. There would be a lot to be said for splitting these factories across 25 countries rather than settling on "the next China"
It would be but just how a tiny country such as Switzerland can dominate the watch manufacturing industry, smaller countries can specialize in a particular industry and excel at it. China still would have a competitive advantage but as the middle class in China rises, labor is getting more expensive and asia-pacific region is ready to accelerate manufacturing capacity. If these countries play their cards right, allow seamless trade and promote a strong supply chain; they can be serious contenders.
That would shield American companies from the geopolitical risks posed by an erratic/belligerent American government of the type currently in office, but it doesn't necessarily make sense from a purely economic point of view. There is a lot of electronics manufacturing know-how and infrastructure concentrated in China, and we all know about the theory of comparative advantage.
>Unique today. But what about tomorrow? It's not like another country can't do the same thing.
It requires the willingness to throw public money at it and depreciate the currency, decades of patience and favourable trade conditions. Technically other countries could do it but most have neither the patience, capital, time or goodwill. This may well include the US.
>There's nothing inherently Chinese about opening a factory quickly.
It's the ecosystem of factories in close quarters that creates their non-replicable competitive advantage. That includes soft capital (lots of people with experience) with hard (container shipping).
For the time being (and at least for the next decade), that is uniquely Chinese, and only the US or EU are even capable of duplicating that (and it's unclear whether they have the will).
> and no other place can so readily spin up a new factory.
No other place to spin up a new factory within the current cost structure and logistics time line. It is not that the capabilities are hard to replicate, it is expensive to replicate. No to mention some of those component can still be exported if necessary.
Once you added traffic, ( If the company is US focused or have US as large customers ) you start doing calculation whether moving make sense in the long term. ( And of course it does )
That could have been said about many countries in the last 100 years. England, Germany, United States, Japan and now China. Capitalism seeks to reduce risk and maximize profit. We are in a cycle to reduce risk and preserve profit. How long it will last is up to the political landscape.
Also many of these factories are in fact Taiwanese and it's the Taiwanese companies who have the know-how. Nothing stopping them from opening new factories in, say, Vietnam or Bangladesh.
As soon as someone else can actually compete, those companies would consider it. In my startup's case the same thing cost $20K made in US vs. $1K made in China, if a VC will foot the difference without taking equity I'd be happy to manufacture in USA.
It doesn't even have to be the USA. My favorite MacBook Pro was made in Ireland. I believe at one time Apple moved, or was thinking about moving, some production to Brazil.
Good point! The Huawei case should put the rest of the world on notice about the threat of US technological dominance along with the use of the financial and judicial system as a weapon to crush the competing countries.
"absolute" dependence is a bit of a stretch... I'm sure all nations are careful about "putting all their eggs in one basket".
China has a number of advantages:
* Highly developed manufacturing/shipping coordination
* Well trained assembly line workers
* Government supplied infrastructure and subsidies (effectively an internal "Marshall Plan")
* Large population that is more than big enough to support its own internal middle class market development in the same way as the US/EU/"West" did after WW2
* Relaxed IPR environment in the same way as the US (and most other countries) did when developing (the US blatantly stole IP from the UK in the late 19th/early 20th centuries)
China also has a number of disadvantages:
* Lack of rule of law
* Central government planning lacking the flexibility to react to rapidly changing events
* Inhibited creative class by the nature of a communist/totalitarian ruling class.
But saying that China "absolutely depends" on the US is untrue. The nature of international trade is that both countries are suffering due to the current US administrations trade "policies". Tariffs are inherently a tax on the consuming nation, not the producer. China has already found a) alternative suppliers for US products (eg soybeans) and b) alternative markets (SEA, APAC, EU, ME).
No one else has workers that work for a pittance and have an average IQ of 100... and are willing to work very long hours. It will cost money and probably quality to move this anywhere else without paying a lot more for the same thing. Apple has put over a hundred billion into its pocket on the back of these works, now let's cut them loose and pay someone else the money you "saved" to do the same thing for more.
I've been to China and lived there for 5 years and now living in India for 3 years.
The infrastructure scale in China is huge. Even in small towns electricity is offered 24/7.
In India even in the largest cities there is constant load shedding, power cuts often 1 or 2 hours daily.
Internet is slower in India, heck you can't find screws for sales on Amazon India and in china even in the smallest towns, I saw speciality stores at every few kilometres who stocked every kind of screws.
India might be able to compete in terms of population but it's decades behind china in infrastructure.
No disrespect to India but I am afraid till India has insane custom duties on foreign imported products, Indian talent will have a self imposed ceiling.
In Chinese market, you can find quality German tools but in Indian market, even tools are hard to find, I've no idea how makers deal with this shit here.
If I had to tweak one policy in India, I'd remove all custom duties so that youth is able to import quality tools and inputs from abroad and is able to produce quality output from that.
India limits what you can import and puts tariff on that, this results in using shoddy input for manufacturing resulting in shoddy output.
Garbage in garbage out.
Talent is crushed before kt gets a chance to blossom.
