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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 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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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. ...

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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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David Barboza of NYT describes the hidden subsidies China gives to Foxconn for its plant in Zhengzhou, in a poor region of China. The factory there makes about half a million iPhones a day. These subsidies include incentive packages, infrastructure building, local government help of about $1.5 billion. As a result Apple has high margins. For a 32 gigabyte iPhone 7 that costs $400 to make, the retail price is about $649 in the U.S.  The hidden subsidies is why Apple can maintain dominance as profits are reinvested. And the result is that with only 12% of the smartphone market Apple can take in 90% of the profit, according to Strategy Analytics. Barboza looks back at Apple before co-founder Steve Jobs left in 1985 as focussing on manufacturing at plants in Colorado and California. By 2001 with iPod sales soaring the move to China under Cook, who previously worked for Compaq, was underway. With the introduction of the iPhone in 2007, the move to China for manufacturing accelerated. The reason: only China offered the kind of subsidies, the speed of approval and building of infrastructure facilities, the local government support, the hundreds of thousands of workers, and the best tooling engineers, to produce in huge volumes with speed, and maintaining quality levels. Earlier plants including one in Colorado Springs that this Lyrarc editor was invited to visit just prior to Jobs rejoining Apple had many quality problems, so much so that Apple had a large part of the manufactured personal computers set aside for rework. The quality levels were dismal, defects were unbelievably high. This is the Apple manufacturing process and plant that Jobs must have seen when he returned, and which he hired Cook to fix. Not only were costs higher in the U.S., (subsidies in China came later) when Jobs looked at the manufacturing quality and the inability to get the quality he needed from American workers and engineers at that time in the 1990's, only then did he turn to China- and the more he saw what was possible to accomplish there he sensed an unusual opportunity to finally put the ghosts of memories from competition with Microsoft at rest, and to surpass everything that had been done in Silicon Valley. The result one of the most ingenious and large manufacturing networks in the world, huge profits for an American company, except for one thing- it would not do much for American workers. ...

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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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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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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 makes most of its products in China. This exposes Apple to high risk with the Chinese tariff set at 46% on April 2, 2025. If it passes on the tariff to customers it faces a loss in sales, if it does not pass onto customers the higher tariff price and cuts margins it will affect Apple profits. Apple's high margin strategy by making in China is now at risk. Apple had been given a warning to shift from over concentrating manufacturing in China. It did not heed the warning since 2016 and only made small shifts of manufacturing to India and Vietnam.

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A lot that is wrong at Apple and Tim Cook's responsibility for putting profits over national interest in not preserving but destroying American manufacturing. All the talk about design is a smokescreen for dismally letting down American communities that relied on American industrial ingenuity. Tim Cook started the process of sending America's industrial manufacturing base to China in 1998 with an elaborate plan that has been put into effect over 2 decades. Some of this I saw with my own eyes in the period just before Jobs returned in 1997, on a trip as Japanese manufacturing methods consultant at Apple's Colorado Springs Plant. Apple's failure since 2016 to correct this overconcentration of manufacturing in one place is one of the major failures for America in the first decades of the 21st century. Apple's success in profit margins was bought at a price that is too high for the communities and towns that depended on manufacturing across America during the 20th century- it has a spiralling effect as other companies followed Apple leading to the shipping out of America's entire industrial base. Creating risks of international conflict as this entire process was allowed to happen by administrations of Bush and Obama that have failed America in unimaginable ways with foreign wars, and neglect of American workers. DJT, Biden who retained DJT policy, and DJT second term are only now correcting these serious mistakes and American business shortsightedness. ...

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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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Orange juice from Brazil, copper from Chile, electronics and pharma from India, and aircraft from EU, are part of broad exemptions in US tariffs plans. The exemptions are designed to give flexibility to US negotiators where it helps the US economy to import these items. 

This month negotiating teams from Japan, EU, South Korea and othere countries are trying to get exemptions for other items. BMW is seeking export rebates for exports of SUV's to EU from its US factories. And VW is seeking to use investments it says it will make in the US manufacturing as a way to get exemptions in tariffs or lower tariff rate similar to the way Apple has negotiated a tariff exemption for its Chinese exports to the US by saying it will invest $100 billion in the US manufacturing. US negotiators have to get the firm guarantees that these investments are going to be made.

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Apple and Foxconn will add production sites in Karnataka state and Hyderabad in addition to expanding manufacturing in the site at Chennai. Apple plans production of 20 million iphones in India at the Chennai plant by 2024 and having 100,000 workers. The head of Foxconn met pm Modi this week in New Delhi. The supply chain for Apple is being shifted from China to India and other countries.

