Comment by tooltalk | Hacker News Reader

Comment by tooltalk | Hacker News Reader

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Samsung is the largest smartphone-maker in the world (and has been for much of past 10+ years). They ceased all their phone-making operation in China and left for Vietnam a couple of years ago (also most recently closed their last display, shipbuilding operation) -- along with 200+ suppliers, plus 20+ new domestic suppliers created there along the way. Now, most of Samsung phones are made in Vietnam and their output there accounts for some 30% of Vietnam's export and 20% of their GDP (2019).

I'm very skeptical that China is the only place Apple can make their products. Sure, Apple doesn't actually "manufacture" anything -- the company outsourced it to Taiwnese CM's like Foxconn, Wistron, and others who have cleary demonstrated that they have no competence, experience, or even desire to build things outside China (see Foxconn's misadventures in Brazil, Wisconsin US). But that shouldnt' be surprising considering that their business model entirely depends on ginormous state subsidies and seemingly unlimited supply of young, unskilled laborers from rural China. Also consider the fact that most critical, high-value components come from not China, but South Korea, Japan, the US (some via TSMC in Taiwan) -- China still makes less than 5% of all chips produced globally (as of 2019 according to US SIA). Of course, they are all assembled/packaged there, but China's contribution to this whole process still accounts for less than 4% of overall value.

I just don't buy the argument that China as the world's electronic supply-chain can't be replaced.

>I'm very skeptical that China is the only place Apple can make their products

I'm skeptical as well since Foxconn also open a factory in India for Apple.

https://asia.nikkei.com/Business/Technology/Foxconn-set-to-m...

And Samsung is able to produce a large share of their smartphones in Vietnam (180 million annual unit capacity). There's clearly no reason Apple can't further distribute production across India, Vietnam, Indonesia and a few other nations, while reducing dependency on China. The bigger issue is they want to continue to have privileged access to the Chinese consumer market.

> I just don't buy the argument that China as the world's electronic supply-chain can't be replaced.

No one is really interested in taking the hit in creating in country supply chains for all of the low value stuff. Vietnam is too small to support that, SE Asia as a whole might work (or maybe India), but both are still politically and economically unstable to do much in this area yet. China has scale and stability.

I see final assembly moving to different countries, but the supply chains will remain plumbed through China for a while.

>> China has scale and stability.

??? Vietnam has nearly twice South Korea's population (and less than Japan's) and of course, it also has scale, as South Korean businesses in Vietnam have shown repeatedly.

To boot, Vietnam has no immediate internal political threats (eg, compared against China's separatist movements by ethnic minorities in Tibet, Uigher, Inner Mongolia) or no potential regional geopolitical/territorial conflicts with neighbors (eg, Phillippines, Japan, India, etc), other than China. And, most importantly, despite having fought a war half-century ago, America's diplomatic and trade relationship with Vietnam is far less hostile -- it's in fact quite amicable -- than with China.

>> ... but the supply chains will remain plumbed through China for a while.

That's inevitable only b/c of Apple's political clout and relentless lobbying here in the US. I was hoping, while I was no fan of Trump, Trump's trade policy would at least partly address this, but oh boy, how quickly he caved in before Apple and dished out tariff exemptions.

Vietnam has 90 million people. South Korea doesn’t have much scale, Japan has a bit, the numbers only start making sense if we could develop a supply chain throughout Indonesia, Malaysia, maybe using talent and capital from Singapore. Or India and South Asia, of course, if things were more stable. But alas, stability is important. And none of those regions are very stable.

> That's only inevitable b/c of Apple's political clout and relentless lobbying in here.

Apple is like .1% of the political clout and lobbying being brought to bear. Their only notability in this is that they are the only FAANG that has significant business in China.

>> Apple is like .1% of the political clout and lobbying being brought to bear

Sure, as Tim Apple testified before Congress, Apple pays the most tax in the US and is also the most valuable company in the world. I'm pretty sure there is nothing going on between Apple and American/Chinese gov't. /s

>Apple pays the most tax in the US //

Interesting, how much, what percentage is that of Apple revenue and what percentage of total federal tax income?

Companies pay taxes on profit, not revenue. Otherwise capital intensive industries like banks and oil companies would be screwed.

>I just don't buy the argument that China as the world's electronic supply-chain can't be replaced. //

Of course it can. Manufacturing moved there over the last 30 years for the low regulation and particularly the low wages that keep manufacturing cheap and allow the bosses/owners to make more money. So, all you need is to accept less profit, which the controlling powers won't do without keeping wages/costs down to soften the blow - Western regulations on safety and workers rights means that's hard so prices will have to rise.

You might do it in a decade, but it'll hurt profits. Hence, USA politicians wading in with 'China can't be trusted all our allies must now buy electronics from us' ... which also helps y'all to spy on us too. Double win for USA.

Sure, nobody is expecting an overnight miracle, but it's certainly not going to take anywhere close to a decade either, as Tim Apple and others American executives have deliberately misled all these years.

And no, the US isn't interested in bringing the whole supply-chain back home, it just doesn't want a politically or economically unreliable partner.

+1

I assume part of the massive china/apple deal was a promise to stay in china (and act as a passive marketing prop for chinese manufacturing).

Foxconn has large presence in India and Vietnam.

Vietnam's plus are its cheap labour and proximity/good relations with China. As labour is growing costly in China, assembling of things is moving to Vietnam. Many components are still manufactured in China and exported to Vietnam.

Samsung likely has fewer suppliers compared to Apple. And it's much easier to coordinate its supply chain with other Samsung subsidiaries, even across borders.

China can as the electronics supply-chain can absolutely be replaced - at a cost.

Why does Samsung likely have fewer suppliers? Samsung makes more varieties of phones, and their phones are technically similar to Apple phones.

Because Samsung subsidiaries makes a bunch of those components - something Apple doesn't do.

I intentionally emphasized the fact that Samsung is the largest smartphone maker and that more than 200 suppliers moved along with the company to make that transition (and 20+ new domestic suppliers). While Apple surpassed Samsung's revenue in recent years, the depth and scale of Samsung's manufacturing are much greater -- not only b/c they make so many different and high volume products, but they also compete with many suppliers in their supply-chain.

I always cringed at Tim Apple's deceptive rambling on the industry's dependence and necessity of supply-chain in China and feared that he was cooking up something more sinister behind the curtain. I recall as far back as 2012 when Tim defended their oversea outsourcing practices on CBS by claiming that "Apple iPhone engines were made in America," even as they were working to offshore that to TSMC in Taiwan shortly afterward.

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