4 ms·

I’m curious how analysts price in the small % chance that China snaps their finger and destroys Apple’s manufacturing supply chain.

senttoschool 4y ago
I'm going to guess that most major public international companies can be destroyed if China decides to do so. The US did try with Huawei.
jjtheblunt 4y ago
That supply chain exists in China though to make China huge money, so why would they?
- mensetmanusman 4y ago
  China just destroyed hundreds of thousands of tech jobs due to ideology. Ideology trumps reason for true believers like Xi. They are struggling now with massive youth unemployment, but the CCP believes the struggle is worth it.
  - mmsnberbar66 4y ago
    which ideology is that?
    - CorrectHorseBat 4y ago
      Xi Jinping Thought https://en.m.wikipedia.org/wiki/Xi_Jinping_Thought https://en.m.wikipedia.org/wiki/Xi_Jinping_Thought
  - NhanH 4y ago
    > China just destroyed hundreds of thousands of tech jobs due to ideology What did they do?
    - jpgvm 4y ago
      Probably referring to the tech "crackdown" that was undertaken from about 2021 through to now. Though "crackdown" really is overly strongly worded. Really what they did was catch China's anti-trust and data protection laws up to approximately EU levels. This of course caused investors to panic like crazy because "uncertainty" even though everything was incredibly certain. The one people should have been worried about was the complete obliteration of the after-school industry. This was telegraphed for a whole year before it happened and investors sat on their hands the whole time and then got wiped out. Only -then- did they decide that "woe is me, I didn't pay any attention to all to changing legal landscape of what CCP considers to be entirely their domain". TLDR: Investors are uninformed, dumb and a poor judge of future success in most cases.
  - naravara 4y ago
    Hundreds of thousands in the Chinese context doesn't seem like very much? Presumably they can all get other jobs no?
    - mensetmanusman 4y ago
      https://www.bloomberg.com/news/articles/2023-05-16/china-s-youth-jobless-rate-jumps-to-record-20-4-in-danger-sign?leadSource=uverify%20wall#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-05-16/china-s-y... >20% youth unemployment, and they stop counting you after a few months of no success finding a job. Not everyone is finding jobs.
      - naravara 4y ago
        Ooof that sounds bad.
  - nocsi 4y ago
    It’s Chinas way of humbling their tech workers and giving them a reminder. Bored youth isn’t a big deal - they’re all going to be plenty busy if Xi comes through on his 2027 plans
mschuster91 4y ago
Which is why Apple is slowly moving manufacture capacity to Thailand and Vietnam. The writing has been on the wall for long enough time now that China is no longer a reliable partner (if it has ever been that). The most pressing issue anyway isn't that China kicks Apple and other Western companies out of the country - it's the utter dominance of TSMC. Everyone is going to be really, really screwed should China invade Taiwan and TSMC management blows up the factories to prevent them from falling into Chinese hands.
- jpgvm 4y ago
  China has been an incredibly reliable partner to Apple. They were looking to expand that relationship before the US government shut it down. They wouldn't have been planning that if it was going poorly. Companies are relocating out of China for cost and for political risk of further US decoupling. China itself (apart from rising costs) isn't really the entity causing this despite what the narrative may sound from US media. I'm located in Thailand and my friends are running companies that are on the beneficial end of this migration. It's actually been tough going because atleast for manufacturing the infrastructure isn't really here outside of the auto industry (which is dominated by local factories of Japanese brands). We will see though, I anticipate that much of this will blow over in time, a new status quo will be reached with China that might see their share of exports to the US decline somewhat but total decoupling is unlikely as it would split the world in half.
  - Longlius 4y ago
    > China itself (apart from rising costs) isn't really the entity causing this despite what the narrative may sound from US media. China has been literally abducting foreign workers and you think the fact that companies want to leave the country falls squarely on the shoulders of the US government?
  - AbrahamParangi 4y ago
    If China invades Taiwan, I’m looking forward to the commentary about how it is America’s fault.
jpgvm 4y ago
Approximately none. APPL demands some of the highest P/E and PEG premiums in the entire stock market, definitely higher than anything in it's weight class. I also think that happens to be a pretty reasonable assessment. China is not at all interested in Apple pulling out of manufacturing in China. They are a great customer and have provided many Chinese companies with the opportunity to grow massively. YTMC for instance was slated to become a primary memory supplier for Apple before the US government blocked it. So it seems pretty obvious the risk isn't China, it's the US government deciding that Apple is no longer allowed to manufacture or perhaps even sell high end Macs to China etc.
