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Alternative view: Apple has spent many years happily profiting from cheap Chinese manufacturing, labor, electrial engineering expertise and supply chains to t

Alternative view: Apple has spent many years happily profiting from cheap Chinese manufacturing, labor, electrial engineering expertise and supply chains to the point where they are now completely beholden to a foreign country. A country whose increasing rivalry with the US in economic power and geopolitical influence (along with increased tensions) has been clear for well over a decade. Apple is diversifying a bit into India and elsewhere (Vietnam I think?), but China could throw Apple into a huge crisis tomorrow if they were cut off, since it would take years to ramp up capacity elsewhere, and sourcing many of the components would be next to impossible. And Apple really couldn't blame anyone but themselves for it. It also seems to me like the are diversifying more because India demanded it and for price, rather than tho reduce dependencies ok China. But that's just unqualified guesswork.

judge2020 4y ago
This is the situation for the rest of the chip industry besides Intel, who also uses Taiwan TSMC fabs for some of their side operations (see Arc GPUs). Not just computer chips either, 37% of U.S. clothing imports are from China[0], for example. 0: https://www.just-style.com/analysis/analysis-china-market-share-of-us-apparel-imports-rises-after-four-year-lull/ https://www.just-style.com/analysis/analysis-china-market-sh...
- smoldesu 4y ago
  So... we're in agreement that over-reliance on China is a bad thing, then?
  - powerhour 4y ago
    I think so. I think the disagreement is in how to deal with the problem. Obviously tariffs are a terrible idea (if you think about it for more than a couple minutes). Alternatives like mandating exporters meet environmental and employment standards that meet or exceed ours would probably make a good sized dent.
  - 2Gkashmiri 4y ago
    At the same moment, the rest of the works is realizing the fact that us pretty much dictates what happens around the world. Want to build your own x86 Chios? Guess what? You can't because Intel/and won't let you and even if they did , if it were one of the "not our allies list" people, the govt will step in. Same for Netherlands fab machine makers. They dictate who can they sell to or not.. That is why nations are investing in stuff like risc-v. Tomorrow MasterCard/visa can be "ordered by govt " to pull out of a country and suddenly their card economy collapses. Unless they have an alternative, like India does with rupay or UPI which is being exported to other countries as a technology they can locally implement. Same for stuff like aws or Google or github or basically the entire american internet giants. You know if tomorrow whatsapp is ordered to stop service in say India what will happen? Without a local alternative already in place, WhatsApp and ipso facto us govt can literally hold that country for ransom. Whatsapp is a silly example but think about it. Sure China is bad for labour but its not like Americans aren't fighting anszon for Union rights or for $15/hour pay and benefits? I'm not trying to say they are equal, just that its a spectrum. For non Americans and non Chinese, Be it India or Russia or Iran, these two nations are just as offensive in different manners and it's just a matter of perspective
    - smoldesu 4y ago
      I get what you're saying; the US is far from the shining example of what a democracy should look like. On the other side of that coin, though, China is taking us for a ride. Politically speaking, it's unwise to continue giving them power over our supply chain. Ultimately it's a monster fight with no real winners, but ensuring that world superpowers stay competitive with one another is how we prevent mutually assured destruction. Even for China's allies, I fail to see how hamstringing the CCP is a bad thing.
JackFr 4y ago
> but China could throw Apple into a huge crisis tomorrow if they were cut off, since it would take years to ramp up capacity elsewhere. Would not be painless for China though. The thing about trade is, it’s trade. While Apple and American consumers benefit, so does China or obviously they wouldn’t trade. They’re not making our phones as a charity to us.
- cronix 4y ago
  Yes, they've been taking the profits and building their military at a fast rate for 20 years...to do...something.
  - Retric 4y ago
    China has the 2nd largest military budget but only spends 1.7% GDP on it vs the global average of 2.2% and US at 3.5%. India the worlds 3rd largest spender is between them at 2.7% GDP, and #4 the UK spends 2.2% GDP. https://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures https://en.wikipedia.org/wiki/List_of_countries_by_military_... I may strongly dislike China, but a relative lack of military spending is one of their strengths.
    - elefanten 4y ago
      Trend rapidly changing, they were focused elsewhere previously. The part that matters is what they’ll use it for (so far, signs point to authoritarian conquest of sovereign political entities)
