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Comment by wtvanhest | Hacker News Reader

That is an interesting theory but I would guess that the real reason is their devalued currency which allows apple to save a huge percentage on production.

Sure cheap labor helps, but is cheap partially due to the currency difference.

Despite anecdotal stories, The US still makes up 20% of world manufacturing and retains its spot as the global leader. http://en.wikipedia.org/wiki/Economy_of_the_United_States

The colocation theory (the theory which the author is talking about) is a good thoery to explain silicon valley though.

If you want to run a tech company, you want it to be colacated near your supply chain (engineers), and other service providers. This is probably a big reason why Silicon Valley has remained dominant despite so many other cities trying.

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How is it that you accept that 'colocation theory' explains Silicon Valley, but you dismiss it as explaining Shenzhen without explaining why one is different from the other?

That is a good question, sorry I wasn't more clear. The basic reason is that there is plenty of manufacturing all over the Midwest that could easily produce the entire Apple supply chain.

Shenzhen can also produce that supply chain, but they are no more capable than a lot of American cities.

What Shenzhen has that America doesn't are cheap labor, and a devalued currency.

Silicon Valley is different primarily because there is no other city with the concentration of brilliant engineers vs others. NYC for example probably has more computer engineers by numbers, but there are more opportunities for those engineers to make huge pay in other industries outside of startups. The fact that Silicon Valley is full of amazing engineers who are excited to work in the tech industry means that it is the best location for your startup to locate (relatively, and if you need a lot of engineers, not all startups do, some need more sales focused or science focus etc and there are better cities for those companies).

> The basic reason is that there is plenty of manufacturing all over the Midwest that could easily produce the entire Apple supply chain.

Citation needed. There's a huge number of companies making memory, displays, batteries, CPUs at scale in the midwest? Who are they currently selling their products to? I admit to being very ignorant of such firms.

I'm sure everyone of those parts is built in the US. I do not know the location of every FAB, nor battery manufacturer, nor display manufacturer, and neither does anyone else.

What we do know is that Intel has a fab in Arizona for example and Corning's headquarters (gorilla glass) are in NY etc.

I also don't know for sure what is in each city in China. While it is public information (for the most part), finding a source to back my claim would be as possible as backing the authors claim.

Backing the author's claim is the fact that Apple has done all the legwork on this, and ended up doing all this stuff in China. Unless you have also figured out how to profitably source manufacturing in the US for consumer electronics at the scale of tens of billions of dollars of revenue per year, the burden of proof is firmly on your shoulders.

You are missing the point.

The author says that the reason Apple can manufacture there more profitably is because of colocation of other industries.

I say that while colocation may be a factor, the real factor is a devalued currency which the author completely overlooks.

The midwest has some great manufacturing industries, but the idea that it is anywhere near ready to replicate Shenzhen on any reasonable timeframe or cost basis is simply not credible.

The expertise, density and investment levels are totally different and cannot be rapidly changed.

I'll go as far to say that a devalued currency and/or cheap labor may have been the reason the manufacturing base moved initially, but technology has advanced since that time and Shenzhen has now built up an infrastructure advantage which is much harder to counter.

>>The basic reason is that there is plenty of manufacturing all over the Midwest that could easily produce the entire Apple supply chain.

Do you have a source for that? Foxconn has greater than 1 million employees. I don't think there is any company with a labor force of that scale in the US, or anywhere else in the world. And, per the article at the top of this thread, the bigger issue is the supply chain. If iPhones were made in the Midwest, they would still be importing glass, simple hardware, and thousands of other parts that are still made in China.

For comparison, the USPS is one of the biggest private employers in the US if not the biggest, and it has just under 600,000 employees. The active US military is around 1,500,000 strong. China's active military is closer to 2,300,000 strong. There are more full-time Foxconn employees than active troops in the militaries of any but about three countries.

Walmart has circa 2.1M employees, but they are the only exception that comes to mind

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