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Some hard-liners want a more aggressive stance. Lou Jiwei, who retired as finance minister in 2016 but is still the head of the country’s social security fund,

by apo 8y ago

Some hard-liners want a more aggressive stance. Lou Jiwei, who retired as finance minister in 2016 but is still the head of the country’s social security fund, suggested on Sunday that China could deliberately disrupt American companies’ supply chains by halting the export of crucial components mostly made in China. But Chinese trade experts dismiss that idea as impractical and not the government’s position. If anything would play into the administration's hands, it would be that move. By taking themselves offline, the Chinese would be ceding market share to upstart competitors and encouraging further reshoring of mission-critical supply chain components.

adventured 8y ago
It would no doubt be disruptive, temporarily. And it would also prompt a multi hundred billion dollar redirection of investment into moving those supply lines to other countries. Vietnam would love to get some more of China's tech manufacturing action, as would a dozen other developing countries. Others would welcome gains to be had in apparel or autos by moves like that by China. One of the biggest problems China has in this trade war: they're entirely replaceable. They offer nothing strictly unique that can't be replaced by another country, even though there may be a serious cost involved. The mistake of not being a large technology originator.
- justicezyx 8y ago
  > One of the biggest problems China has in this trade war: they're entirely replaceable. They offer nothing strictly unique that can't be replaced by another country, even though there may be a serious cost involved. I cannot see evidences that China is particularly more so than any other country.
  - Retric 8y ago
    Saudi Oil is a commodity, but many country’s don’t have oil. Every country has low skilled workers.
    - kasey_junk 8y ago
      Low skilled workers doesn’t accurately describe what China brings to the table currently. They effectively are the only place in the world you can source certain parts of the electronic supply chain at the volume currently necessary. They’ve been up the technical ladder for decades at the same time as other places have shed that capability. It would take a long time for Vietnam to come online. I’d guess Korea or Japan would be closest and that would have dramatic price impact.
      - beamatronic 8y ago
        What is a dramatic price impact in the context of Apple products. 5%? 10%? Would that really stop you? They keep hiking the prices anyway.
        taobility 8y ago
        for iPhone, maybe it's just 10%, what about the other staff you need to buy daily? Do you count how many staff you using are Made In China right now?
        Retric 8y ago
        Nationwide ~1/5th of US imports come directly from China, that’s bumped a little when countries manufacture with Chinease parts but stays well under 1/4th of US imports and ~1/37th the US GDP. Personally, I get very little directly or indirectly from China based on my shopping habits it’s mostly electronic gifts.
        justicezyx 8y ago
        There is no absolute standard of low-tech and high-tech. The question is how replaceable. That is indirect relevant to iPhone or any small sample of particular items. The point is, overall, how replaceable is China? How is China ranked on the replaceable country list? I cannot see any evidences that China will be ranked below top3 (US China EU) in the world's least replaceable country when cutting from global trade.
  - enitihas 8y ago
    Correct. Even if their large industrial integration of all sorts of parts in close proximity was easily replaceable(which is itself very difficult), for them to be easily replaceable, buyers would have to be more price indifferent, which doesn't seem to be happening.
  - deleted 8y ago
    [deleted]
- tambourine_man 8y ago
  I’m not sure. Tim Cook seemed to suggest the iPhone couldn’t be manufactured anywhere else.
  - hourislate 8y ago
    China sources most of the components for Apple Products from different countries. Here is a list of countries that provide the parts. https://www.quora.com/Where-is-the-iPhone-originally-made https://www.quora.com/Where-is-the-iPhone-originally-made As you can see it would be fairly easy to for Apple/Foxconn to source these parts and build their products in the USA. I think the big motivator for them is they would rather outsource manufacturing to Foxconn and wash their hands of having to deal with it.
    - mc32 8y ago
      Also Foxconn could move ops back to Taiwan, albeit a bit expensive labor wise.
      - seanmcdirmid 8y ago