      - Retric 4y ago
        As a share of GDP it was higher in 2019 at 1.9%, so it's growth it really a function of economic growth.
    - sxg 4y ago
      What about the NATO requirement to spend 2% of GDP on defense? Isn't it strategic for the US to spend disproportionately more on the military to support allies' militaries (e.g., South Korea) and prevent the rise of competing superpowers? https://www.nato.int/cps/en/natohq/topics_67655.htm https://www.nato.int/cps/en/natohq/topics_67655.htm
nixcraft 4y ago
India and Vietnam, which are already sites of Apple production, are among the countries being seen as an alternative option to China[1]. However, parts for iPhone, iPad and Macs come from around the globe and are assembled in China, India and Vietnam. Apple depends upon a global supply chain to make final products. The production of the iPhone doubled this year in India because of ongoing geo-tension and strict lockdowns in China. However, that is just 7% of production iPhones. Anyway, I hope China and the USA reach some middle ground and keep Taiwan safe. Any war between these two giant countries would disaster the world economy and escalate to world war 3. [1] https://www.business-standard.com/article/companies/apple-inc-planning-to-ramp-up-production-in-india-over-china-report-122052200075_1.html https://www.business-standard.com/article/companies/apple-in...
f38zf5vdt 4y ago
China's long bet is that greed will outstrip any desire for North Americans to intervene with their autocracy. So far they've been absolutely correct.
- iforgotpassword 4y ago
  Well there were enough examples from the past that made that a pretty safe bet.
hodgesrm 4y ago
> Apple has spent many years happily profiting from cheap Chinese manufacturing, labor, electrial engineering expertise and supply chains to the point where they are now completely beholden to a foreign country. Up to a point there's a cost advantage, but Tim Cook has also pointed that Apple uses Chinese factories because it allows them to take advantage of the local manufacturing capabilities, which are substantial. [0] In fact to hear him tell it those capabilities are simply not available elsewhere. I take him at his word on this topic at least. [0] https://www.inc.com/glenn-leibowitz/apple-ceo-tim-cook-this-is-number-1-reason-we-make-iphones-in-china-its-not-what-you-think.html https://www.inc.com/glenn-leibowitz/apple-ceo-tim-cook-this-...
- quantumwannabe 4y ago
  Tim Cook also invested a third of a trillion dollars in China because they did not have the manufacturing capabilities to build the iPhone how Apple wanted at the time of the investment. [1] [1] https://www.businessinsider.com/apple-tim-cook-275-billion-china-deal-regulatory-crackdown-report-2021-12 https://www.businessinsider.com/apple-tim-cook-275-billion-c...
  - Torifyme12 4y ago
    And Cook mocked the US because we didn't have the right tooling to make screws for his Mac pro, he went all over the news and kept spewing how bad our industrial sector was. One of the tooling engineers that had previously worked with Apple before they were offshored said, "Well, we couldn't wait around for him to come back to us, we have to eat too so we switched to making different things. He's welcome to invest in our production and we'll make whatever he wants" Cook loves helping out China, not sure why. /s
  - arvindamirtaa 4y ago
    A somewhat warped understanding on "manufacturing capabilities". While Apple may have had to spend money setting up the specific assembly line, fabrication plants, train staff, etc because they simply didn't exist prior to their requirement, the fact that they were able to set it up someplace, and continuously feed raw materials, parts, labour etc with dozens of redundant suppliers for EACH component, is what indicates manufacturing capability. Manufacturing is more ecosystem than "capability".
frozencell 4y ago
Apparently [0] Apple is relocating production progressively in the US starting with Texas. [0] https://www.apple.com/newsroom/2019/09/apples-new-mac-pro-to-be-made-in-texas/ https://www.apple.com/newsroom/2019/09/apples-new-mac-pro-to...
- billyhoffman 4y ago
  I am glad that there is native manufacturing, but let's but that in perspective: Apple doesn't publish units-sold figures, but Iphone revenue is 5x that of Macs [0]. The Mac Pro is the least popular Mac. Again, I don't have number breakdowns, but Apple did say in the most recent keynote that launched the M2 Macbook Air that the Macbook Air, and the 13" Macbook Pro are their 2 most popular models. So it's safe to say the Mac Pro represents an extreme fraction of Apple manufacturing. [0] https://sixcolors.com/post/2022/07/apple-announces-83b-fiscal-third-quarter/ https://sixcolors.com/post/2022/07/apple-announces-83b-fisca...
geodel 4y ago
Another thing to note is China is not just producer but huge consumer of Apple products. India with its rather small population of folks who can really afford Apple products, and primitive manufacturing capabilities at scale compare to China is going to remain minor distraction for at least couple of decades. So sensible diversification is in distant future than many imagine.

