Apple is America's semiconductor problem

A weird article.

Apple was not the first or the only company to look to East Asia for cheap manufacturing, elctronic equipments, chips, or cheap labor. The trend was started and accelerated by motor companies and hardware just followed suit.

Then, some other points are just...there. Apple is America's semiconductor problem because Apple is so big it purchases things in bulk and gets discounts - like every other big company in every industry.

TSMC sold 100% of the capacity to Apple for 3nm chips because no one else had the designs ready, Apple needed them in bulk, and the yield wasn't that high. It is problematic, but you need to mention these things when making a claim.

The problem is two fold - other companies are not really innovating and experimenting at semis with a scale at which Apple is. This is a market failure more than an Apple failure. Others were reliant on Qualcomm, broadcomm, samsung, and Intel, with slower pace of innovation. Then there is Asian countries with cheap economies of scale.

It's one thing to assume the most nefarious intent from the start and then look at everything from that lens. It mostly leads to paranoia, not insight.

> Apple buys a far larger share of smartphone and computer semiconductors, given that it accounts for half of global smartphones sales and earns 85% of all smartphones

I feel like I'm getting trolled by the author who is citing sales and profits instead of units produced as a metric.

I have zero doubt Apple's influence is considerable and maybe monopolistic or something like that in a number of ways.

But I find an article that doesn't even address any other companies a little hard to swallow. Are other companies simply not able to "reshore" chip fabs?

I have no idea what some of the tidbits thrown in about the apple watch has anything to do with the topic. Let alone some of the heavy handed lines in the article that simply aren't supported as far as I can tell.

Some of the lines in this article seem borderline hysterical...

Post hoc ergo propter hoc. Sure, Apple offshoring their semiconductor mfg compounded the US' lack of domestic semiconductor mfg capacity/expertise.

Apple also did that because it is a _business_, and has not always been the behemoth it is today. They went overseas because it made more sense, not because they had some anti-American goal of crippling US mfg capabilities.

The AELP is, ideologically, a anti-big-co institute, which is admirable but is also why this piece engages in post hoc ergo propter hoc rather than discussing meaningful policy proposals:

> The American Economic Liberties Project launched in February 2020 to help translate the intellectual victories of the anti-monopoly movement into momentum towards concrete, wide-ranging policy changes that begin to address today’s crisis of concentrated economic power

If you're talking about America's semiconductor problem and not mentioning Intel even once, your view is horribly horribly slanted

Lol, maybe the author should ask himself if we ban Apple will we then see the American semiconductor industry boom and take over the world?

If not, then the logic is strenuous at best, you just viscerally hate Apple and want to find reasons to blame it as opposed to doing anything constructive for the American Semiconductor Industry. Something constructive would involve fixing the work ethic of American Semiconductor Factory employees which seems to be heavily lacking compared to their Taiwanese counterparts, a problem that we don’t see with say the AI workforce or any upper order white collar workforce.

Intel also worked on modems for a long time, ultimately abandoning it and selling it to Apple, who has also not been able to bear fruit with that yet. Modems are hard but Intel with their experience could’ve stuck it out and had a competitive modem chip but instead focused on short term profits which have evaporated now. Note I own shares in both companies.

The kind of monopoly apple has is interesting. In the US Apple has a complete monopoly on customers that spend money.

If your app shows ads, apple customers are more valuable.

If your app sells any kind of product apple users buy more.

Market power is not determined by the number of users but by control of revenue.

> In 2017, when Apple announced it was moving away from using UK-based Imagination Technologies for graphics processors, the company lost two thirds of its value overnight.

I'm not sure what the author is suggesting here. They licensed technology from Imagine Technologies, so therefore they must continue licensing their technology?

Also: Imagine Technologies is a chip designer, not a chip fabricator. It's stuck in at the end of a paragraph about Apple's suppliers, but unless I'm mistaken—which I absolutely could be!—Imagine Technologies wasn't one. Also it's a UK company, so I'm not sure how Apple ending their contract with Imagine Technologies hurts the US's semiconductor problem.

These two articles are much better at explaining why any smartphone or computer manufacturer could never hope to source most of their components from the US.

It's not just about semiconductors, but the entire supply chain.

https://www.theatlantic.com/business/archive/2012/01/why-the...

https://www.nytimes.com/2019/01/28/technology/iphones-apple-...

This is a pretty disappointing article with some very questionable examples.

The Imagination Technology example in particular is poor since they were a supplier of intellectual property, not physical goods. So Apple’s usage of them as a supplier had limited bearing on the firm’s other customers or lack thereof. Similarly, the ban of Apple Watches over IP theft has nothing to do with the supply chain issues that the authors attempted to outline.

The thesis is also all over the place. The title indicates the problem is semiconductors, but then lots of the arguments have to do with suppliers outside of semiconductors. If Apple’s reliance on TSMC is the big problem, then why isn’t even mentioned that TSMC is the only competitive fab on cutting edge nodes?

Lastly, the overarching theme is severely misguided. All of these supply chain dealings are as old as semiconductors themselves. When the industry moved towards targeting consumer electronics in the 70s, semiconductor manufacturing moved out of the US long before Apple was relevant. And if Apple weren’t a powerhouse of consumer electronics today, other companies would be doing the same things. It’s just part of the nature of trying to manufacture and sell mass market electronics.