        But still cheaper than the US. I don't see iPhones being made in the US anytime soon, there are many places in Asia other than China that would be higher up the list than the states.
        mc32 8y ago
        Yeah. I don’t think it’s likely that production would come back —though not impossible. That said the main point is Foxconn could move production to other manufacturing centers, if need be, though it would need some transition period to avoid disruption.
        taobility 8y ago
        I don't think any other Asia countries has same scale of labor, supply chain and infrastructure to manufacture the goods with tremendous demand like iPhone. It's not just cheap labor, it involves a whole manufacture ecosystem.
- nkoren 8y ago
  The manufacturing ecosystem in Shenzhen (for example) is unique. Any individual element of it is probably replaceable (at a considerable cost), but the presence of all those elements in the same place is not. The agglomeration benefits of this are HUGE, and losing them would introduce a thousand small frictions into the manufacturing process. Issues that can be sorted out in hours or days in Shenzhen (finding alternate suppliers, repairing specialized machinery, etc.) would take weeks or months anywhere else. That's for individual issues. A complex piece of equipment might have a dozen such issues while scaling and optimizing its manufacturing processes. In Shenzhen, this might cause a few weeks of delay. Anywhere else, the delay would be measured in years. There are several other such manufacturing ecosystems in China; Shenzhen is just the one I'm more familiar with. Yes, the individual parts may be replaceable -- but the whole is significantly greater than the sum of its parts. Building replacement ecosystems elsewhere would take decades. It took China roughly two decades to build this kind of ecosystem. Its primary resource for doing so was the ~4 million STEM graduates in produces every year. That's on par with the rest of the world put together. So don't underestimate the difficult of replicating this.
  - doctorpangloss 8y ago
    This is a commonly espoused narrative. I’m sure there were synergies in steel and auto production in US cities connected by rail between Pennsylvania and Michigan. I’d say the key misunderstanding is that you’re conflating China with “markets” in “it took China roughly two decades to build this kind of ecosystem.” If you read it as, “Markets took two decades to build this kind of ecosystem,” it should be clear that the relationship between prices, time, volume, supply and demand aren’t determined by political prerogatives, but by market ones. In other words, if your thesis is correct (that there’s something special about Shenzhen), the thing that’s special about it can be reproduced elsewhere. It will probably happen faster than two decades, because it’s proven to be a lucrative setup.
    - mywittyname 8y ago
      The Shenzhen special sauce is the high density of complimentary industries and specialized workforce. It's certainly possible to replicate, but history has shown that it can be difficult. It would be like trying to supplant Hollywood.
stephen-mw 8y ago
I think the path to get us there (reshoring chips) would be extremely painful, but it certainly would be a better position for the United States to restore our ability to produce these critical components. Also, just in time for this research to get off the ground: >If it all works out, the effect could be to make small groups of engineers capable of feats that would take 100 engineers to achieve today. https://spectrum.ieee.org/tech-talk/computing/hardware/darpas-planning-a-major-remake-of-us-electronics-pay-attention https://spectrum.ieee.org/tech-talk/computing/hardware/darpa...
- debacle 8y ago
  Reshoring chips would be far less painful than other types of manufacturing. The tooling is complex but the supply chain is less so.
- throwaway2048 8y ago
  few companies build chips in china, the most important role it plays in most electronic's company supply lines is assembly/PCB work. https://en.wikipedia.org/wiki/List_of_semiconductor_fabrication_plants https://en.wikipedia.org/wiki/List_of_semiconductor_fabricat... Note virtually all of the chinese plants in that list are nowhere near cutting edge process node sizes
  - janekm 8y ago
    27% of IC packaging (turning the raw die into something that can be soldered to a PCB) happens in China with most of the remainder in other south-east Asian countries. https://www.electronicsweekly.com/news/business/china-no-1-ic-package-test-2018-04/ https://www.electronicsweekly.com/news/business/china-no-1-i...
jayd16 8y ago
B does not follow from A. Isn't it more realistic that US citizens pay for this trade war with more expensive goods in the short term, while supply chains move to other countries that aren't China but are still cheaper than the US?