judge2020 4y ago

This is the situation for the rest of the chip industry besides Intel, who also uses Taiwan TSMC fabs for some of their side operations (see Arc GPUs). Not just computer chips either, 37% of U.S. clothing imports are from China[0], for example. 0: https://www.just-style.com/analysis/analysis-china-market-share-of-us-apparel-imports-rises-after-four-year-lull/ https://www.just-style.com/analysis/analysis-china-market-sh...

smoldesu 4y ago
So... we're in agreement that over-reliance on China is a bad thing, then?
- powerhour 4y ago
  I think so. I think the disagreement is in how to deal with the problem. Obviously tariffs are a terrible idea (if you think about it for more than a couple minutes). Alternatives like mandating exporters meet environmental and employment standards that meet or exceed ours would probably make a good sized dent.
- 2Gkashmiri 4y ago
  At the same moment, the rest of the works is realizing the fact that us pretty much dictates what happens around the world. Want to build your own x86 Chios? Guess what? You can't because Intel/and won't let you and even if they did , if it were one of the "not our allies list" people, the govt will step in. Same for Netherlands fab machine makers. They dictate who can they sell to or not.. That is why nations are investing in stuff like risc-v. Tomorrow MasterCard/visa can be "ordered by govt " to pull out of a country and suddenly their card economy collapses. Unless they have an alternative, like India does with rupay or UPI which is being exported to other countries as a technology they can locally implement. Same for stuff like aws or Google or github or basically the entire american internet giants. You know if tomorrow whatsapp is ordered to stop service in say India what will happen? Without a local alternative already in place, WhatsApp and ipso facto us govt can literally hold that country for ransom. Whatsapp is a silly example but think about it. Sure China is bad for labour but its not like Americans aren't fighting anszon for Union rights or for $15/hour pay and benefits? I'm not trying to say they are equal, just that its a spectrum. For non Americans and non Chinese, Be it India or Russia or Iran, these two nations are just as offensive in different manners and it's just a matter of perspective
  - smoldesu 4y ago
    I get what you're saying; the US is far from the shining example of what a democracy should look like. On the other side of that coin, though, China is taking us for a ride. Politically speaking, it's unwise to continue giving them power over our supply chain. Ultimately it's a monster fight with no real winners, but ensuring that world superpowers stay competitive with one another is how we prevent mutually assured destruction. Even for China's allies, I fail to see how hamstringing the CCP is a bad thing.

JackFr 4y ago

> but China could throw Apple into a huge crisis tomorrow if they were cut off, since it would take years to ramp up capacity elsewhere. Would not be painless for China though. The thing about trade is, it’s trade. While Apple and American consumers benefit, so does China or obviously they wouldn’t trade. They’re not making our phones as a charity to us.

cronix 4y ago
Yes, they've been taking the profits and building their military at a fast rate for 20 years...to do...something.
- Retric 4y ago
  China has the 2nd largest military budget but only spends 1.7% GDP on it vs the global average of 2.2% and US at 3.5%. India the worlds 3rd largest spender is between them at 2.7% GDP, and #4 the UK spends 2.2% GDP. https://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures https://en.wikipedia.org/wiki/List_of_countries_by_military_... I may strongly dislike China, but a relative lack of military spending is one of their strengths.
  - elefanten 4y ago
    Trend rapidly changing, they were focused elsewhere previously. The part that matters is what they’ll use it for (so far, signs point to authoritarian conquest of sovereign political entities)
    - Retric 4y ago
      As a share of GDP it was higher in 2019 at 1.9%, so it's growth it really a function of economic growth.
  - sxg 4y ago
    What about the NATO requirement to spend 2% of GDP on defense? Isn't it strategic for the US to spend disproportionately more on the military to support allies' militaries (e.g., South Korea) and prevent the rise of competing superpowers? https://www.nato.int/cps/en/natohq/topics_67655.htm https://www.nato.int/cps/en/natohq/topics_67655.htm

