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WSJ Quiz on data centers- test your knowledge. Does China have the most data centers? No the US with 4000, followed by Britain with 515 and Germany with 500 showing that China is not in the AI craze the way the US is even though the idea of the US falling behind in AI is used to get trillions of dollars in AI funding. This only means infrastructure that is dilapidated and broken in the US will not be replaced, and that the US plan to reindustrialize to get jobs will lack funding as dollars are diverted from these essential and vital needs to AI. Eventually Asian countries with new infrastructure will find ways to get that US technology without having to pay for it. The American public will be paying for this AI craze. We at Lyrarc.com checked how many data centers China has built? The number is 250 data centers are operational and note this in the MIT Technology Review it says 80% of these data centers are not being used, there is 80% overcapacity in China. Because China's AI such as Deep Seek is designed so that it uses less computing power. What this means is that only the US will put over 3 times the combined data centers put in by China, UK and Germany for AI and US will put in 16 times the data centers China has put in. As China only needs or is using 20% of its 250 operational data centers or 50 data centers the US is putting in 80 times the data center capacity China is using in 2026. Why 80 times? Because China has a Plan and it can manage the supply to the need or demand. In the US each company is trying to put so many in so it can get the leadership position in the market. For example Amazon puts in $200 billion instead of the $100 billion it can afford simply to be in the leadership ranks. There is much wasteful spending in the US market system than China's coordinated effort in a new technology even though ideologues like to say the US system is superior, and a plan by the state is frowned upon in the US, costing the US dearly when it lost its entire manufacturing base to China while economists said everything was OK. Even the WSJ Quiz fails to ask the question we asked about China and how many data centers China has actually made operational, how much is overcapacity- 250 datacenters and 80% overcapacity. Showing how little the public knows and even WSJ has looked into, giving a few companies such as Google, Amazon, Apple, Microsoft and others the freedom to spend in a reckless way so that future infrastructure investments and reindustrialization investments will be crowded out in the US economy. And economists as usual will say its OK. ...

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Apple gets 19% of its sales in China with a manufacturing base that includes 1 million people employed in one Chinese city. In an effort to promote Make in China China is giving Huawei more room to compete with Apple. Huawei is bringing out a new 5G phone as an alternative and has banned use of Aplle iphones in government agencies. This means about 56 million people will have to turn to locally made products. China presents this move as an effort to protect data and cybersecurity. Yet Apple has a share price increase of 46% this year even in an environment in which US and China are restricting the export of key technologies (by US) or critical materials for electric cars (by China). Apple's responses to this have been slow preferring to keep its supply chain the way it is in a strategy based on the short run, with some minor shift to India and Vietnam.

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For years Apple concentrated all its iPhone production in a few factories in China. The Zhenzhou factory with 300,000 employees is one of the largest of the Apple suppliers. These suppliers including Foxconn and Luxshare work witn Apples NPI process in which manufacturing is designed around Apple designs and prototypes. For the first time WSJ reports on protests at the Zhengzhou factory over Covid controls and wages, conditions. Young people in China are no longer keen on working in these conditions and protested. Apple finally recognizes the need to reduce concentration in one country and plans to bring 40 to 45% of the production of iPhones to India. Initially it plans to bring NPI trained suppliers such as Luxshare that have facilities in Vietnam to assemble outside China. Over time suppliers in India will have to develop the needed skills, planning and engineering concentration of people to Make in India what is now Made in China.

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The average price of a smartphone in India in 2022 was $206 excluding taxes, Apple's smartphones go for $898. With discounts Apple is now bringing the price down to below $500. In 2019 phones over $500 made up 3% of the market. This has increased to 6% in 2022. Apple is counting on this share of the market going up and prices being brought down below $500 to build a larger share of the market. Its market in 2023 is about 5% in India compared to 22% in China.

In China Apple has its own stores. It is only now opening its first store in Mumbai. This and building manufacturing facilities in India could be the way to increase its share of the market in India to where it provides an alternative comparable to the Chinese market. This is the first time after the pandemic and the supply chain issues, the idea of friendshoring, that Apple is reorienting its policy for making India a key part of its supply chain and market. 

 

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Apple relies on Chinese suppliers for about 90% of its products. So reliant is Apple on China that it is slow to make changes to adapt to president Biden's policies for a new US Asian Economic Framework that builds new supply chains. By contrast Samsung has largely stayed out of China using supply chain manufacturing in Vietnam and other countries. India and Vietnam are major alternatives and only India can offer the well trained workforce and supplies of land, labour, incentives and facilities that China offers. This makes Apple a laggard in the changes that are happening today to supply chains bringing manufacturing closer to home and making products in countries allied to the US in Asia. This includes South Korea, Japan, India and Vietnam as production hubs for parts and assembly of advanced technology products. Apple is only now beginning the task of building supply chains outside China and returning manufacturing to the US which will bring back US technological leadership by 2030, American policy set by president Biden. ...

