Apple Services Shut Down in China in Startling About-Face
nytimes.com
nytimes.com
With that in mind, I could see Apple having simple components being produced in a number of different countries, then shipped out to wherever their products are in demand. Then the components are assembled by robots locally and the final product is picked up or shipped down the street to the consumer. I remember reading that this is where the auto industry is heading. They want to produce interchangeable car parts which get assembled at the dealership when a person purchases the car.
So to your point, China is already done. Instead of huge factories producing consumer ready goods, Apple just needs a handful of smaller factories making much simpler intermediary components. It's much easier to setup and move these smaller factories around, rather than these huge factory cities managing a massive production line.
Besides most of the companies are trying to move the manufacturing to Vietnam, Indonesia, India, Africa etc or automatizing as much as possible.
I think it's more likely that, goods will become more flimsy, cheaply made, and disposable. If true progress no longer provides motivation to buy new things, manufacturers will invent new ones.
They could, for instance, speculatively set up entire facilities in new areas, hire staff, and experiment with parallel development of the same products to measure how well the new bring-up is going.
This type of move could address both.
One risk is that the company’s ability to manufacture may be seriously affected by the actions of a single government. If their current factories were suddenly impacted by a policy decision, future profits would definitely be hurt. By spending money now (that, incidentally, their competitors might not be able to), Apple can lower that risk; and, they would also be acting on their own terms instead of having to react to someone else.
There is also the investment side. By spending money now, they could end up with even more capacity that will enable them to develop more products for more people and increase overall profit in the future. If they don’t spend that kind of money, their competitors could catch up. The time to invest is before you have a problem.
What China has to be careful of is eventually the US/EU decide to get tough on Chinese protectionism and impose significant barriers to goods manufactured in China. And that would also be bad for Apple again since they make their stuff in China.
I always hear this, but given the experience of most american companies in china, it seems little stretched.
Last I heard, Google, Facebook, Yahoo, Adobe, and a huge slew of smaller tech companies (if you want to stay in the same industry as Apple) had all colluded together to suppress wages.
I have a hard time believing anyone who claims this was an exception to a rule. It seems far more likely to believe it is the rule.
They lobbied for things like H-1B visas that let them get cheap people with limited options for career movement. You get the benefit of on-shore workers under tighter control and suppression of wages.
They colluded to influence labor standards over many years to declare broad swaths of overtime eligible employees as "exempt".
Apple and those tech giants got caught doing more direct collusion and unethical behavior. That isn't an unknown or shocking revelation. Pretty sure the mall bagel place I worked in tossed resumes from several other eateries.
From Ben Thompson at Stratechery:
This is a very big deal. Feel free to ignore anyone making snarky comments about China’s average monthly wage being the same as the price of an iPhone 5C. The two pertinent facts about China are that:
There is tremendous income disparity There are a TON of people
So while many Western markets may have a greater percentage of the population that can afford an iPhone, the absolute number of Chinese who are potential customers is very high as well.
I've seen plenty of Chinese people whose actual individual monthly wage was almost certainly less than the price of an iPhone; it didn't stop them from having iPhones.
The fact of the matter is that they do have a large population size and that presents its own problems for economic growth, believe it or not. Hell, it presents problems for the long-term stability of the country. Right now China's biggest threat is itself - corruption in China is a pervasive and massive problem (Source: https://www.transparency.org/cpi2014/results). China isn't the only country with a massive population; India has one too. Ben Thompson's facts are also true about India.
Not to mention the governments of USA/EU etc. might do the same to Chinese companies.
> India's pro-market government
Is still behind China in many respects when it comes to pro-marketness.
> Not to mention the governments of USA/EU etc. might do the same to Chinese companies.
No I mentioned this explicitly.
The supply chain is made up of thousands of companies who in turn rely on thousands of others. You can't recreate this top down, it has to be through organic growth.
But it's about as credible as the Saudi's dumping all of their US treasuries. Apple enjoys a very high margin at a very high price point. Any move would be margin-killing, not price-raising. They're not manufacturing in China to be charitable.
Remember when the U.S. government at least pretended to care about things like privacy and human rights internationally. Now it seems to be more like "Wait, China did it? Why can't we do it then?!". Case in point, in a recent encryption hearing, law enforcement argued that if Apple showed its source code to the Chinese government (it didn't), then it should also show it to the US gov!
No. When was that?
Foxconn is replacing millions of workers in China with robotics. Couldn't Apple acquire these same robotics, perform their own manufacturing in the US (remember, substantial tax breaks in the US for equipment purchases!), and then lease out any spare capacity.
Seems its all coming back to US shores. As a US citizen, I don't mind.
Hahahaha nope.
Red Chinese fingers do the final assembly and Red Chinese tax laws provide loopholes but iPhones are not a Red Chinese product.
