5 ms·

4x cheaper as in 1/4 the cost to produce? So a foreign competitor can charge half as much as you and still make a a gross margin of 50%? Nah you’re out of busin

4x cheaper as in 1/4 the cost to produce? So a foreign competitor can charge half as much as you and still make a a gross margin of 50%? Nah you’re out of business immediately.

leoedin 4y ago
Labour is 4x cheaper. Bill of material cost is going to be pretty much the same everywhere. Depending on the product, the labour cost of manufacturing might only be 20% - so that 4x turns into a 15% saving on cost of goods. That needs to be contrasted against shipping costs and the overhead of managing a Chinese factory.
- christophilus 4y ago
  > Bill of material cost is going to be pretty much the same everywhere. A decade or so ago, my dad analyzed a part that came from his Chinese competitor. The finished Chinese part, including shipping, cost less than my dad’s company was paying for the raw materials. He was still able to compete by producing a much higher quality product (found in nuclear power plants, chemical processing plants, oil rigs, and other places where quality really matters). Anyway, my point is, I wouldn’t assume China is only cheaper due to labor.
_8j50 4y ago
On its own yeah but tariffs subsidies and other policy tools can make it so you are profitable. If apple makes iphones for $99 in China you can specifically implement tariffs on iphones at 500% so it is equally costly if making it in the US costs 499.
- oneoff786 4y ago
  So now iPhones are 80% cheaper in every other country in the world? Seems unlikely to work. You’ve also introduced a massive tax for a single product for a single company which is prettt bullshit
  - _8j50 4y ago
    No, that means apple which is a US company tucks its tail between its legs and starts making iPhones in the US for US/europe customers and wherever else it wants if it wants to compete outside of the US. Apple specifically makes most of its iphone profits from the US and it is a mainline product for a trillion dollar company that is taking money out of the US consumer into Chinese economy so it isn't bullshit at all.
    - oneoff786 4y ago
      A tariff like this has never happened before and would be heavily contested. Not especially realistic. And also wouldn’t prevent apple from making iPhones in China for every other market.
      - _8j50 4y ago
        You are right but at least a large part of their revenue will come from US made iphones which means money in the US economy instead of China, similar tariffs for others who innovate in the US but manufacture elsewhere can be implemented as well since international commerce can be regulates by the fed gov. It would also set precedent for future outsourcing attempts, reduce the likelihood of wars and supply chain chaos.

4x cheaper as in 1/4 the cost to produce? So a foreign competitor can charge half as much as you and still make a a gross margin of 50%? Nah you’re out of business immediately.

leoedin 4y ago

Labour is 4x cheaper. Bill of material cost is going to be pretty much the same everywhere. Depending on the product, the labour cost of manufacturing might only be 20% - so that 4x turns into a 15% saving on cost of goods. That needs to be contrasted against shipping costs and the overhead of managing a Chinese factory.

christophilus 4y ago
> Bill of material cost is going to be pretty much the same everywhere. A decade or so ago, my dad analyzed a part that came from his Chinese competitor. The finished Chinese part, including shipping, cost less than my dad’s company was paying for the raw materials. He was still able to compete by producing a much higher quality product (found in nuclear power plants, chemical processing plants, oil rigs, and other places where quality really matters). Anyway, my point is, I wouldn’t assume China is only cheaper due to labor.

_8j50 4y ago

On its own yeah but tariffs subsidies and other policy tools can make it so you are profitable. If apple makes iphones for $99 in China you can specifically implement tariffs on iphones at 500% so it is equally costly if making it in the US costs 499.

oneoff786 4y ago
So now iPhones are 80% cheaper in every other country in the world? Seems unlikely to work. You’ve also introduced a massive tax for a single product for a single company which is prettt bullshit
- _8j50 4y ago
  No, that means apple which is a US company tucks its tail between its legs and starts making iPhones in the US for US/europe customers and wherever else it wants if it wants to compete outside of the US. Apple specifically makes most of its iphone profits from the US and it is a mainline product for a trillion dollar company that is taking money out of the US consumer into Chinese economy so it isn't bullshit at all.
  - oneoff786 4y ago
    A tariff like this has never happened before and would be heavily contested. Not especially realistic. And also wouldn’t prevent apple from making iPhones in China for every other market.
    - _8j50 4y ago
      You are right but at least a large part of their revenue will come from US made iphones which means money in the US economy instead of China, similar tariffs for others who innovate in the US but manufacture elsewhere can be implemented as well since international commerce can be regulates by the fed gov. It would also set precedent for future outsourcing attempts, reduce the likelihood of wars and supply chain chaos.