David Parker > Recent Status Updates

Apple Squeeze (profit) tilted the field in favor of local verses Taiwanese rivals. They would work for the experience, could access cheap capital, government subsidies, land appropriation, and a labor pool. Foxconn (Taiwan) that had builtChina’s manufacturing over the past forty years was being strangled.

Ci Jinping’s Made in China 2025 plan, published in 2015, had asked Chinese companies to “master core technologies, perfect the industrial supply chain, and perform our own development capabilities.”

By 2018, Xi had shut down Scholars Against Corporate Misbehavior, SACOM, after thirteen years of advocacy, the group disbanded.

2013 Chinese news presses for worker rights: overtime, and dormitories number workers. Jacky Haynes attempted to champion for workers but subcontractors faced with profits and Apples’, “do what ever it takes.” approach among suppliers meant that if you wanted to be in the loop, show a profit.

Rule by Law is controlling the people— or this case, nudging corporate behavior. Voluntary is the new mandatory.

China began to exploit this by designing legislation to compel foreign companies to respond with favors: overhaul how they did business, leave China, or find out what the local officials wanted. Rule by law.

When foreign factories began to build in the experimental zones, 1980’s, rural farmers were allowed to work there but not put down roots. They had problems with social services, and few labor rights, and their children couldn’t attend urban schools.

The centralized government has control over personnel, whereas sub national governments run the bulk of the economy; and they initiate, negotiate, implement, divert, and resist reforms, policies, rules, and laws. Thus allowing duplication on a large scale.

The regionally decentralized authoritarian (RDA) is a large meritocracy for officials from provincial governors down to the local cadres. They are given wide latitude to incentivize businesses and work with them to achieve fast growth and higher employment.

China is a more decentralized nation than America. China is federalism on steroids, contrasting with Soviet Communism. Beijing sets the goals in substance and pace, but it’s up to the provinces, municipalities, and countries to figure out how to meet them.

The best way to save face, if I mess up don’t look at you and don’t acknowledge it.
If I cheat you and you don’t catch me, it’s your fault.

Apple was building interdependence into their Apple campuses in China. The Apple engineering was so intergrated into their components that they couldn’t buy off the shelf inventory.

2007 Apple #2 in Supply Chain Top 25. It was totally vertical with all suppliers and sub-suppliers in China and its engineering teams in the plants.

Exposed for profits: iPod products sold 937,000 units in 2003 to shipping 4.4 million units in 2004, then 22.5 million units in 2005.

One stop shopping: Foxconn created a campus in China that incorporated buildings, labor, dorms, supplies, exporting facilities, and company stores/services.

But as Grove warned: our pursuit of our individual businesses, which often involves transferring manufacturing and a great deal of engineering out of the country, has hindered our ability to bring innovations to scale at home. Without scaling, we don’t just lose jobs—we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate.”

No regulatory oversight of what was happening, a shift in where all this work was being performed was inevitable. The co-founder of Intel, Andy Grove, would later diagnose the problem as “a general undervaluing of manufacturing—the idea that as long as ‘knowledge work’ stays in the US, it doesn’t matter what happens to factory jobs.” B

Original Design Manufacturers (ODM) buy the parts from third party, assemble, label, package and ship.

Purchase Price Variance (PPV), if you can control the supply chain, then you can make more money. I’ll sell you a widget for a dollar but buy it for $0.36. Thus you’re paying for the service and the inflated widget cost.