And whatever companies product in India do not sell buy export their stuff to other rich countries and domestic market is kinda empty.
I think it's mostly investment in education. Certain cultures value education more than others. Certain states enforce more challenging and advanced curricula than others.
IQ is influenced by education. An illiterate farmer is likely to score worse on an IQ test than someone with a high-school education. If you do transnational IQ studies, you can still calibrate the test to give an average of 100, but countries where the population consists mostly of illiterate farmers are going to have a lower average than countries where almost everyone went to school.
That does mean that 100 is a somewhat arbitrary cutoff to require. A better criterion would be what percentage of the population has the education necessary to retrain for a manufacturing job quickly.
By definition, IQ averages 100 across a population. What you are talking about is how people respond to IQ testing which is inherently culturally biased.
For any particular IQ test, there can only be one population for which it is perfectly calibrated to yield an average of 100. Other populations e.g. in different countries will have different averages.
And of course the whole point of IQ tests is to be culturally biased, since it's about performing well on a particular set of tasks at the exclusion of others. If the illiterate farmer wanted to find out how smart someone is, they'd probably use completely different criteria.
105-107 is probably a little high, but the real number is likely above 100. If mainland China is fudging the numbers, then Macau & Hong Kong are as well. Their PISA scores are all pretty close.[1]
PISA scores are controversial to use as a comparison between countries. And yes China, Macau, and Hong Kong are likely using some creative strategies to boost their scores.
"This year, Chinese administrators chose their students from a group of cities and regions aptly named B-S-J-G, after Beijing, a province-level municipality, Jiangsu, a province on the eastern coast of the country, Guangdong, a southern coastal province, and Shanghai, a province-level municipality. Previously, Chinese authorities had chosen Shanghai as mainland China’s sole representative, whose students finished at the top of all three subject areas in both the previous two PISA studies in 2012 and 2009.
Now, if all countries were to take this approach, we would see London selected to be the sole representative of Britain, or Boston and its suburbs representing the U.S. This year, in fact, saw a separate score calculated for Massachusetts, which if taken as the nation’s results, would grab the top spot in reading with eight other nations, 2nd place in science with ten other nations, and 12th in math.
If we dig deeper into the sampling, we come across another potential problem with the PISA testing: that the sampling done on mainland China (Beijing, Jiangsu, Guangdong and Shanghai) and other cities was not taken from a wide variety of schools. Rather, the very best schools were chosen and the very best students were cherry-picked from those schools."
I think it's proven that South East Asians have highest IQ second to only Askenazi Jews.
I read various paper mentioning that. South East Asia was never poor even if you go back to historical accounts of travelers from Italy or Arab world, you'll never find poor and south asians cities mentioned in the same line.
Nonetheless all counties there were dirt poor at some point in the last hundred years. North Korea still is.
IQ is largely a measure of education, which itself is largely related to how developed your country is. Large groups of relatively uneducated rural dwellers will drag the average down.
It's well known Asians are smarter, whether for cultural or genetic reasons, but the devil is in the details. If you look at average populations I would expect the inverse for counties like China that only developed recently.
I was curious to compare Apple's revenues from China with the payments it sends to China for manufacturing.
Revenues (official data): ~$50B/year, down from $80B/year a year ago.
Costs attributed to China are very hard to measure. A lot of the official "manufacturing cost" of the iPhone doesn't actually stay in China (as chips, screens, etc. are all manufactured outside of China, and simply assembled there: https://www.bloomberg.com/opinion/articles/2019-06-12/apple-...). According to one source (https://theconversation.com/we-estimate-china-only-makes-8-4...), about ~$8-9/phone stays in China. Also, Apple makes ~200M iPhones a year (not all of them in China, but let's ignore that).
Assuming my numbers are not too far off, Apple contributes ~200M x $10, or just ~$2B to the Chinese economy by manufacturing the iPhones there.
It seems that if China restricts (or even merely discourages) people from buying Apple products, it will hurt Apple a lot more than Apple could ever hurt China.
Of course, China cannot do anything to Apple without US retaliating. But as the trade conflict escalates, this threat loses its power as there are fewer things to retaliate with.
Your $2B number is way off. While most chips are manufactured outside China, most chip packaging happens within. So, all the costs post mass chip production (into cut silicon dies), including chip packaging, testing, PCB manufacture, assembly, etc happens in China. You're off by at least 5X, $50/iPhone is the money paid to Chinese vendors, or at least $10B.
Considering the 3X labor buying power compated to the US, $10B/annum is directly supporting the livelihood of plenty in China. The indirect benefit of training a workforce in cutting edge high tech manufacturing, and R&D, is possibly much higher. So high in fact that Huawei, Xiaomi and Oppo combined probably outsell Apple and Samsung combined
Ah thanks, I wish I had better sources, the one I quoted was all I could find. Yeah at $10B/year, the tables are turned I think.
Strictly speaking, it's still a lot less than the money paid by the Chinese citizens to Apple. But that's not a fair comparison, since it's not like the Beijing government can just take that money and use it to pay salaries to some workers.