by apo 8y ago

adventured 8y ago

It would no doubt be disruptive, temporarily. And it would also prompt a multi hundred billion dollar redirection of investment into moving those supply lines to other countries. Vietnam would love to get some more of China's tech manufacturing action, as would a dozen other developing countries. Others would welcome gains to be had in apparel or autos by moves like that by China. One of the biggest problems China has in this trade war: they're entirely replaceable. They offer nothing strictly unique that can't be replaced by another country, even though there may be a serious cost involved. The mistake of not being a large technology originator.

justicezyx 8y ago
> One of the biggest problems China has in this trade war: they're entirely replaceable. They offer nothing strictly unique that can't be replaced by another country, even though there may be a serious cost involved. I cannot see evidences that China is particularly more so than any other country.
- Retric 8y ago
  Saudi Oil is a commodity, but many country’s don’t have oil. Every country has low skilled workers.
  - kasey_junk 8y ago
    Low skilled workers doesn’t accurately describe what China brings to the table currently. They effectively are the only place in the world you can source certain parts of the electronic supply chain at the volume currently necessary. They’ve been up the technical ladder for decades at the same time as other places have shed that capability. It would take a long time for Vietnam to come online. I’d guess Korea or Japan would be closest and that would have dramatic price impact.
    - beamatronic 8y ago
      What is a dramatic price impact in the context of Apple products. 5%? 10%? Would that really stop you? They keep hiking the prices anyway.
      - taobility 8y ago
        for iPhone, maybe it's just 10%, what about the other staff you need to buy daily? Do you count how many staff you using are Made In China right now?
        Retric 8y ago
        Nationwide ~1/5th of US imports come directly from China, that’s bumped a little when countries manufacture with Chinease parts but stays well under 1/4th of US imports and ~1/37th the US GDP. Personally, I get very little directly or indirectly from China based on my shopping habits it’s mostly electronic gifts.
        justicezyx 8y ago
        There is no absolute standard of low-tech and high-tech. The question is how replaceable. That is indirect relevant to iPhone or any small sample of particular items. The point is, overall, how replaceable is China? How is China ranked on the replaceable country list? I cannot see any evidences that China will be ranked below top3 (US China EU) in the world's least replaceable country when cutting from global trade.
- enitihas 8y ago
  Correct. Even if their large industrial integration of all sorts of parts in close proximity was easily replaceable(which is itself very difficult), for them to be easily replaceable, buyers would have to be more price indifferent, which doesn't seem to be happening.
- deleted 8y ago
  [deleted]
tambourine_man 8y ago
I’m not sure. Tim Cook seemed to suggest the iPhone couldn’t be manufactured anywhere else.
- hourislate 8y ago
  China sources most of the components for Apple Products from different countries. Here is a list of countries that provide the parts. https://www.quora.com/Where-is-the-iPhone-originally-made https://www.quora.com/Where-is-the-iPhone-originally-made As you can see it would be fairly easy to for Apple/Foxconn to source these parts and build their products in the USA. I think the big motivator for them is they would rather outsource manufacturing to Foxconn and wash their hands of having to deal with it.
  - mc32 8y ago
    Also Foxconn could move ops back to Taiwan, albeit a bit expensive labor wise.
    - seanmcdirmid 8y ago
      But still cheaper than the US. I don't see iPhones being made in the US anytime soon, there are many places in Asia other than China that would be higher up the list than the states.
      - mc32 8y ago
        Yeah. I don’t think it’s likely that production would come back —though not impossible. That said the main point is Foxconn could move production to other manufacturing centers, if need be, though it would need some transition period to avoid disruption.
      - taobility 8y ago
        I don't think any other Asia countries has same scale of labor, supply chain and infrastructure to manufacture the goods with tremendous demand like iPhone. It's not just cheap labor, it involves a whole manufacture ecosystem.
nkoren 8y ago
The manufacturing ecosystem in Shenzhen (for example) is unique. Any individual element of it is probably replaceable (at a considerable cost), but the presence of all those elements in the same place is not. The agglomeration benefits of this are HUGE, and losing them would introduce a thousand small frictions into the manufacturing process. Issues that can be sorted out in hours or days in Shenzhen (finding alternate suppliers, repairing specialized machinery, etc.) would take weeks or months anywhere else. That's for individual issues. A complex piece of equipment might have a dozen such issues while scaling and optimizing its manufacturing processes. In Shenzhen, this might cause a few weeks of delay. Anywhere else, the delay would be measured in years. There are several other such manufacturing ecosystems in China; Shenzhen is just the one I'm more familiar with. Yes, the individual parts may be replaceable -- but the whole is significantly greater than the sum of its parts. Building replacement ecosystems elsewhere would take decades. It took China roughly two decades to build this kind of ecosystem. Its primary resource for doing so was the ~4 million STEM graduates in produces every year. That's on par with the rest of the world put together. So don't underestimate the difficult of replicating this.
- doctorpangloss 8y ago
  This is a commonly espoused narrative. I’m sure there were synergies in steel and auto production in US cities connected by rail between Pennsylvania and Michigan. I’d say the key misunderstanding is that you’re conflating China with “markets” in “it took China roughly two decades to build this kind of ecosystem.” If you read it as, “Markets took two decades to build this kind of ecosystem,” it should be clear that the relationship between prices, time, volume, supply and demand aren’t determined by political prerogatives, but by market ones. In other words, if your thesis is correct (that there’s something special about Shenzhen), the thing that’s special about it can be reproduced elsewhere. It will probably happen faster than two decades, because it’s proven to be a lucrative setup.
  - mywittyname 8y ago
    The Shenzhen special sauce is the high density of complimentary industries and specialized workforce. It's certainly possible to replicate, but history has shown that it can be difficult. It would be like trying to supplant Hollywood.

stephen-mw 8y ago

I think the path to get us there (reshoring chips) would be extremely painful, but it certainly would be a better position for the United States to restore our ability to produce these critical components. Also, just in time for this research to get off the ground: >If it all works out, the effect could be to make small groups of engineers capable of feats that would take 100 engineers to achieve today. https://spectrum.ieee.org/tech-talk/computing/hardware/darpas-planning-a-major-remake-of-us-electronics-pay-attention https://spectrum.ieee.org/tech-talk/computing/hardware/darpa...

debacle 8y ago
Reshoring chips would be far less painful than other types of manufacturing. The tooling is complex but the supply chain is less so.
throwaway2048 8y ago
few companies build chips in china, the most important role it plays in most electronic's company supply lines is assembly/PCB work. https://en.wikipedia.org/wiki/List_of_semiconductor_fabrication_plants https://en.wikipedia.org/wiki/List_of_semiconductor_fabricat... Note virtually all of the chinese plants in that list are nowhere near cutting edge process node sizes
- janekm 8y ago
  27% of IC packaging (turning the raw die into something that can be soldered to a PCB) happens in China with most of the remainder in other south-east Asian countries. https://www.electronicsweekly.com/news/business/china-no-1-ic-package-test-2018-04/ https://www.electronicsweekly.com/news/business/china-no-1-i...

jayd16 8y ago

B does not follow from A. Isn't it more realistic that US citizens pay for this trade war with more expensive goods in the short term, while supply chains move to other countries that aren't China but are still cheaper than the US?