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What these companies do are selling/shipping components to China for assembly and then re-export the final products, which make the biggest revenue and profit.

by ww520 6y ago

What these companies do are selling/shipping components to China for assembly and then re-export the final products, which make the biggest revenue and profit. It's relatively easy for these companies to shift the manufacture (assembly) to other countries to keep the same revenue and profit. An India or Vietnam assembled iPhone generates the same profit for Apple. Foreign companies have difficult time making profit in China due to protectionism. McDonald opened thousands of restaurants in China and had to sell their ownership to Chinese companies last year.

blackrock 6y ago
This is not entirely correct. In the past, while exports from China, was important for foreign companies, the new situation, is that it is increasingly more profitable to sell within China. Something like, close to half of GM’s profit from auto sales, are to customers inside China. They charge normal worldwide prices for their cars, but the labor costs are a fraction of what it is in America. This is what GM risks losing, in an ever increasing trade war with China. For another example, Intel miscalculated during Obama’s reign, and lost out on billions in sales, because the U.S. wanted to restrict advanced CPU server chips to China. What happened instead? China designed their own CPU chips. iPhone assembly is really not that important, or profitable, to China anymore.
Obsnold 6y ago
I think a lot of people underestimate how difficult it is to move manufacturing out of China. Manufacturing isn't all unskilled labour that can be moved to whatever the cheapest country is. There is a lot of expertise needed in modern manufacturing and these days China has most of the experts. I'm not saying it won't happen but it will be a more gradual shift over time than a sudden change.
- blackrock 6y ago
  This is correct. And China isn’t really interested in low quality sweat-labor manufacturing anymore. This brings in very little added value, and it damages the environment. But these jobs keep the lesser educated people from the villages occupied, and it gives them a chance to get their children a formal education. Instead, they want massive robotic, automated, and mechanized manufacturing. Where a technician is standing by, and just watching the robots, for quality control. All those assembly line technicians at Foxconn can go to college and train to be a Computer Scientist or Engineer. Then in another 10 years, China will have a massive amount of computer programmers, engineers, and AI scientists.

by ww520 6y ago

blackrock 6y ago

This is not entirely correct. In the past, while exports from China, was important for foreign companies, the new situation, is that it is increasingly more profitable to sell within China. Something like, close to half of GM’s profit from auto sales, are to customers inside China. They charge normal worldwide prices for their cars, but the labor costs are a fraction of what it is in America. This is what GM risks losing, in an ever increasing trade war with China. For another example, Intel miscalculated during Obama’s reign, and lost out on billions in sales, because the U.S. wanted to restrict advanced CPU server chips to China. What happened instead? China designed their own CPU chips. iPhone assembly is really not that important, or profitable, to China anymore.

Obsnold 6y ago

I think a lot of people underestimate how difficult it is to move manufacturing out of China. Manufacturing isn't all unskilled labour that can be moved to whatever the cheapest country is. There is a lot of expertise needed in modern manufacturing and these days China has most of the experts. I'm not saying it won't happen but it will be a more gradual shift over time than a sudden change.

blackrock 6y ago
This is correct. And China isn’t really interested in low quality sweat-labor manufacturing anymore. This brings in very little added value, and it damages the environment. But these jobs keep the lesser educated people from the villages occupied, and it gives them a chance to get their children a formal education. Instead, they want massive robotic, automated, and mechanized manufacturing. Where a technician is standing by, and just watching the robots, for quality control. All those assembly line technicians at Foxconn can go to college and train to be a Computer Scientist or Engineer. Then in another 10 years, China will have a massive amount of computer programmers, engineers, and AI scientists.