I suppose they could, over time, guide domestic consumption towards more domestic goods, but it's a slow and uncertain process.
But let's not forget how many people they lifted out of poverty with that $2B. It is being used to install infrastructure in china, education/health services have vastly improved compared to Apple who still likes to keep their money in bank, helped no American's life joyful.
> Of course, China cannot do anything to Apple without US retaliating. But as the trade conflict escalates, this threat loses its power as there are fewer things to retaliate with.
It did, and not so few times. There was a case in 2015 when some low level customs bureaucrat made Apple C-levels loose sleep for close to a month when he arrested the whole new model iphone shipment just before the holiday season on grounds of them either having a typo in the declaration, or something equally silly
>Of course, China cannot do anything to Apple without US retaliating.
Not really the main reason. Apple has an extremely good relationship with China, and has been helping them from NAND, Glass, Battery, Display, Plastic, to every other form of components up to speed and quality.
Yes Mr. Xi has a lot of enterprises reconsidering their options with respect to China. If I'm not mistaken the Chinese have a saying, "The measure of someone's irreplaceability is the divet that is left in the bucket of water after their fist is removed."
Dear Apple, as a Vim user, the only thing that will get me to buy your touchbar macbook is a stamp that says "Made in the USA". I will learn Emacs to buy that laptop.
I have done this, and I find my self activating caps-lock on other peoples computers all the time, it has become second nature in just a few weeks.
The only people who realistically need caps-lock are people writing software licenses and youtube video titles, everyone should be able to get by with the shift-key otherwise.
Is the whole escape key thing a joke that I'm not in on? Why don't you just use the part of the touchbar that is exactly the same as an escape key all the way down to saying "esc"? I don't get it man.
It's not the same. If you're used to typing without looking at your keyboard, a fake key on the touchbar does not compare to an actual key where you can feel without looking that your finger is in the right place, and can know by the key travel that you've actually pressed it.
It's pretty much the same as the difference between a car where the air conditioner and radio knobs are a touch screen vs. being real knobs that you can safely adjust while driving.
I thought that too, then I got one of the new MacBooks and used it for about a week. I stopped noticing that the escape key wasn’t a key somewhere between day 5 and 7. It’s very easy to hit, as you can trigger it by tapping anywhere on the edge of the touchbar (not just the graphical button), and thus I think it becomes very easy for your muscle memory to adjust.
I would still prefer a physical function row, but it’s not that big of a deal. And actually some of the controls on the touchbar are really nice, for example the volume and brightness controls for changing all your connected displays at once.
Exactly. You can just swipe the corner of it like you're brushing off dust or something, and it will register as a click. It's probably less effort than having to mash down a button that far to the edge of the keyboard.
While I'd normally agree, in this case, I have to disagree. Because the position of the button (proximity to the edge of the case and top-left corner of the keyboard), I have no trouble hitting it accurately without looking.
I'm an avid vim user, and the touchbar escape key gives me no trouble whatsoever. Since it's a single button on a far end with space between it and the other buttons, it's hard to miscalculate the position of the tap even without looking. There was no learning curve; it didn't take time to get used to it.
I suppose it's just a matter of personal preference and habit, though. Maybe some people have trouble aiming? I really thought I'd miss the tactile feedback (as has been the case with similar touch devices for me in the past), but in this case, I don't really notice it.
i'm a regular vim user and my muscle-memory still tells my finger to "press" the ESC button. without that tactile response something just feels a little off. i frequently find myself hitting it a second time while logged into remote terminals over poor connections, as i don't get the immediate visual cue that my ESC has registered. not only that but last week my touchbar became unresponsive (and after various attempts to fix it, is now completely blank), so now i don't even have an ESC button :( so now i've been using Ctrl[ until i get around to remapping ESC. i can't believe the touchbar doesn't drive apple engineers/devs crazy.. regretting replacing my 2014 mbp
It's like a car moving A/C controls to a touchscreen. Yeah, it's "the same"... but the lost of tactile feedback is a pretty dramatic thing. You really notice it when you use one.
* Distance to touch bar ESC is ~3-4 keys, which is quite a bit to travel for a pinky and for me even requires forearm movement. But this is the same, touch-bar or not, so I've been remapping since before the physical ESC disappeared anyway.
This is a bigger deal for me because I use vi mode on my terminal and so I hit ESC all the time in the terminal.
Also I use Dvorak, so 70% of my keystrokes are already on the home row, so moving off the home row for something so common as ESC is much more noticeable.
Lastly - who the hell uses caps lock anyway? For short words like ESC, holding shift has now become second nature. For longer things I often type it in lowercase, select in vim, then use `U` to convert to uppercase. For not-in-vim uppercase on the internet: I just don't shout. :P
It’s actually harder to move out of China with higher levels of automation. Labor is everywhere. Expertise around assembly automation is much more limited, and is easier to find in China than Vietnam and other countries typically being moved to.