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Senators in the US Congress, Rubio and Schumer, have asked the US government to look into Apple's plans to work with Chinese semiconductor company YMTC. As a result the Commerce Department has placed export restrictions on YMTC. This NYT report looks at the two decade long rise of China and of Apple after Steve Jobs returned to Apple in 1997 and shifted manufacturing to China. When Jobs returned to Apple he found major quality issues at Apple's manufacturing facilities, a demoralized workforce, and financial losses, with CEO Michael Spindler running the company into the ground. Jobs had to start with afresh model for Apple and decided to shift manufacturing to China under the engineering leadership of Tim Cook. Alabama native Cook went to Auburn University for his engineering degree and Duke for his business degree. Cook joined Jobs in 1998 at Apple and for ten years till 2007 the two cut costs, shifted to contract manufacturers and rebuilt Apple with new products, iPod, iPad and the iphone. By not manufacturing Apple avoided quality control issues, and the costs of maintaining inventory. It was Tim Cook who ran operations worldwide, and he gradually built up the manufacturing relationships in China with Foxconn, which makes most of Apple's products in sprawling Chinese factories that employ 20 years later about 3 million Chinese workers. Foxconn was chosen by Apple in 2000 to manufacture the Apple Mac laptop. Before that it was a parts supplier to Apple. Increasingly Apple relied on Foxconn to make its new products including the iPhone. Both companies growth relied on the manufacturing of Foxconn to the point where Apple was dependent on Foxconn and had intertwined its operations with Foxconn in China. Today the whole relationship is being called into question after two decades in which American workers suffered the effects of the outshoring of manufacturing jobs. It should be noted that though Mr. Trump raised the issue of manufacturing exclusively in China with Apple, the Trump administration did little to change the practices of the company that pioneered this type of massive manufacturing role for China. That surrendered the entire supply chain to foreign suppliers in the interest of cutting costs and maintaining huge profit margins, with which it financed an array of new products and reached $1 trillion in sales from $10 billion, hundredfold increase over 2 decades. American workers and families for the first time in American history got very little from this Cook-Jobs project. American infrastructure in communities that would have been supported by American factories including the services and infrastructure in communities financed through local taxes, a practice throughout the Industrial Revolution in the US, was sharply disrupted over 2 decades. It caused a rupture in social relations and increased inequality in the US, and defunded infrastructure that comes with manufacturing.  It is the task of the Biden administration to now correct what Mr. Trump simply talked about but never induced or required Apple to do- lead the resurgence of American manufacturing, and make its major investments in the US, invest in its workers and families, invest in America. ...

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Apple's plans to make the new iPhone 14 in India. Its efforts to bring NPI or New Product Introduction processes to India so that new iPhones can be built in a short time. This would mean not replicating production processes existing in China but setting up new ones from scratch. About 95% of iPhones are made in China. Only about 7% in India by year end which Apple plans to increase to much higher levels by 2025, as some of the supply chain for Apple shifts to India from China. The Modi government is setting up new infrastructure and logistics centers in India to prepare for India becoming a key part of the supply chain for the US and the European Union.

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Apple CEO Cook and manufacturing base in China deference to China security laws to keep a foothold in China. Under Cook Apple held off on diversifying its manufacturing base in China, leaving a legacy sure to be questioned as concentration of supply chain in China has serious repercussions on the manufacturing base of US, EU and India. No participation from Apple in reversing the dangerous deindustrialization of the US, not even an open discussion at Apple and its partner companies, a legacy that will come more and more in the spotlight long after he is gone.

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After the Apple sales warning following the slowing down of the Chinese economy, this report asks who will be next- Starbucks, Nike? Starbucks has 3600 stores in China. Nike sales in China were on the upswing till the sales slowdown in China. Experts say more sales warnings are expected as Chinese consumers cut back sharply. Chinese consumers are gloomy about prospects for the future considering the trade tensions with the U.S. and the effects on the Chinese economy of tariffs.

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Apple is in a quandary about what straegy to pursue in the large China market. Apple's pricing depends on its image of bringing in exciting new products. With growth slowing in iPhone sales and lack of new products like the iPhone Apple can go after the market of lower end smartphones to maintain growth. In that segment Apple faces strong competition from manufacturers who make products in-house and have the scale to compete effectively such as Samsung. Other manufacturers such as Lenovo are also surging in this part of the market. Sales figures for the smartphone market give some idea of the problem Apple faces. Smartphone sales for the industry slowed to growth estimated at 41% for 2013, compared to 136% in 2012. In 2014 IDC forecasts growth slowing even further to 17% and by 2015 the smartphone segment looks even less promising with only 12% growth. And much of this growth is likely to go to regional smartphone companies such as Lenovo Group of China, and other brands which are better at competing in the lower priced smartphone segment of below $100, say analysts. Apple sales were 7.9% of the smartphone market in China, Samsung had 15.4%, and Lenovo 13.1%, in the 4th quarter of 2012, according to IDC....

