Apple could be used as a 'bargaining chip' in the trade war, Chinese state media warns

[tao]

• Apple has benefited from cheap labor and strong supply chain in China which has helped it boost profit and get to a $1 trillion valuation, the state-backed People's Daily said.
• The U.S. firm should share that money with Chinese citizens, the article urged.
• Apple could be the target of "anger and nationalist sentiment" amid the ongoing trade war.

 

Apple has benefited from cheap labor and a strong supply chain in China and needs to share more of its profit with the Chinese people or face "anger and nationalist sentiment" amid the ongoing trade war, an article in the state-backed People's Daily warned Tuesday.

 

The opinion piece highlights how Apple made $9.6 billion in revenues in China in the June quarter, which helped the U.S. giant to recently hit a $1 trillion valuation.

 

But the continuing trade war between the U.S. and China could leave Apple and other U.S. firms vulnerable as "bargaining chips" for Beijing, according to the article.

 

"The eye-catching success achieved in the Chinese market may provoke nationalist sentiment if U.S. President Donald Trump's recently adopted protectionist measures hit Chinese companies hard," the People's Daily said.

 

"China is by far the most important overseas market for the U.S.-based Apple, leaving it exposed if Chinese people make it a target of anger and nationalist sentiment. China doesn't want to close its doors to Apple despite the trade conflict, but if the U.S. company wants to earn good money in China, its needs to share its development dividends with the Chinese people."

 

It's unclear how the publication thinks Apple should share its profits with Chinese citizens.

 

At the time of publication, Apple had not responded to CNBC's request for comment on any of the claims in the article.

 

Last week, China said it was ready to retaliate with tariffs on around $60 billion of U.S. goods, just days after the U.S. administration revealed that Trump had spoken with U.S. Trade Representative Robert Lighthizer and asked him to consider increasing the proposed levies on $200 billion of Chinese goods up to 25 percent, from 10 percent.

 

So far, Apple has been broadly insulated from the trade war. Trump reportedly told Apple CEO Tim Cook in June that iPhones assembled in China would be spared from levies.

 

But People's Daily took issue with the economics of the iPhone. The article claimed that Chinese companies in Apple's supply chain only get 1.8 percent of total profits created by the flagship device. People's Daily did not cite where it got this figure from.

 

Ultimately, Chinese state media argued that U.S. companies could begin to enter the firing line in the conflict between the world's two largest economies.

 

"The trade conflict initiated by the Trump administration reminds China to re-examine China-U.S. trade," People's Daily wrote. "It seems U.S. companies doing business in China are the biggest winners from China-U.S. trade. The Chinese market is vital for many top U.S. brands, giving Beijing more leeway to play hardball in the trade conflict."

 

< Here >

[luisam]

 

2 hours ago, tao said:

 

It's unclear how the publication thinks Apple should share its profits with Chinese citizens.

 

Apple sticks "Made in China" on its devices is because the majority of the parts tend to be sourced from China, even if some importante parts are made elsewhere. The assembly of Apple's devices is for the most part done in China - which is why we will continue to see "Made in China" despite a lot of these companies, including Apple, creating their designs in countries like the United States.  Looking more closely at the Chinese assembly line, it's also made people question why Apple has chosen to outsource and even assemble its devices outside its domestic territory and choose China as its primary location. The simple answer is: China allows greater flexibility and even has the natural resources to cope with high-demand manufacturing.

 

So, if China is messing up Apple's business, they might be sawing the branch from which they are hanging.

[tao]

33 minutes ago, luisam said:

they might be sawing the branch from which they are hanging.

Yes, life is a two-edged sword.  But when pride enters the equation, a win-win turns into a lose-lose situation. 

[BimBamSmash]

I keep wondering, with all the young Chinese studying and graduating abroad - especially from US academies, and with so many years of experience doing parts manufacturing and assembly for tech giants back at home, what keeps these guys from "founding the next Apple" themselves? I know they have brands that do quite well in markets, but at their hearts they are all copycats, with low-grade clones.

[luisam]

2 hours ago, BimBamSmash said:

I keep wondering, with all the young Chinese studying and graduating abroad - especially from US academies, and with so many years of experience doing parts manufacturing and assembly for tech giants back at home, what keeps these guys from "founding the next Apple" themselves? I know they have brands that do quite well in markets, but at their hearts they are all copycats, with low-grade clones. 