Manufacturing technology in China is not at a monopoly and is not highly automated. In fact, if you look at what's being built in the Chinese tech hubs (e.g. Shenzhen), it tends to be more of an advanced assembly hub than raw component manufacturing because the that's where China wants to sit in the value chain for now.
Manufacturing of the components can be done pretty much anywhere, even incredibly high-tech components like CPUs (e.g. Intel has fabs in the US, Ireland, Israel and China, but also used to be in Malaysia, Vietnam, Costa Rica and so on). However, most component manufacturing is commodity stuff like capacitors or springs or whatnot. Very low profit and growth. It's not to say that China doesn't make a large number of those things, but those are even easier to manufacture pretty much anywhere and there's no real monopoly on those things in China and once they're automated it means that there's no specific reason they have to stay in China.
China manufacturers want to move up the value chain and thus are really doing final assembly of the components or sub-assembly work (with final assembly perhaps also being performed in China) of other people's designs. The next step up the value chain is of course to sell their own designs, and services around selling designs, and it's pretty clear that there's ample talent in China's domestic market to get there very soon.
Anyways, what makes money and grows is figuring out how to put the existing components together into novel products and then charge for profit for product demand. A capacitor might cost $.01, but in an iPhone that same capacitor might be "worth" $.03 as a fraction of the total sale price. It's better to be Apple selling 1,000,000 iPhones than to be the capacitor maker selling 1,000,000 capacitors because Apple gets to pocket the extra $.02.
The reason China has become such a major manufacturing center is because of two factors:
1) The raw components are readily available.
2) The labor is cheap.
As I've mentioned, #1 isn't really important for mass manufacturing. Over the decades similar major tech manufacturing centers have sprung up in quite a few places, for example Akihabara in Tokyo or Yongsan in Seoul. These places are now shadows of their former selves, but you can still go to Yongsan and buy 100,000 3" computer power supply fan motors for cheap if you really want to.
What made the whole thing work in China is #2 - cheap labor. And that exactly why it used to work in Japan and then Korea. But the economy got better in those places and the labor got less cheap. It's why Akihabara mostly just sells used stuff and video games and nobody really buys computers and radios at Yongsan anymore. The labor market is just simply got too expensive to keep employed manually soldering tiny components together.
Folks I know now say that things aren't so cheap in Shenzhen anymore. Facilities cost as much as any first-world country, and labor is getting to be Eastern European levels or higher. The availability of components is still unstoppable, but that only exists because the manufacturers exist and that only exists because the labor was cheap. Which means Shenzhen is becoming more and more of a good place to rapidly prototype and engineer designs for manufacturing...but is starting to feel less and less like the place you want to do the final factory work for a million copies of the thing you just designed.
Once the labor pool prices itself out, the ubiquitous availability of parts will eventually dry up and it will no longer be the manufacturing paradise it was and won't even be a great place to design stuff. So where does it move to? I don't really know, but you need a good combination of:
a) poor to not wealthy
b) reasonably well educated
c) ability to move materiel in and out
d) not a global pariah
e) a culture of hard work
f) not lots of other natural resource traps to focus the economy on
I think there will be a few years of fooling around with repatriating some manufacturing in the U.S., but the conditions here are bad for electronics manufacturing. So I think it'll eventually settle for a generation in maybe SE Asia or somewhere in Latin America. Wildcards might be Eastern Europe (maybe Poland, Slovakia, Czech, Hungary) or or a few places in Africa (Kenya, Ethiopia, South Africa, etc.).
Or even more intriguing, the countries that China has focused their Belt and Road program on -- after all China will need a future China to make cheap stuff for them!
There is specialized machinery, a whole set of very specific skills, and the supply chain is considerably more than 'resistors'.
Walking down the street in Shenzhen you see a vast array of all sorts of components, like a raspi/makers candy land. And they are all cheap.
There's a layer of specialization on top of much of the assembly that requires bonafide 'know how'.
We sent a factory a schema and 3D design, they basically had to redo everything for the purposes of manufacturing, and it was more than trivial. We had to work back and forth in a detailed way.
Also - there is the civil infrastructure, access to capital, export friendly terms - etc.
The electricity is stable in China, not so in India. etc.
So yes, it's mostly volume and labour, but it's much more.
I think your list of a-f applies to things like sewing shoes, but not to iPhones, for example.
> There is specialized machinery, a whole set of very specific skills
This is true, but it's only as sticky as how long it takes to place the equipment and to train people in the next place.
> I think your list of a-f applies to things like sewing shoes
It wasn't really all that long ago when China could only manufacture things like shoes and was considered to be basically a third world country. The only special conditions that China had that made it the next Akihabara was access to a cheap and reasonably well educated labor pool (and one could argue a government that had the political will to push for rapid economic development pushed forward by Deng Xiaoping style reform).
Every other thing that's happened, happened after that. Every nut, bolt, high temperature vacuum sealer...every special soldering skill and QA plant, every automated CAD driven metal milling machine. All of it came to a place that made cheap shoes.