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The success of Apple's stores in Beijing, Shanghai. Apple plans to open stores throughout China. China's rising upper middle class and its passion for premium products. Fot the first three quarters of the fiscal year, Apple revenues in China were $8.8 billion. This is a six fold jump in revenues. China is now the second largest market after the U.S. for apps that run on the smartphone and the tablet, according to Distimo.

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Consumer issues raised in CCTV's 315 broadcasts named after World Consumer Rights Day. There is new energy in CCTV reporters now that consumer rights are a priority under the new administration of Jinping-Li Keqiang. Companies that have come up for review include food companies McDonald's, Yum Brands, retailer Carrefour, Automobile company VW, and computer/smartphone company Apple. Foreign companies operating in China are now expected to follow the high standards they maintain in their home markets or come up for review.

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China is implementing president Xi Jinping's policy to reduce foreign influence in China's internet, and promote local tech suppliers. Restrictive policies went into effect for IBM, Cisco, Microsoft, Qualcomm, to reduce their influence in China's core tech industries. Apple remained an exception till April 2016 when Apple was asked to shut down Apple iBooks and iTunes services in China. China sees this as an effort to promote in Jinping's words local "high quality content with positive voices for a healthy, positive culture that is a force for good.," according to Xinhua news service. It also increases the role of Huawei, Alibaba, and Tencent in the internet in China.

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Apple will be opening 25 stores in China in 2010-2012. Its first store is a 16,000 square foot store in Shanghai. Apple was slow to cultivate the Chinese market. Most of its newest products like the iPad and the iPhone 4 are not available in China. Apple is moving aggressively in the Chinese market to make up for lost time. It has 2000 authorized dealers in China, with 800 added in just the first quarter of 2010. Official restrictions also play a part. For instance the iPhone was officially released in China 2 years after it was launched in the USA, because of the long time negotiating with state run telecom companies and restrictions. In the meantime 1 million iPhones came into China through tourists and smuggling.

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Apple and protests over working conditions at factories of suppliers like Foxconn which make the iPads and iPhones. Issues related to Apple's large profit margins and the low wages paid to workers at supplier factories in China and other countries.

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Behind the deal Apple made to buy 100 million chips from TSMC's $165 billion plant near Phoenix is, yes, DJT Tariff exemptions. Yes, it took tariffs to get Apple and TSMC to invest in the US after much if not all of chip manufacturing was sent by Apple to China and Taiwan's TSMC. Was the Biden administration successful in getting Apple to invest in the US on a the scale that was needed? The answer is no. Even when TSMC agreed to invest in plants in the US under Biden it's management described the US as a difficult place to attract talent and build plants as reported in the WSJ at that time. There is a real element of truth in saying that it took a real effort such as the DJT tariffs move to change a situation in which most manufacturing was shipped out by US business to China. The Taiwanese had a condescending attitude that the US could not build advanced technology plants as evidenced in statements by head of TSMC, who was himself educated in the US technology institutions in the 1960's and 1970's. The US business shipped out its industrial and technological knowhow to Asia in a mistaken theory only found in textbooks that this was not going to affect US leadership and US dominance in the world. And with it the dominance of the scientific and industrial revolution culture of Europe and the US that enabled its free institutions of government and ideas of liberty of man. It is an astounding story of our times that this has actually been allowed to happen under previous administrations, technology elites, by economists, and governing elites, with some still clinging on to these ideas found only in textbook economic theory, when something entirely different has happened to neighborhoods, communities and factories now abandoned in the US. ...

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Thirty years of neglect it all began in 1998 with Tim Cook from Alabama was hired to ship manufacturing to China- Apple now takes WSJ reporters to its "nascent effort" in building new supply chain for chips manufacturing in 2026. Steve Jobs was hired in 1998 when Steve Jobs returned to run Apple a second time. By this time the company was failing and manufacturing plants had huge quality control issues, morale was low. Instead of fixing these problems at US factories, Jobs and Cook came up with a new strategy- Make in China, invent and price at a premium in PC's for large margins with low cost Chinese manufacturing using tightly controlled US design, reinvest the profits in a virtuous cycle, invent and design to compete with Microsoft. It succeeded for Apple share owners, and it failed for American workers and people- succeeded by creating a $3 trillion valuation, it failed for the American people by leaving American workers to go unemployed and setting the trend to destroy the manufacturing capabilities and structures that had led to the US following Britain with 300 years of dominance in standards of living for its people and its industrial stength since 1750. (1750-1900 Britain's dominance 1900-2000 US dominance). It also created Asian competitors in China/Taiwan, and South Korea to whom the US business had in reckless manner based on textbook theory of economists for four administrations (Bush-Clinton-Bush-Obama) had shipped American manufacturing and knowhow to China. ...