- beebeepka 4y ago
  https://www.businessinsider.com/us-would-destroy-taiwan-semiconductor-factories-avoid-china-trump-adviser-2023-3 https://www.businessinsider.com/us-would-destroy-taiwan-semi... https://www.theregister.com/2022/01/05/taiwan_should_destory_tsmc_paper/ https://www.theregister.com/2022/01/05/taiwan_should_destory... https://www.tomshardware.com/news/taiwan-will-defend-tsmc-from-us-bombing-in-the-event-of-a-china-war https://www.tomshardware.com/news/taiwan-will-defend-tsmc-fr... https://www.reuters.com/technology/asml-ceo-says-politics-will-lead-slower-semiconductor-advances-2023-04-26/ https://www.reuters.com/technology/asml-ceo-says-politics-wi... Dang Chinese won't leave the poor west alone. Can't they just accept US hegemony
  - Nevermark 4y ago
    Under apparent US hegemony, the US was wasting trillions on wars, while China’s economy grew at a much faster pace. Their increased local suppression, political and military flexing may be helpful to those consolidating power at the top, but they are costly moves to maintain, and have upended the compounding economic power game they were quietly winning. > “The greatest victory is that which requires no battle.” [0] [0] Sun Tzu (Some Chinese guy), The Art of War
samwillis 4y ago
Chinas economic growth is built on trade and manufacturing, fucking over the poser child for Chinese manufacturing won't help that. The chance of that happing is close to nill. But it's also worth noting that apple is expanding is manufacturing in other countries, notably India, Vietnam and Brazil, so they are somewhat hedged on that already.
- modernpink 4y ago
  The reality is that the quality of production in those countries isn't going to match China, that is why things are still Made in China despite rising wages and geopolitical tensions. The FT reported that 50% of Indian iPhone _casings_ did not pass quality checks [1] to be sent forward for factory use. That is just the casing, a not particularly complex piece relative to other iPhone parts. On top of that, Mac Pro production moved from the US back to China [2] after an attempt at "Made in America" due to easier parts sourcing. I can see Vietnam getting there, but again the scale is just not comparable to China. [1] https://www.ft.com/content/0d70a823-0fba-49ae-a453-2518afcb01f9 https://www.ft.com/content/0d70a823-0fba-49ae-a453-2518afcb0... [2] https://www.ft.com/content/0cddd49e-99d2-11e9-9573-ee5cbb98ed36 https://www.ft.com/content/0cddd49e-99d2-11e9-9573-ee5cbb98e...
  - SnorkelTan 4y ago
    China used to be known for cheap low-quality products. Building manufacturing capabilities from scratch seems like it would be incredibly difficult and take time. I'm sure those countries will get there. It just really depends on the patron being patient. I would think Apple is.
- Timber-6539 4y ago
  > The chance of that happing is close to nill. Not nil as long as Taiwan is still "independent".
NickC25 4y ago
I doubt it's priced in at all - as long as Tim ~tows~ toes (thanks HN!) The Party's line with great enthusiasm, it won't happen unless Apple publicly makes the first move. Tim sits on Tsinghua's B-School board, after all. The Party loves Tim, and Tim loves The Party. Obviously, it would be great to see (disclaimer: I use Apple products, own Apple stock & leap call options - so such a scenario would harm me fiscally) because it would signal that the west is tired of China's bullshit and is willing to pay the price to not have to deal with them anymore. That would be a huge statement.
- gnu8 4y ago
  Toe
  - idontwantthis 4y ago
    koetoe?
    - ChoGGi 4y ago
      Toe the starting line
    - aaronbrethorst 4y ago
      Kowtow, but no.
  - nytesky 4y ago
    I always thought it was tow, like a tugboat towing something and keeping it aligned. Instead it’s about foot races! “ The phrase means “follow the rules or obey an authority.” “Tow the line” is a misspelling based on “toe” and “tow” sounding the same, but “tow the line” is always an error. The phrase comes from the idea of standing at the starting line before a race (i.e., getting as close as possible without overstepping the mark).”
    - Workaccount2 4y ago
      Interesting, but I'm going to stick with "tow the line" because it simply makes way more sense and is way more intuitive.
seanhunter 4y ago
They obsess about it. For example: https://seekingalpha.com/article/4558283-apple-how-the-risk-of-china-affects-my-investment-thesis https://seekingalpha.com/article/4558283-apple-how-the-risk-... or an older story but shows how this dynamic works https://www.cnbc.com/2019/05/22/goldman-apples-earnings-would-drop-by-nearly-30percent-if-china-bans-its-products.html https://www.cnbc.com/2019/05/22/goldman-apples-earnings-woul... for people who trade apple, stories about China, supply chain and government policy will be all over their bloombergs every day.