> Walking down the street in Shenzhen you see a vast array of all sorts of components,
During the 80s you could walk around Akihabara in Tokyo or maybe even Ximending in Taipei and see the same thing. In the 90s it was Yongsan in Seoul.
There is no special geographic, resource or economic reason why it has to be in China. And we know this because it was previously in other places. Shenzhen is simply the latest stop for global manufacturing.
Foxconn, the symbol of Chinese manufacturing, after all, is Taiwanese.
It's not like the change happened over night, or even that it's entirely completed today. Japan still makes some of the highest-end precision optical components on the planet, video games and robotics. South Korea still dominates in memory and display technologies. Hell, the U.S. still designs some of the best consumer electronics anywhere.
Someday, people will speak in awe of the tech ecosystem in <insert city in some other country> and talk about the grand 'ol days in Shenzhen...which will be known mostly for drones and pinball machines or something. It may take a decade, but it will happen.
But that kind of change is very rare. China has done more economic growth in 30 years than any nation in history.
I don't see India or Vietnam moving that quickly in any direction.
Vietnam does not have the scale or institutions, India has all sorts of problems.
China declared Shenzhen to be a global city for this and they 'made it happen'. I'm not sure if there are going to be other candidates.
But in the end, it's diffusive and I agree with you, maybe some countries are able to carve out niches.
Maybe India beats China to chip fabs or something, due to their competitive position in adjacent things like software, and their relationship with American companies on that front, and the fact it may not take 'a national directive' to do it.
Most likely they will move to some country around China so its still easy for them to move stuff and raw materials around. They can also move the production to India a place where they always struggled to sell the phone.
Maybe, just maybe, tariffs aren't such a bad idea. Yes, we realize it's really just a "tax on everything" but by making it a little less cost-effective to move manufacturing to China, we may bring more jobs and money back into the United States.
And don't say quality, the Chinese will manufacture exactly what you pay them to manufacture. It's not their fault that 90% of their customers pay them to make cheap shit.
If anything I'd trust (for now) the quality more with the Chinese as they've been building iPhones for 10 years, have experience, have their quality control improved year by year etc.
No newcomer won't be as good from day 1
As long as those are countries that the US wouldn't eventually end up having a 4x trade deficit with, it should still be a good tradeoff for the US. That's a reasonable expectation since barriers for US companies to operate in those countries are lower than in China.
>The countries being considered include Mexico, India, Vietnam, Indonesia and Malaysia. India and Vietnam are among the favorites for smartphones, Nikkei said, citing sources who did not want to be identified as the discussions are private.
India has import tariffs (is it correct to call them tariffs?) on stuff like that. It is a huge yet growing economy. If you you relocate your production there you avoid the tariffs. Bet you dollars to donuts if or when they move it'll be to the Indian subcontinent.
"Apple's India Move Is Risky, But Better Than Facing Trump's Trade War"
Import tariffs are a big reason why Apple’s market share in India is abysmally low. The products cost a lot more while affordability and income are also relatively lower (on average) compared to other countries.
iPhone assembly in India started a few years ago, with Wistron and more recently, Foxconn, setting up facilities. So far these two assemble only the older models, and the volumes may not be very high. But they will accelerate the pace since Apple cannot have local stores, due to regulations, unless it sources at least 30% locally. It’s been trying to negotiate better terms with the government, but hasn’t seen much success since many other smartphone makers have facilities here (the government once said it would not provide preferential treatment to anyone).
Next year (2020) or 2021 may be the year when flagship iPhones are assembled in India, even if volumes are lower.
Interesting info, thanks. Never heard of Wistron before. The 30% rule seems like a reasonable bar in order to foster local growth, do you think? High import tariffs I'm not so sure about. Some might argue it's protectionist but I think there's nothing wrong with protecting parts of your economy that are weak. See: “How Rich Countries Got Rich and Why Poor Countries Stay Poor” by Erik S Reinert
As India becomes wealthier and if Apple can move production of all of their models there relatively soon that should set them up nicely to capture a larger chunk of that market.
The 30% local sourcing rule is just one aspect to encourage local manufacturing, employment and capacity building for companies that want to start their own "single brand" stores. I personally don't think that will help a lot, though it does add pressure on some companies like Apple, now that it has realized after a long time that India's market ought to be tapped after the slowdown in China and near saturation elsewhere (Apple did not focus on India for a very, very long time, and the country barely got any attention — Apple's services are also extremely poor in India. Apple Maps is far, far behind Google Maps, and Siri doesn't recognize Indian accents well).
India should have encouraged manufacturing and assembly of semiconductors and electronics a long time ago, but successive governments didn't do much about it with urgency. The infrastructure for this is quite weak (especially in comparison to China and Taiwan). Add to this issues with electricity (there are periodic power cuts in most cities) and other infrastructure issues, it's more difficult for companies to get things done. That's where companies like Foxconn, which have had a presence in India to assemble computers and other accessories, have an advantage in ramping up.