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Trade in services is not enough. Services won't build ships for the US Navy. Services don't provide jobs for factory workers. Trade in services won't rebuild the US manufacturing base. It won't rebuild the middle class. Trade in services won't make pharmaceuticals Made in America that are available always, including in times of war, pandemics and disruptions. Bottom line as DJT pointed out in a Cabinet meeting on April 10 is that the US could no longer be a world power without its industrial base, it's manufacturing base. Americans companies doing the outshoring are really the targets of the Tariffs because they are at the heart of the mechanisms causing the destruction of the industrial and manufacturing base of America, vital for it's security and for it's leadership of the free world and western civilization. It started with Apple in 1998 and I witnessed this as a consultant seeing the production line at the Apple Colorado Springs plant in 1997 with rework and defective product before Steve Jobs returned to Apple. By 1998 Apple started shipping it's entire production base to China. DJT told the Cabinet meeting on April 10, 2025, all previous presidents had to tell companies firing all their workers and outshoring their machines was- "there will be a tariff of 50 or 100% on your products imported into the US."  And these companies would never have fired all their workers and sent their factories to China or some other country. Economists and experts who have turned their backs on American workers see the $1 trillion deficit countries have with China and the loss of their industrial and manufcturing base with one excuse or another. Trade in Services in which the USA has an advantage does not do much for American workers, or for the 5 million manufacturing jobs lost and tens of thousands of factories that have been outshored.  National Security and Jobs, the Middle Class, factory communities across all 51 states are all at stake. ...

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Andy Grove makes this passionate plea for the dignity of workers in America in 2010. It is worth reading in 2020 what this founder of Intel Corp and pioneering spirit of Silicon Valley has to say. Andy Grove of Intel says there is something seriously wrong when the unemployment rate in the Bay Area is higher than the 9.7% national average for the USA. American companies have added jobs like crazy in Asia, but things are sputtering back home. Hon Hai has 800,000 employees and makes most of the electronic and computer products for American companies. Grove says startups are not the answer, unless they scale up and create jobs the way Intel did starting back in 1968, with a $3 million capital infusion by investors. The move from the first production model to mass production is critical, as companies hire thousands of people. Innovation and scaling up have to go together. He makes his point clearly by pointing out that Apple has 25,000 employees. For every Apple employee there are 10 employees in China working on Apple iMacs, iPods, iPhones. And he adds that the same 10 to 1 relationship applies to other U.S. tech companies. And here Grove asks the tough question by first posing an answer. He says it sounds like- no big deal, we keep the high paying jobs, we keep most of the profits, but what kind of society are we going to have with highly paid professional workers and lots of people unemployed? And he doesn't mention that there are a lot more young people unemployed. He says the US has become very inefficient at creating tech jobs, and it would be a great mistake not to act decisively early on. And adds that the investments in such areas as solar power and electric car batteries have to be made early on to maintain leadership in these areas. Grove faults academics like Alan Blinder and others who say loss of manufacturing jobs and whole industries was no big deal. The U.S. has forgotten the value of manufacturing jobs. He wants to see America focus on jobs and rebuild its industrial base. And less of transferring engineering knowhow and new technologies overseas, technology that can help bring innovation and scaling up of factories at home. In his view individual companies doing their own thing, in a misguided fashion that jobs don't matter, is not the answer to the situation we face. The industrial economies of Asia, China at the present day, have focussed on jobs and technology, and scaled up. Grove reminds readers of the situation in America in 1932, when jobless veterans demonstrating outside the White House in large numbers were dispersed by soldiers with live ammunition and fixed bayonets. This makes him shudder at the very thought of it, and brings back memories of his early years in Hungary, as a young man in 1956. Are we listening? ...

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Indian finance minister Sitharaman says this is a good time for India's manufacturing companies to invest and "work out strategies for drawing western manufacturers to India." WSJ reports that Apple and its contract manufacturer in China are looking to diversify and build a  manufacturing base for the iPhone in India.

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Analyst estimates show Samsung taking 43% of smartphone profits to Apple's 57%. This is up from 26% for Samsung and 74% for Apple in the 1st quarter of 2012. Samsung could soon surpass Apple because of the wide range of models and its manufacturing capabilities. Apple sees a shrinking of margins in coming years.

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Krugman cites Apple as the largest company in the U.S. in terms of its valuation but having only 43,000 employees in the U.S. He asks the question- why does Apple get most of its manufacturing done in China? Apple indirectly employs about 700,000 people at its suppliers, with most of them in China. Companies contribute to a country's economy by creating successful clusters of research, innovation and manufacturing. In Apple's case, to the great detriment of the U.S. economy, the manufacturing part is being done entirely overseas. If cost is the only factor for this, then the question remains how German manufacturing has managed to surivive and grow with wages that are higher than in the U.S.

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How lockdowns affected Apple's contract manufacturing through Foxconn in southern China and how this led to policy of relaxing the tight restrictions and embarking on a new policy path that responds to people's lockdown fatigue.