I've also heard that Apple is the largest purchaser of CNC machining equipment in the entire world.
I'm curious to know how many years away we are from robotics being able to complete the final assembly of small electronics at the same speeds and low prices as humans and what affect this will have on countries like China that rely heavily on low cost factory labor.
I wonder what the remaining 30% is. It seems to me that the most delicate work is the stuff you want to automate the most to lower defects. The less delicate work can be done by humans. But the less delicate work should also be the most easily automated?
What you say makes perfect sense that this is in many ways the part of the assembly process that would gain the most benefit from automation but is probably the most difficult to automate.
I'm really curious to see how fully automating this process would change the globalized manufacturing industry. Would Apple move more manufacturing stateside or would there be a new rush to move manufacturing to countries with the lowest energy costs and tax burden. And are these countries typically the same as those offering cheap labor right now.
Does anyone know how China stacks up in terms of costs once you remove the labor component? Are energy and taxes low as well? I imagine environmental/regulatory costs are quite low.
The benefit to Apple of being in China is the responsiveness of the supply chain.
And you make it sound like cheap labor only exists in China.
China has tremendous technical expertise and vast amounts of relatively cheap labour, which is a formidable combination. Singapore, Japan and Chinese Taipei have the expertise, but they don't have enough cheap labour. Thailand and Indonesia have plenty of cheap labour, but they don't have the expertise. China also has superb logistics, which reduces cost and improves lead times.
For the foreseeable future, China is simply unavoidable. Within just a few years, their position as the dominant manufacturing nation will be secondary to their position as the dominant consumer market.
Government can be largely replaced by software. (just thinking long term here)
Democracy can be more pure. Corruption can be controlled. Economies can be stabilized and better planned. Environmental resources can be better managed.
We've got a lot more work to do past sharing images & allowing chats (though look at the massive affect of just those things)
It may be that it takes 1-2 centuries to software-ize our govs.
And are we so sure it would be more efficient? GitHub as a constitution would be a blessing and a curse.
I think as the technical part of the population we tend to be overoptimistic about technical solutions, which then get steamrolled by the real world's existing power structures.
Apple needed to put more thought and effort into their launch if they were considering becoming a mainstay in a completely different political/cultural market.
Others have pointed out that China's closure to outside (software) tech. has helped them as an incubator, but really I think American companies have failed to bend their policies to the degree necessary to continue to exist (in China). Google for a while has tried to resist censorship, but it's really a question of whether a company wants the one billion Chinese citizens to have access to their products at all, or if they would like to be shutout.
Unsurprising. China has a habit of allowing foreign services to operate for a bit. Then they come out with their own version.
Chinese protectionism (aided by the language barrier) has served chinese entrepreneurs quite well.
They have their own google. Their own fb. Their own twitter. Basically all services that India doesnt have. The list goes on. These services may or may not be inferior to the original but from an economic standpoint, its good since the money and data flows within the economy instead of going abroad.
India has its own taxi service but they are getting severe competition from uber (with rumours floating of a possible buyout by uber). We have flipkart but they are getting pummelled by amazon (which just walked in late to the indian ecommerce market after flipkart laid all the groundwork) and was recently down-valued by investors.
China is also successfully exporting to india- chinese smartphones are doing very well, much better than Apple.
The US companies (slack being perfect example) have the typical approach of: 1. Take capital and give out free stuff 2. Be everywhere 3. Now either show ads and mine user data and build user profiles. Alternately, they shutdown. All this churn causes a tremendous amount of loss in the local economy.
For instance, at the time when Google was kicked out of China essentially leaving their market a Baidu monopoly, Baidu lacked many useful features of Google especially if you wanted to search for non-Chinese websites (e.g. if you were a scientist wanting to do international research). The PRC didn't care. Having a pliable and controlled 'captain of industry' in the form of the Baidu founder was a more important goal to them, than the convenience of their own people.
Repeat that story a million times and you have an economy that looks superficially strong but makes its people miserable .... oh wait no it doesn't, because the censorship and language barriers ensure most people have no idea what they're missing out on.
But in long term i dont know. I am no econmist but If all your stuff is made abroad and little is made locally how will consumers find money to pay for the imported goods?
Protectionism doesn't fix that though. If you can't afford sophisticated cheap foreign-made goods, you also can't afford the crappy expensive protected local made goods either.
Not everything has to be seen through Western colored goggles. There is something quite admirable to me about China forcefully wanting their own local products front and center and frankly it's worked out well for their economy all things considered.
It's a pretty rare event to create a situation where the interests of the PRC are directly aligned with the US government's interests.
China doesn't want to be a dumping ground for western media, and they're rightfully concerned about not being able to build a content export industry.