After crude oil imports, the import of electronic goods stands second (or sometimes third, after gold) in terms of foreign exchange outgo and the current account deficit. This is a huge problem for the government. In the last two decades, India has achieved a lot, mainly through the private sector, on mobile phone usage penetration, and India has the lowest (or one of the lowest) cellular plan pricing in the world. But it still lags on other related fronts, like great devices to take full advantage of the network and the Internet while remaining secure. High import tariffs on these products make them inaccessible to most people, and they have to make do with cheaper and inferior products. So I personally don't support high tariffs on products that can accelerate the way people connect and what they can achieve.
Where's the USA cited in all this? Curious. I can't imagine the supply lines here would make it feasible.
From the article, Mexico, India, Vietnam, Indonesia, Malaysia:
> The countries being considered include Mexico, India, Vietnam, Indonesia and Malaysia. India and Vietnam are among the favorites for smartphones, Nikkei said, citing sources who did not want to be identified as the discussions are private.
I’m envisioning an outcome beyond the article. Labor costs are higher in the U.S.A. to be sure but I wonder how much of a difference it ultimately is if you look at the related costs/benefits. I can think of a couple of reasons it is worth considering:
- Distribution and Shipping efficiencies
- Higher levels of productivity and training efficacy
- Nationalistic sentiment and contra-beneficial protectionism
When they started building the current Mac Pro in the USA, they couldn't find the correct screws for a particular component. When they eventually found a supplier who could deliver something that was close to spec, the owner of the factory hand-delivered it to them over 22 trips in his Lexus:
Its not just the capacity to make a screw - its the contract with Apple that they will buy it once your investors have started paying for the company to make it.
Good luck merely getting registered as a new vendor for anything a multinational company makes.
I groaned at this. Purchased a Chinese made lawn mower engine and the bolts for it weren't long enough to mount it in my mower. So, I went looking for longer bolts. Turned out that the Chinese bolts weren't Metric or SAE. Totally nonstandard junk.
When you have to ship in 100 parts to make the phone that shipping efficiency disappears. They do just fine taking in shipments of their phones at 3 hubs and getting them all over the country.
“National sentiment” isn’t going to lower wages to $2/hr
It’s hard to have something happen without first imagining how and why it would work. Is there something wrong with that if you also are aware of The existing problems and future pitfalls?
I’m not blind to the challenges but also expect the current economic and political situations aren’t going to just go away over night. This will make decisions which make not make sense today potentially more attractive in the future.
Leave the speculation to the actual economists. By the way, they are all almost unanimous that protectionist tariffs to prop up domestic manufacturing is an awful idea.
I hope so. But for automation to make fiscal sense, necessarily there would be fewer jobs, fewer hours and net lower pay servicing and supervising the machines. (assuming annual phone purchases have essentially flattened of course)
I hope otherwise, but an unhappy alternative forecast would be "Perhaps you won't have Americans assembling phones, but for sure a few people will own all the machines that do so"
Not sure why automating boring and repetitive and eminently automatable jobs is such an "unhappy alternative".
The entire history of technological progress that has brought more people out of poverty is of better and more automated agriculture and manufacturing and distribution.
Things become more efficient in the use of resources over time. Automation aids in that by reducing wastage.
Yes Apple shareholders might own the machines that make iPhones, but people working, doing service activities that can't be automated, they will be buying them. If there's no one to buy, there won't be any reason to make them.
>The entire history of technological progress that has brought more people out of poverty is of better and more automated agriculture and manufacturing and distribution.
Absolutely agreed. But previous technical progress has moved the bulk of people from one repetitive task (farming) to another (manufacturing).
It is a great goal to eliminate dreary jobs, but if the current process does not create new repetitive jobs but eliminates that category of task in favor of high skill tasks, then there is going to have to be some mechanism to impart those skills.
During previous technical revolutions, there was no effort to do so and luckily the new jobs could be learned in minimal time. But these are the exact jobs that are going to disappear now. And ironically people are becoming more skeptical of universities not less.
So yes, it is a great goal to eliminate low skill jobs, but assuming some invisible force will give everyone a challenging job that they can do is perhaps magical thinking. Consider: if you tell a factory worker that his job will be automated away, he is not relived by it but panicked. If it is an improvement for him, one has to ask why.
> If there's no one to buy, there won't be any reason to make them.
This is what caused of the great depression: concentration of wealth away from consumers who drive the economy and into a tiny number of hands. If it's just one company or even sector that fails then it's just a bump. If it's widespread or systemic then it's a disaster.
I'm watching all this with great interest. Everyone thinks Vietnam is some third world poor country, but the reality is that there is massive amounts of money here. Hai Phong in the north is a HUGE port. Samsung already makes about 80% of their phones in this region and it is only growing as Trump drives huge amounts of investment.
It is very easy to get goods shipped over from China (I've driven the backroads and seen it myself). Assembled in Vietnam. Shipped out of Hai Phong, and totally avoid the tariffs.
Also look at what is happening in Sihanoukville, Cambodia with Chinese taking over the entire city. It is a major shipping point. Very interesting times indeed!