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Apple is investing $700 million in a new material called sapphire that will replace glass to provide better breakage protection for the iPhone. The first sapphire screens will be coming off a manufacturing plant in Mesa, Arizona, that Apple runs with GT Advanced Technologies. Apple is using sapphire, a harder and more corrosion resistant material that is costly to produce, for the cover on the fingerprint reader and iphone camera lens. About 11% of iPhone owner screens have cracked or broken screens, according to warranty provider SquareTrade. Compared to Gorilla Glass costing $3 per screen, the sapphire screen would cost $16. Apple paid $113 million for a 1.4 million square foot Mesa facility from a solar panel producer and leased it to GT, a manufacturer of furnaces to produce sapphire. Apple is paying GT $578 million to install furnaces at the factory and run the plant.

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Surprisingly very little can be found on the internet on how the relationship between Apple's Tim Cook and Foxconn started and how it evolved over the two decades- a key to understanding the two decade rise of Apple since 1998 when Tim Cook, an Alabama engineer, joined Apple's Steve Jobs to rebuild an almost demolished Apple. It is also key to understanding the rise of China in manufacturing to the point of excluding all other countries, including the US, for major investments. It is also key to understanding how the social relations have been disrupted in the US, how the US workers and families suffered from outshoring on this massive scale never before seen in the US for 100 years of the Industrial Revolution since Lincoln in the 1860's. This has not significantly changed to this day as the US goes into the midterms to elect a new Congress. Mr. Trump ruffled sentiment on this issue but had little action or results to show for it to reverse this. Mr. Biden is making some headway as the US elects a new Congress in November 2022 to take up the tasks to restore American leadership in manufacturing and in technologies that support advanced manufacturing from semiconductors to renewable energy. What happens now depends on many things. Mr. Cook talks about intuition as a main driver along with preparation and hard work in his project which has done little for America and the American people, in the sense of how its communities look like, and how its families live, as they are largely excluded from Cook's Apple project. Even as it employs about 3 million workers of contract manufacturers, for the most part in China with Foxconn. Total employees in the US are 37,000 mostly highly paid engineers and technical workers. The 270,000 working in what it calls its ecosystem are mostly workers in retail stores paid much lower wages. Of manufacturing there is little on the scale in China. Not since the days of Lincoln in the 1960's who fought a civil war so that the rights of labour in the US were protected as seen in his message to Congress in the 1860's, and through the Industrial Revolution for 100 years, has something like this happened in the US. It is not about some manufacturing taking place in Asia, it is the sheer scale that excludes America from significant manufacturing, about 300,000 workers in the US mostly in lower paid retail jobs, and 3 million in China with contract manufacturers that is an aberration from history. It is about delegating an entire supply chain in manufacturing that constitutes this huge aberration.     ...

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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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The different strategies of Apple and Samsung in getting to the point where the two companies now dominate the smartphone market. Whereas Apple makes only one phone, its iPhone, Samsung's strategy is to have multiple phones in each price segment. It has five levels of Android based phones, with 2-3 models in each price segment. Samsung also benefits from doing its own maufacturing. When faced with a number of technologies Samsung's strategy is to bet on all of the technologies until one of them emerges as a winner, and then concentrate resources on that technology. It uses a similiar strategy for televisions. Apple by contrast places more emphasis on original design and profit margins over sales, gaining sales without eroding margins by being the first innovator in the market. It also has its own unique arrangement for manufacturing at lowcost with Foxconn in China that supports its high margins. Apple is secretive about its designs and promotes its brand heavily with its own retail stores. Apple also uses its innovative edge as leverage to steer profits away from carriers. Analyst estimates are that carriers such as AT&T and Verizon pay about $400 per iPhone to subsidize its cost because this is the only way to get customers into their retail stores. IDC estimates are that the smartphone market is $219 billon in 2012. Both companies are very close in volume- IDC estimates Apple shipped 93.2 million smartphones in 2011, compared to Samsung's 94 million units. Apple has market share of 23.5% in the fourth quarter 2012, up from 16% in 2010. Samsung has 22.8%, up from 9.4% in 2010. Apple and Samsung have together taken 91% of operating profits of all cellphone companies in the fourth quarter, an increase of 30% from 2011, according to Strategy Analytics....

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Geopolitical problems and installation of US air defense systems in South Korea led to Chinese restrictions on South Korea. This led Samsung to reduce its labor force in China from 60,000 to 18,000 in 2023. It shifted operations to India and Vietnam. It is Vietnam's largest exporter and makes 20-30% of its global smartphones in India. Apple is only now beginning to shift to India. This is called decoupling or de-risking after an excessive concentration of manufacturing by companies like Apple in China.

Xiaomi took a large share of the local market in China from Samsung, another reason Samsung reduced presence in China. It still gets advanced components from China. In India Samsung has a dominant market presence. Because India is a price conscious market Apple has only a small market share in India.

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The lack of ample natural gas supplies has hurt Mexico's manufacturing sector. Pemex has focussed on crude oil production and Mexico imports natural gas from Texas. BBVA Bancomer estimates a loss of 3.6% of manufacturing output in the last year from the lack of natural gas produced in Mexico from its large gas reserves.