senttoschool 4y ago

I'm going to guess that most major public international companies can be destroyed if China decides to do so. The US did try with Huawei.

jjtheblunt 4y ago

That supply chain exists in China though to make China huge money, so why would they?

mensetmanusman 4y ago
China just destroyed hundreds of thousands of tech jobs due to ideology. Ideology trumps reason for true believers like Xi. They are struggling now with massive youth unemployment, but the CCP believes the struggle is worth it.
- mmsnberbar66 4y ago
  which ideology is that?
  - CorrectHorseBat 4y ago
    Xi Jinping Thought https://en.m.wikipedia.org/wiki/Xi_Jinping_Thought https://en.m.wikipedia.org/wiki/Xi_Jinping_Thought
- NhanH 4y ago
  > China just destroyed hundreds of thousands of tech jobs due to ideology What did they do?
  - jpgvm 4y ago
    Probably referring to the tech "crackdown" that was undertaken from about 2021 through to now. Though "crackdown" really is overly strongly worded. Really what they did was catch China's anti-trust and data protection laws up to approximately EU levels. This of course caused investors to panic like crazy because "uncertainty" even though everything was incredibly certain. The one people should have been worried about was the complete obliteration of the after-school industry. This was telegraphed for a whole year before it happened and investors sat on their hands the whole time and then got wiped out. Only -then- did they decide that "woe is me, I didn't pay any attention to all to changing legal landscape of what CCP considers to be entirely their domain". TLDR: Investors are uninformed, dumb and a poor judge of future success in most cases.
- naravara 4y ago
  Hundreds of thousands in the Chinese context doesn't seem like very much? Presumably they can all get other jobs no?
  - mensetmanusman 4y ago
    https://www.bloomberg.com/news/articles/2023-05-16/china-s-youth-jobless-rate-jumps-to-record-20-4-in-danger-sign?leadSource=uverify%20wall#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-05-16/china-s-y... >20% youth unemployment, and they stop counting you after a few months of no success finding a job. Not everyone is finding jobs.
    - naravara 4y ago
      Ooof that sounds bad.
- nocsi 4y ago
  It’s Chinas way of humbling their tech workers and giving them a reminder. Bored youth isn’t a big deal - they’re all going to be plenty busy if Xi comes through on his 2027 plans

mschuster91 4y ago

Which is why Apple is slowly moving manufacture capacity to Thailand and Vietnam. The writing has been on the wall for long enough time now that China is no longer a reliable partner (if it has ever been that). The most pressing issue anyway isn't that China kicks Apple and other Western companies out of the country - it's the utter dominance of TSMC. Everyone is going to be really, really screwed should China invade Taiwan and TSMC management blows up the factories to prevent them from falling into Chinese hands.

jpgvm 4y ago
China has been an incredibly reliable partner to Apple. They were looking to expand that relationship before the US government shut it down. They wouldn't have been planning that if it was going poorly. Companies are relocating out of China for cost and for political risk of further US decoupling. China itself (apart from rising costs) isn't really the entity causing this despite what the narrative may sound from US media. I'm located in Thailand and my friends are running companies that are on the beneficial end of this migration. It's actually been tough going because atleast for manufacturing the infrastructure isn't really here outside of the auto industry (which is dominated by local factories of Japanese brands). We will see though, I anticipate that much of this will blow over in time, a new status quo will be reached with China that might see their share of exports to the US decline somewhat but total decoupling is unlikely as it would split the world in half.
- Longlius 4y ago
  > China itself (apart from rising costs) isn't really the entity causing this despite what the narrative may sound from US media. China has been literally abducting foreign workers and you think the fact that companies want to leave the country falls squarely on the shoulders of the US government?
- AbrahamParangi 4y ago
  If China invades Taiwan, I’m looking forward to the commentary about how it is America’s fault.

jpgvm 4y ago

Approximately none. APPL demands some of the highest P/E and PEG premiums in the entire stock market, definitely higher than anything in it's weight class. I also think that happens to be a pretty reasonable assessment. China is not at all interested in Apple pulling out of manufacturing in China. They are a great customer and have provided many Chinese companies with the opportunity to grow massively. YTMC for instance was slated to become a primary memory supplier for Apple before the US government blocked it. So it seems pretty obvious the risk isn't China, it's the US government deciding that Apple is no longer allowed to manufacture or perhaps even sell high end Macs to China etc.