Production capacity may move out of China, but it would most likely be assembled by the same (Chinese/Taiwanese) companies who are doing it now in China, like Foxconn and others. That’s the only way this can move forward at a quicker pace. Some of these companies have facilities and people in other countries.
Looks like taxes can alter behavior after all. The "tariffs don't work" lie is now observably false.
That it took Donald Trump to get companies to make their supply lines less fragile is pretty depressing. Never rely on a single source for anything if you don't have to.
No one had any doubts that taxes or tariffs "work", corporations respond to incentives. If you want to get political about it, Apple's not going to be making their "big, beautiful plants" in the US [1].
Trump was dealt a very strong hand given the global macroeconomic state, and he had no compunction about playing it to achieve nationalistic goals.
It’s wading into ideological territory not best treaded on HN, but IMO tariffs are an important tool in the arsenal, and they are being used to good effect here. The upcoming G-20 summit will be an important data point on whether we are going to see a beneficial resolution soon.
I think China is doing the math on whether a Democrat President will be less likely to wield the cudgel of tariffs so strongly, and if they can afford to wait it out, it would be much more effective if the tariffs were a bipartisan effort. Obviously that was never going to happen.
I think the US will find that national economic responses from other nations will drive the response.
The US may consume large amounts of the world's resources, but there are ample markets outside the US. These markets are growing rapidly and are open to Chinese investment.
Tariffs on specific countries is a mercantilist, short sighted, zero sum policy. It is not backed by any reality, other than the effect of the Smoot-Hawley act in the 1930s.
Tariffs on specific products to protect local industry, or subsidies to local industry have some economic sense in some circumstances, particularly as an aid to transition that industry.
But Trump's manner and mechanism of trade policy has achieved very little other than froth. The USMCA is a rewarmed NAFTA, trade policy with the EU is stagnant, the US has withdrawn from APAC in terms of economic engagement.
As I understand it, Tesla is building a factory in Shanghai because there's a massive market for Teslas in China, not because of tariffs. In fact, the original plan was to build the factory without a local partner, which would have meant that Tesla would have had to pay tariffs anyways. But after Tesla's decision, the Chinese government lifted joint-venture requirements in the auto industry, so Tesla won't have to pay tariffs after all.
Nobody is going to claim that a 25% tariff won't destroy a trading relationship, of course it will. That's a monster tariff. It's big enough and wide enough it will have substantial effects if it's held.
The issue is who actually wins, who loses, what are the after-effects etc..
All things considered, China will be the bigger loser here, but America doesn't stand much to gain, other than some overall strategic leverage.
iPhone's won't be any cheaper, and Apple likely won't be making more money over this, rather, they'll possibly have a more resilient supply chain, and America will maintain more power in the ensuing balance.
If anything 'the rest' of SE Asia is probably the winner in all of this. Which is fine.
Edit: I should add, if 25% tariffs are maintained, all of America will soon start to see that hit them personally; there will be a material lift in consumer prices that will be noticeable even at the consumer level. I don't think it will be a 1970's OPEC shock, but we'll see it. It takes a long time to realign supply chains, and even then a lot of it is not very amenable to shifting away from China. It will be interesting to see what happens when this goes from an 'abstraction' to materially popping into people's lives.
It's already hitting my business hard as we're scrambling to figure out what to do, and this reality will soon trickle into the lives of regular people.
I actually do support some kind of trade re-negotiation with China, and the 25% tactic is in some ways a nice manoeuvre, the problem is, it might have to be a bluff because it's going to hit the economy very hard.
> All things considered, China will be the bigger loser here, but America doesn't stand much to gain, other than some overall strategic leverage.
That is what it has been about. Geopolitical dominance and leverage. Your statement is like "by preparing for Olympics America doesn't stand to gain much, except a few medals, global recognition of sporting prowess, and a healthy cultural of staying fit".
Apple will probably actually end up losing a significant amount of money over this. They're likely to lose a lot of their market share in China, not because of any explicit government measures against them, but because Chinese people are getting angry at the American government's trade war against China, and will avoid prominent American brands. China has a massive internal market, similar in scale to the US or Europe, so losing out there is a significant blow to a company like Apple.
While I’m loath to credit Trump for intentionally bettering the world... uh...
Has he done just that by starting this economic war with China? I mean, the less power China has, the better for humanity as a whole.
i.e. if one would choose to be born in China, I’d be curious as hell to know why. It’s pretty far down on my list of preferred places to live due to its government’s nakedly anti-human approach to... well, pretty much everything.
This might be the most damaging of all announcements made thus far.
Companies have known they probably have relied a little bit too much on 'one country' thus far, and that there could be ramifications, and this 'mini trade war' is basically the red flag which caused them to 'do something'.
Apple is a monster, representing alone a good chunk of the trade.
But it isn't this specific move, it's the knock-on effects and the permanency of it the changes that will be the real damage.
Apple is an industry leader, and this will cause everyone to think about their situation in the same way.
Even if the 'trade war' ended today with happy smiles, companies will still look into this, because all of this could happen again, and it's probably the right thing to do anyhow in their eyes.
