Will China win the chip war?
It all comes down to need. Do electronic companies need more from China or does China need electronic companies more? And it seems that China is winning.
This was the situation on May 7, 2023, in Zhengzhou. Empty streets, and closed businesses, all because Foxconn had closed its doors and moved its production to India.
That left many Chinese workers on the streets, a heartbreaking scene.
This leads to significant social challenges. Those who hate China lick their mustaches. Foxconn recently mentioned to the BBC that Foxconn would be moving its production to Mexico and Vietnam.
This leaves the idea that jobs will never come back to China. And if you look at other stories from the alt media that don’t judge and just show, but because they look at China, and not at those who left, they don’t look at how those who left did. He does not tell us if they will return or not.
The visible tells us that the US and business have won the battle and those who hate China will celebrate. But for those who love China, I have good news for you, which you will find below.
Wistron and Foxconn (which manufacture for Apple) and other technology companies left China for India. But now Apple is looking for a way to come back. They thought that India was the same as China and that it was only a matter of looking at nominal prices. In India, a worker costs a quarter of what it costs in China. If it were peasants growing rice or laborers picking fruit, it would make sense. But things don’t work like that.
15% of Apple cases made in India failed quality tests. And they have trouble training workers.
They are no longer going to produce IPads and Mac PCs in India due to quality issues and lack of training and the lack of that facility to source raw materials in China.
In 2020 they sold the Wistron factories and moved to India. And they have not found qualified personnel. Seeing this, the Indian conglomerate, Tata acquires Wistron and loses eligibility to produce for Apple.
Foxconn and Winstron found that the efficiency of workers in India was very low. Indian workers were reluctant to work overtime and had relatively limited technical skills.
Foxconn had to move to India at Apple’s request and now only has 70,000 employees. But then they had to lower it to 50 thousand. And then there was a fire in India. 40% of the production lines were destroyed.
Apple is again quietly investing to increase production in China.
Adidas had also moved into Vietnam, but in 2022 Adidas only saw a 1% revenue increase. Revenues in China fell 50%. Adidas executives are now trying to win the trust of Chinese consumers.
The CEO of US chip company NVIDIA expressed that the Chinese market is irreplaceable and urged the US to take into account the interests of chip companies in China and carefully reconsider its chip policies towards China. These companies could not withstand continued losses in the Chinese market. NVIDIA has developed several chips specifically for the Chinese market.
If this has happened with the giants, what else could happen with other not-so-big companies?
The issue of who needs who determines the outcome of sanctions and trade wars. And companies that align themselves with politics put their profits on the line.
As you can see, China is like any other country, semi-controlled chaos. It has enormous problems and tremendous virtues.
The problem with looking only at cheap labor is that several things are not considered:
- Proximity of suppliers
- Import costs of raw materials (within China there are many suppliers and nothing has to be imported)
- Legal environment of suppliers and the company (to comply with regulations)
- Minimum technical level of staff
- Idiosyncrasy and culture favorable to efficiency and quality
- Presence of suppliers of the tier you are looking for
Since 1979 they have been creating an industrial ecosystem. For the entrepreneur who is going to produce a new product, that is like being hungry and finding a neighborhood full of restaurants. And for those who already produce products, it is like going to eat at the usual restaurant knowing that they always have more options. Moving to another country is like moving to a town where there are no restaurants. You will be able to eat, but you must cook yourself.
The tier you are looking for is the level of sophistication. Low-tier fast food is not the same as high-tier gourmet food. The technological and aerospace are usually in a high tier.
Critical thinking invites you to ask the basic questions amid news media spam. The basic question in this dispute with China is “Do electronic companies need more from China or does China need electronic companies more? From what we see, it seems they need more from China.
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