 

Chinese geeks don't need to reinvent "Apple"; don't even have the chance to do so. I'm not a "fan" of Chinese technology but must recognize that China has it's own electronics comunicatons giants, like ZTE and mainly Huawei, which just displaced Apple as the second biggest smartphone provider and expects to displace Samsung from the first place. They should produce something radically new in some Chinese garage to crate some "new Apple"! By the way, Huawei is not a copycat of Samsung or Apple, they've developed their own tecnology and certainly I wouldn't  dare define a Huawei smartphone as a "low grade clone"

[BimBamSmash]

I don't think my original message was taken for what it was intended.The issue I was trying to raise was related to Apple and its appeal in China. To rephrase, I was trying to say that right now the Chinese have access to good education, they have had good hands-on experience with assembly, and they are the world's second strongest economy. They have everything it takes to invent, design and produce high quality goods of their own right back at home. Goods that not only competitive and appealing, but come to surpass everything the likes of Apple are known and loved for. The Chinese are not exercising this potential. Instead they look into cloning already existing goods - the formula that has already proved to be successful. When they don't do that the Chinese ask for a larger cut in profits from that which they assemble for overseas customers. That's not right. They have everything they need to work towards the point where, instead of asking Apple for a cut of profits it'd be Apple that pleas for a share. That is something I'd love to see. Perfectly achievable too if the Chinese let go of their old business practices.

 

You made some new points in your post that I'd like to talk about.

 

21 hours ago, luisam said:

Chinese geeks don't need to reinvent "Apple"; don't even have the chance to do so.

 

Disagree. The way I see it, when one has access to the best education money can buy the least one can do is to be different from the average Joe.

 

 

21 hours ago, luisam said:

China has it's own electronics comunicatons giants, like ZTE and mainly Huawei, which just displaced Apple as the second biggest smartphone provider and expects to displace Samsung from the first place.

 

I have never seen much discussions on the underlying reasons behind this. I cannot reach an educated conclusion. What I currently know, correct or not, makes me think like this:

 

The Chinese had the upper hand here only because of competitive prices. Not everyone in the world is sitting on a pot of gold, ready to shell out a grand a year or so for a cellphone. That's when the Chinese come to the spotlight. The deal? Consumers are offered some of the same features and design as those from the expensive counterparts, but at a huge discount. You want an iPhone but cannot afford it? No problem, they have clones that look and play just the same. You want Apple accessories but price tags are astronomical? Fine they have clones that look and work just the same - only not as durable. That gets you sales. Easy to push you all the way to the top. It is good. I am not criticizing it. But this practice best suits nations with average education and little to no resources. China is not like that. They can do better. They must do better.

 

21 hours ago, luisam said:

They should produce something radically new in some Chinese garage to crate some "new Apple"!

 

I am not sure if that was a question or a statement. But yes, they should. You don't need to start from a garage to build the next Apple these days. Not in a country with the economic prowess of China. China has several strong brands that, like you said, are already doing pretty well for themselves. Just put in a bit of taste to what you're currently doing and let magic do the rest. That's right. Design. Taste. What's keeping Apple up the charts nowadays? Innovation? Hardly. They weren't nearly as profitable back in the days of Jobs when real innovation was there. The secret to their success nowadays is their eye candy, gimmicky designs that fool customers. It is all about design. Vast majority of those who pick up the iPhone don't even know or even care what the device can do. It is all about show off. Not the hardest thing to do for competitors, especially those from a country with strong economy and well educated youths.

 

21 hours ago, luisam said:

By the way, Huawei is not a copycat of Samsung or Apple, they've developed their own tecnology and certainly I wouldn't  dare define a Huawei smartphone as a "low grade clone"

 

I don't know about their tech. I don't understand hardware. I leave it to someone else to compare the Kirin 970, A11, Exynos and Snapdragon or whatever processor it is that they have in their tech products.

 

From a tangible design perspective, I look at their products appearances. The images. Hell, even their website. The way they present themselves. And yes, they come off as copycats to me. Just compare their webpage with that of Sumsung and Apple.

 

About products themselves, and speaking on Huawei in particular, let's look at their P20 series of cellphones:

 

The camera. They wanted a three-lens design (for whatever reason). They put a 1x dual camera lens from the iPhone X/Plus line, on top of a 1x single lens camera from the regular iPhone. Surely there were more clever means to combine these into a 1x three-lens camera, if not a tech breakthrough that allows a single lens to work like three.

