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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,

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.

devoply 7y ago
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.
- hdfbdtbcdg 7y ago
  > have an average IQ of 100... I am going to assume good faith. 100 is the definition of average IQ.
  - yorwba 7y ago
    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.
    - rswail 7y ago
      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.
      - yorwba 7y ago
        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.
- reaperducer 7y ago
  No one else has workers that work for a pittance Africa. Bangladesh. Haiti. India(?) Look for where the clothing manufacturers have moved. Most people who can be trained to run a stitching machine can be trained to work on an electronics assembly line.
  - devoply 7y ago
    If that were true then why are they all in East Asia, all with people around 100 IQ?
    - nine_k 7y ago
      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.
  - acchow 7y ago
    You dropped GP's criterion of IQ. According to worlddata.info, the average IQ in Bangladesh is 77. India is 81.
  - gingabriska 7y ago
    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.
- ZhuanXia 7y ago
  China’s average IQ is 105 to 107. Even if you think their factory workers are below average they are probably higher than 100.
  - eloff 7y ago
    But is this real IQ or fudged Chinese numbers like their GDP growth? One must examine the source.
    - ggreer 7y ago
      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] 1. http://www.unz.com/akarlin/world-map-of-pisa-2015-results/ http://www.unz.com/akarlin/world-map-of-pisa-2015-results/
      - learc83 7y ago
        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." https://www.forbes.com/sites/realspin/2017/01/04/are-the-pisa-education-results-rigged/ https://www.forbes.com/sites/realspin/2017/01/04/are-the-pis...
- discordance 7y ago
  High IQ is probably a contributing reason there are nets around most manufacturing plants in Shenzhen. If you <insert screw here> all day, low IQ might be a good thing.
dheera 7y ago
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.
- reaperducer 7y ago
  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.
  - paulirwin 7y ago
    Typically companies add production in Brazil solely for selling to Brazil, due to their protectionist tariffs.
  - deleted 7y ago
    [deleted]
culturestate 7y ago
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.
- devoply 7y ago
  It's what happens when Poo bear goes looking for honey.
- crdoconnor 7y ago
  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).
  - DiogenesKynikos 7y ago
    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.
reaperducer 7y ago
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.
- TaylorAlexander 7y ago
  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.
  - reaperducer 7y ago
    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.
    - Fjolsvith 7y ago
      Yeah, just look at Tesla.
    - spectramax 7y ago
      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.
      - DiogenesKynikos 7y ago
curiousgal 7y ago
> almost every hardware company remains at the whims of the Chinese government due to their dependency on Chinese manufacturers. If anything, it's the U.S. government that's been volatile and unpredictable.
ptah 7y ago
I'm surprised they also don't do something about their absolute dependence on the US
- thefounder 7y ago
  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.
- rswail 7y ago
  "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).
nabla9 7y ago
Companies are not mowing their manufacturing out of China because China. They move it because the US. They still keep manufacturing in China. Products that go to Chinese markets or non US markets can still be manufactured in China.
deleted 7y ago
[deleted]

devoply 7y ago

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.

hdfbdtbcdg 7y ago
> have an average IQ of 100... I am going to assume good faith. 100 is the definition of average IQ.
- yorwba 7y ago
  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.
  - rswail 7y ago
    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.
    - yorwba 7y ago
      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.
reaperducer 7y ago
No one else has workers that work for a pittance Africa. Bangladesh. Haiti. India(?) Look for where the clothing manufacturers have moved. Most people who can be trained to run a stitching machine can be trained to work on an electronics assembly line.
- devoply 7y ago
  If that were true then why are they all in East Asia, all with people around 100 IQ?
  - nine_k 7y ago
    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.
- acchow 7y ago
  You dropped GP's criterion of IQ. According to worlddata.info, the average IQ in Bangladesh is 77. India is 81.
- gingabriska 7y ago
  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.
ZhuanXia 7y ago
China’s average IQ is 105 to 107. Even if you think their factory workers are below average they are probably higher than 100.
- eloff 7y ago
  But is this real IQ or fudged Chinese numbers like their GDP growth? One must examine the source.
  - ggreer 7y ago
    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] 1. http://www.unz.com/akarlin/world-map-of-pisa-2015-results/ http://www.unz.com/akarlin/world-map-of-pisa-2015-results/
    - learc83 7y ago
      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." https://www.forbes.com/sites/realspin/2017/01/04/are-the-pisa-education-results-rigged/ https://www.forbes.com/sites/realspin/2017/01/04/are-the-pis...
discordance 7y ago
High IQ is probably a contributing reason there are nets around most manufacturing plants in Shenzhen. If you <insert screw here> all day, low IQ might be a good thing.

dheera 7y ago

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.

reaperducer 7y ago
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.
- paulirwin 7y ago
  Typically companies add production in Brazil solely for selling to Brazil, due to their protectionist tariffs.
- deleted 7y ago
  [deleted]

culturestate 7y ago

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.

devoply 7y ago
It's what happens when Poo bear goes looking for honey.
crdoconnor 7y ago
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).
- DiogenesKynikos 7y ago
  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.

reaperducer 7y ago

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.

TaylorAlexander 7y ago
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.
- reaperducer 7y ago
  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.
  - Fjolsvith 7y ago
    Yeah, just look at Tesla.
  - spectramax 7y ago
    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.
    - DiogenesKynikos 7y ago

curiousgal 7y ago

> almost every hardware company remains at the whims of the Chinese government due to their dependency on Chinese manufacturers. If anything, it's the U.S. government that's been volatile and unpredictable.

ptah 7y ago

I'm surprised they also don't do something about their absolute dependence on the US

thefounder 7y ago
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.
rswail 7y ago
"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).

nabla9 7y ago

Companies are not mowing their manufacturing out of China because China. They move it because the US. They still keep manufacturing in China. Products that go to Chinese markets or non US markets can still be manufactured in China.

deleted 7y ago

[deleted]