Once a portion of manufacturing leaves, it's never coming back, and as other sources become more reliant and competitive and other companies see leaders planting their flags elsewhere, there will be follow-on and the genie will not be put back in the bottle.
I think this year is a major change point for China and the world, as the 1990's were fast but quiet, the 2000's it came to everyone's attention, the 2010's concerns started to rise outside the border, jingoism, 'head of state for life' and enough critical mass of concerned voices lead by Mr. Big in the Presidency (rational acting or not, it's made a mark).
Combined with a natural slowdown which would have occurred regardless.
Apple is 12% of the smartphone market and falling, they're no monster. They're huge by market cap but not by handset volume. I'm not denying that they're a significant player but let's keep things in perspective. If anything, Samsung is the monster.
> Apple is an industry leader, and this will cause everyone to think about their situation in the same way.
I don't think they are. Arguably Samsung is on the hardware front. Google is on the software front.
> I think this year is a major change point for China and the world, as the 1990's were fast but quiet, the 2000's it came to everyone's attention, the 2010's concerns started to rise outside the border […] Combined with a natural slowdown which would have occurred regardless.
Although the economy is slowing slightly most agree it is still growing in the 6% range. Given that most economists believe that China has more or less the largest economy in the world in PPP terms even taking into account that their regions definitely tend to over-inflate key numbers. We can see by metrics like electricity production and consumption that the economy is probably the largest in the world at least according to the CIA Factbook anyhow.
# Last year China built ~6,000kms of high-speed rail, actually increasing the rate of build out in the face of an economic trade war. To put that in perspective that's more kms than Spain has ever built and Spain has the second longest high-speed rail network on the planet.
# Global patent applications leader starting from 1980 (a proxy for innovation) …
# In 2013 China became the third country ever to soft-land on the moon.
# “China is the world's leading country in electricity production from renewable energy sources, with over double the generation of the second-ranking country, the United States.” according to Wikipedia
# Has the largest electric vehicle market in absolute terms and is on track to be 50% of the global market by 2025
1) 'Unit sales' data is not super important next to sales, and especially profit. Some of those manufacturers make $1 per unit, whereas Apple may make $50 per unit in profit.
Apple is 50% of smartphone wholesale revenues globally (and about $200B in sales for all products).
Given that Apple's margins significantly better than other makers, their 'profit dominance' is even greater, they're likely well over 60% of global smartphone profits.
That's huge.
2) All of that aside, Apple is a monster company globally. Everyone pays attention to what they do. This announcement alone will make a big wave in business, and others will follow their lead.
The world's most admired company with major manufacturing in China - has just indicated 'they want to move 30% out' - this is a big deal.
3) "Although the (China) economy is slowing slightly most agree it is still growing in the 6% range."
No, it's growing at 6% in the imaginary fabricated CPC range. Now, it's more likely a little over 3% in reality. [1]
If you want to know how 'we' (outsiders) try to figure out how much China is actually growing, I recommend FT Podcast (Alphaville) on 'What China Wants' [2] basically, they go into forensic detail about how the financial industry tries to directly measure China growth, because nobody buys the CPC data. The only thing that "everyone agrees" (even China) is that their published numbers are made up.
But it's moot: the era of 'mega growth' is gone, and China is slowing down, this nobody doubts, and this situation is going to be significant pressure on Xi outside of everything else.
4) Most people are generally aware that China is 'big' and does things on scale.
They're building rail - super.
They're landing on the moon - almost irrelevant.
Patent Applications - good, but has to be contextualized for all sorts of things.
But again -> it's besides the point:
Apple is a massive company signalling a move away from China. Many others will follow.
It doesn't matter what happens between Trump and Xi, this pattern is now established.
The manufacturing that leaves is never coming back.
America probably does not gain, but the rest of Asia probably will.
China will keep on doing what China does, as you say.
1000 unit order is 1000 unit order, regardless Apple take 60% profit, or Samsung takes 20%. Factories work on orders, and they don't get to keep Apple's profit.
For every unit sold, there is a person behind it that bought that phone over iPhone. Just because a small percentage of people decide to buy an overpriced iPhone doesn’t equate to market dominance.
Commenters on HN often lack basic economic sensibility, the comments related to material business issues, particularly finance and economics are odd.
My point #1, is the opposite of ridiculous, it's the point.
Companies dominate by making money, that's what they care about.
Do you not grasp that Samsung, Huawei, end everyone else would instantly trade their position for Apple's?
Do you not think that Apple's 50x greater profits doesn't give them enormous leverage?
That Apple is selling into a competitive market, and still yields profits and margins massively greater than others is pretty amazing, it doesn't happen in other industries.
Apple is clearly the dominant power in mobile, and their next rival is not a handset maker, it's Google.
As to my original point: Apple is a huge, powerful and important company, and others will take note of what they do. They are a 'leader' in every sense of the term, it would be 'ridiculous' to deny that.
When America's most profitable and admired company that manufactures stuff in China decides to leave - it's a shockwave.