beebeepka 4y ago
https://www.businessinsider.com/us-would-destroy-taiwan-semiconductor-factories-avoid-china-trump-adviser-2023-3 https://www.businessinsider.com/us-would-destroy-taiwan-semi... https://www.theregister.com/2022/01/05/taiwan_should_destory_tsmc_paper/ https://www.theregister.com/2022/01/05/taiwan_should_destory... https://www.tomshardware.com/news/taiwan-will-defend-tsmc-from-us-bombing-in-the-event-of-a-china-war https://www.tomshardware.com/news/taiwan-will-defend-tsmc-fr... https://www.reuters.com/technology/asml-ceo-says-politics-will-lead-slower-semiconductor-advances-2023-04-26/ https://www.reuters.com/technology/asml-ceo-says-politics-wi... Dang Chinese won't leave the poor west alone. Can't they just accept US hegemony
- Nevermark 4y ago
  Under apparent US hegemony, the US was wasting trillions on wars, while China’s economy grew at a much faster pace. Their increased local suppression, political and military flexing may be helpful to those consolidating power at the top, but they are costly moves to maintain, and have upended the compounding economic power game they were quietly winning. > “The greatest victory is that which requires no battle.” [0] [0] Sun Tzu (Some Chinese guy), The Art of War

samwillis 4y ago

Chinas economic growth is built on trade and manufacturing, fucking over the poser child for Chinese manufacturing won't help that. The chance of that happing is close to nill. But it's also worth noting that apple is expanding is manufacturing in other countries, notably India, Vietnam and Brazil, so they are somewhat hedged on that already.

modernpink 4y ago
The reality is that the quality of production in those countries isn't going to match China, that is why things are still Made in China despite rising wages and geopolitical tensions. The FT reported that 50% of Indian iPhone _casings_ did not pass quality checks [1] to be sent forward for factory use. That is just the casing, a not particularly complex piece relative to other iPhone parts. On top of that, Mac Pro production moved from the US back to China [2] after an attempt at "Made in America" due to easier parts sourcing. I can see Vietnam getting there, but again the scale is just not comparable to China. [1] https://www.ft.com/content/0d70a823-0fba-49ae-a453-2518afcb01f9 https://www.ft.com/content/0d70a823-0fba-49ae-a453-2518afcb0... [2] https://www.ft.com/content/0cddd49e-99d2-11e9-9573-ee5cbb98ed36 https://www.ft.com/content/0cddd49e-99d2-11e9-9573-ee5cbb98e...
- SnorkelTan 4y ago
  China used to be known for cheap low-quality products. Building manufacturing capabilities from scratch seems like it would be incredibly difficult and take time. I'm sure those countries will get there. It just really depends on the patron being patient. I would think Apple is.
Timber-6539 4y ago
> The chance of that happing is close to nill. Not nil as long as Taiwan is still "independent".

NickC25 4y ago

I doubt it's priced in at all - as long as Tim ~tows~ toes (thanks HN!) The Party's line with great enthusiasm, it won't happen unless Apple publicly makes the first move. Tim sits on Tsinghua's B-School board, after all. The Party loves Tim, and Tim loves The Party. Obviously, it would be great to see (disclaimer: I use Apple products, own Apple stock & leap call options - so such a scenario would harm me fiscally) because it would signal that the west is tired of China's bullshit and is willing to pay the price to not have to deal with them anymore. That would be a huge statement.

gnu8 4y ago
Toe
- idontwantthis 4y ago
  koetoe?
  - ChoGGi 4y ago
    Toe the starting line
  - aaronbrethorst 4y ago
    Kowtow, but no.
- nytesky 4y ago
  I always thought it was tow, like a tugboat towing something and keeping it aligned. Instead it’s about foot races! “ The phrase means “follow the rules or obey an authority.” “Tow the line” is a misspelling based on “toe” and “tow” sounding the same, but “tow the line” is always an error. The phrase comes from the idea of standing at the starting line before a race (i.e., getting as close as possible without overstepping the mark).”
  - Workaccount2 4y ago
    Interesting, but I'm going to stick with "tow the line" because it simply makes way more sense and is way more intuitive.

seanhunter 4y ago

They obsess about it. For example: https://seekingalpha.com/article/4558283-apple-how-the-risk-of-china-affects-my-investment-thesis https://seekingalpha.com/article/4558283-apple-how-the-risk-... or an older story but shows how this dynamic works https://www.cnbc.com/2019/05/22/goldman-apples-earnings-would-drop-by-nearly-30percent-if-china-bans-its-products.html https://www.cnbc.com/2019/05/22/goldman-apples-earnings-woul... for people who trade apple, stories about China, supply chain and government policy will be all over their bloombergs every day.