 

The speakers. Haven't seen it close up but the pictures look like a direct copy of the iPhone line.

 

The screen. Seems like the Galaxy line with the iPhone's notch applied on top.

 

Other products? Well, there is the MateBook. Again, I don't know about the hardware but the visuals can easily be mistaken for the Macbook. The keyboard looks like MacBook's. Speakers look and are placed the same as MB, Touch ID mechanism is placed and behaves fairly similar to MC. Trackpad looks similar to MB. the chassis looks almost identical to MB. Hell, they almost even used the same name for the product.

 

I could go on but I think I made my point.

 

Look, this is not meant to be an excuse to offend the Chinese or anything. They are doing something many nations can only dream about. But they do not live up to expectations. When I see news like how they are pissed they are not getting a fair cut from their overseas contractors, I just roll eyes in frustration. I am like, seriously? When I was doing my graduate course, more than half of the lecture room were Chinese. When I walked around campus, there were even more Chinese. Hell, it often felt like I was the overseas student there. I read that a healthy number of Chinese graduate from top universities like Harvard, UCLA, Oxbridge and alike - you know the sort of institutions some of the world's top leaders have attended - every year. They got all the best input. Thanks to the US immigration legislation they are legally prohibited from landing a job in the US straight after graduation. They will likely go back home. China has resources. They have money. They have markets unlike anywhere else in the world. So why aren't these Chinese talents putting their knowledge to work? To do something different? What is their disadvantage that stops them from making things the whole world remembers and adores the nation by? Why should the word China become a meme for low quality/cloned/cheap goods? Time to change this.

[steven36]

Using Apple as a barging chip to a congress that  dont like  big tech  to begin with is never going to work and is not going to  replace  the millions of jobs that were out sourced to China . Apple products can be replaced but jobs  have to be brought back or people have to be reeducated ..It's about everything from home grown food to tooth brushes it's not just about one company.  It would be different if Apple were the number #1 kind of  smart phone or desktop OS  but there not and with a flood of new cheap Android phones hitting USA markets this summer your fixing too see IOS lose any grasp it had on the markets in the USA  .Only reason it kept it as long as it did there were no cheap smartphones  in the USA,  now they are and guess what there not made by apple  ...   IOS is going to end up like MAC OS something  only rich people buy .

 

China needs to stop depending on the USA so much and open there trade up to others if they want to ever recover. Closing trade off to the whole world is not going to help them the last time the USA  closed trade off to everyone  it caused the Great Depression  and was the reason they came up with the idea of Global trade. It was Nixon who opened up China to the free world now its to late for them to take a time machine  and go back  to the past without there economy collapsing . You tech nerds act like Global trade was something that started during the internet age but it was not.

 

As far as Apple need to come up with some new ideas like Microsoft  did, because 1. Microsoft beat them in the desktop world long ago 2. Google beat Apple at smart phones now as well . They not really came up with any new worth wild ideas since Jobs died.  There CEO  have let Apple stagnate  and it will catch up with it and China can help speed up the process or they can die a slow death but in the end it's not going to matter to the consumers  about some over priced products that replacing them will save them money. 

 

Apple is  not a good example of fair trade ..They used China for cheap labor and charged the people 3 prices  for there stuff, they have the upper hand in  places were there are no cheap phones if you had to pay 3 prices more than  the rest of the world does there is no over whelming demand to change from who invented the wheel. We had cheap PCs for along time now and the USA just got cheap phones this year. Not only did crooked Apple took advantage with over pricing for years  they also got  busted by the  EU for Tax fraud and had to pay back £11bn. Tim Cook is just another Silicon Valley  crook like all the rest of them in that area are.

 

When is any of Tech going to come out with  anything mind blowing for the consumer to want again ? Cell Phones and PCs have been around a minute now and all the world is all about reinventing the wheel now. It's so boring when technology comes to a stand still. Long before any trade war there has been no break threw .  Consumers in my country dont want no AI unless there rich . We dont like them it's just another thing the rich can use to replace us for cheap labor and one day it will cause another civil war, if the economy dont collapse and do it for us 1st.

 

Apple may be the 1st USA  company that hits $1 trillion but the others are right on it's tail and old saying  is pride becomes before the fall. What goes up must come down .