nixcraft 4y ago

India and Vietnam, which are already sites of Apple production, are among the countries being seen as an alternative option to China[1]. However, parts for iPhone, iPad and Macs come from around the globe and are assembled in China, India and Vietnam. Apple depends upon a global supply chain to make final products. The production of the iPhone doubled this year in India because of ongoing geo-tension and strict lockdowns in China. However, that is just 7% of production iPhones. Anyway, I hope China and the USA reach some middle ground and keep Taiwan safe. Any war between these two giant countries would disaster the world economy and escalate to world war 3. [1] https://www.business-standard.com/article/companies/apple-inc-planning-to-ramp-up-production-in-india-over-china-report-122052200075_1.html https://www.business-standard.com/article/companies/apple-in...

f38zf5vdt 4y ago

China's long bet is that greed will outstrip any desire for North Americans to intervene with their autocracy. So far they've been absolutely correct.

iforgotpassword 4y ago
Well there were enough examples from the past that made that a pretty safe bet.

hodgesrm 4y ago

> Apple has spent many years happily profiting from cheap Chinese manufacturing, labor, electrial engineering expertise and supply chains to the point where they are now completely beholden to a foreign country. Up to a point there's a cost advantage, but Tim Cook has also pointed that Apple uses Chinese factories because it allows them to take advantage of the local manufacturing capabilities, which are substantial. [0] In fact to hear him tell it those capabilities are simply not available elsewhere. I take him at his word on this topic at least. [0] https://www.inc.com/glenn-leibowitz/apple-ceo-tim-cook-this-is-number-1-reason-we-make-iphones-in-china-its-not-what-you-think.html https://www.inc.com/glenn-leibowitz/apple-ceo-tim-cook-this-...

quantumwannabe 4y ago
Tim Cook also invested a third of a trillion dollars in China because they did not have the manufacturing capabilities to build the iPhone how Apple wanted at the time of the investment. [1] [1] https://www.businessinsider.com/apple-tim-cook-275-billion-china-deal-regulatory-crackdown-report-2021-12 https://www.businessinsider.com/apple-tim-cook-275-billion-c...
- Torifyme12 4y ago
  And Cook mocked the US because we didn't have the right tooling to make screws for his Mac pro, he went all over the news and kept spewing how bad our industrial sector was. One of the tooling engineers that had previously worked with Apple before they were offshored said, "Well, we couldn't wait around for him to come back to us, we have to eat too so we switched to making different things. He's welcome to invest in our production and we'll make whatever he wants" Cook loves helping out China, not sure why. /s
- arvindamirtaa 4y ago
  A somewhat warped understanding on "manufacturing capabilities". While Apple may have had to spend money setting up the specific assembly line, fabrication plants, train staff, etc because they simply didn't exist prior to their requirement, the fact that they were able to set it up someplace, and continuously feed raw materials, parts, labour etc with dozens of redundant suppliers for EACH component, is what indicates manufacturing capability. Manufacturing is more ecosystem than "capability".

frozencell 4y ago

Apparently [0] Apple is relocating production progressively in the US starting with Texas. [0] https://www.apple.com/newsroom/2019/09/apples-new-mac-pro-to-be-made-in-texas/ https://www.apple.com/newsroom/2019/09/apples-new-mac-pro-to...

billyhoffman 4y ago
I am glad that there is native manufacturing, but let's but that in perspective: Apple doesn't publish units-sold figures, but Iphone revenue is 5x that of Macs [0]. The Mac Pro is the least popular Mac. Again, I don't have number breakdowns, but Apple did say in the most recent keynote that launched the M2 Macbook Air that the Macbook Air, and the 13" Macbook Pro are their 2 most popular models. So it's safe to say the Mac Pro represents an extreme fraction of Apple manufacturing. [0] https://sixcolors.com/post/2022/07/apple-announces-83b-fiscal-third-quarter/ https://sixcolors.com/post/2022/07/apple-announces-83b-fisca...

geodel 4y ago

Another thing to note is China is not just producer but huge consumer of Apple products. India with its rather small population of folks who can really afford Apple products, and primitive manufacturing capabilities at scale compare to China is going to remain minor distraction for at least couple of decades. So sensible diversification is in distant future than many imagine.