Apple is a large beast for sure.

With as much expertise as the author has. I didn't read solutions or ways forward. I suppose the main objective is awareness?

Apple is a proxy of what people want. The Soviet has already tried top down supply chain management and it did not work.

The idea that introducing more regulations will foster the U.S. semiconductor industry doesn’t make sense. History shows that heavy regulation often stifles competition and innovation, leading to stagnation—similar to what happened in Russia’s outdated industries. Instead of imposing more rules that could entrench dominant players, the focus should be on creating an environment that encourages competition and innovation. Overregulation risks making the U.S. chip industry less competitive globally, which would undermine efforts to revitalize it.

I’m not sure the argument holds water - it seems to be that Apple has huge market power (yes), and manufacturing in Western world basically moved to China (yes), India (yes). But it’s hard to say this is Apples fault.

If Apple had not been there, are we saying manufacturing would have stayed onshore - steel foundaries, car factories and chip manufacturers- I mean China and India account for over 3 billion people, who want roads, houses, cars and washing machines. Where else are the factories going to be - the weight of demand means even if US owned the factories they would still be in Guangdong.

So yeah, Apple probably misuses its market power, but it’s hard to imagine it did anything but tip the playing field further down the way it was already pointing.

So if we tax or punish Apple, do we really think it will all flip back?

My personal take is that energy and computing are the things that need to be in shored - no matter the cost differential. Industrialised counties, hopefully, will become energy independent (lots of solar, lots of insulation, lots fewer transport) and computing is going to be similar - focus on that verifiable secure designs

Intel should have produced ARM chips for Apple as a foundry. If they’re to be wildly successful again, they will be doing this anyway. They gave up 18+ years out of x86 pride and bad leadership. I hope Gelsinger can beat TSMC at the process technology game and win Apple’s business.

Terrible article, as expected from Matt Stoller.

"With this position, Apple uses its outsized buying power to squeeze the margins of its suppliers such as Foxconn, leading to poor pay and terrible working conditions in Chinese factories."

So Foxconn is either choosing to not do business with Apple's competitors who would pay more (??), or the competitors can't place orders of the magnitude that Apple can and Foxconn workforce would just be smaller with a lot less people being employed.

The intellectual dishonesty in the argumentation is so bad that I'm pretty sure I'll skip future Matt Stoller articles.

> monopsony

> (economics) a market in which goods or services are offered by several sellers but there is only one buyer

well that is my new word of the day I guess, not a bad one at that

In this case, people are the problem for being suggestible and buying Apple obsessively. I've worked for 3 different tech companies which bought and forced me to use an expensive company-supplied MacBook, in spite of the fact that their software project ran in production on Linux which is free. The problem is that people are brainwashed.

> With this position, Apple uses its outsized buying power to squeeze the margins of its suppliers such as Foxconn, leading to poor pay and terrible working conditions in Chinese factories.

I'm sorry what? Poor pay and working conditions in the semiconductor hubs of China has been a problem as long as and before Apple made the iPhone. Apple certainly isn't HELPING that situation, but none of them are. All these fabs have made the news at different times for everything from suicide prevention nets to using slave labor to make Apple products, sure, along with every other major tech OEM in the business. I'd be shocked if you could find ANY large manufacturer of these things that hasn't been embroiled in one scandal or another over shitty conditions in their factories.

> Even for the American suppliers who have managed to stay in business, things are hard. With Apple accounting for most or all of the revenue of many of its suppliers—by buying most of their output and blocking its competitors from using similar components—suppliers “dare not put a foot wrong” by speaking against Apple, or even mentioning it by name.

Then how do you know if they refuse to talk about it? This feels like a piece banking on outrage clicks about Apple.

> In 2017, when Apple announced it was moving away from using UK-based Imagination Technologies for graphics processors, the company lost two thirds of its value overnight. Apple’s monopsony power means component suppliers have few buyers.

Yeah, Intel lost a bunch on the stock market too when Apple announced they were rolling their own silicon. Losing Apple as a client is absolutely going to suck for any supplier and a stock dip makes perfect sense in that situation.

Like, none of this is strictly wrong but it's just describing the highly centralized nature of this industry. None of this is unique to Apple. I'm sure Samsung would have no issues at all swinging suppliers by the tail if they were so inclined to do everything outlined here, and I'm sure they have too.

Edit: TIL about the word monopsony.

Seems like I read this article different than many others here...

I didn't read it as "Apple is the problem because they are evil", but as "Apple is the problem because they reached a critical scale in this industry".

No need to rush to defend Apple for being accused to focus on profit, no need to start 'Whataboutism' how other companies have similar goals. Someone describing how Apple took actions in the interest of maximizing its profit is NOT slander or bashing, it is FINE that they do that.

The article talks about Apple’s sheer size as a buyer and how their actions contributed (and partially even caused) the current state of this supply-industry, and how important it is to understand this and evaluate careful steps to counter this trend.

It also describes how Apple's narrative of being a "good corporate citizen" for forcing its suppliers to setup small-volume production in US is only half of the story, and WHY that is. And this is important to state as well, because Apple is and will continue to focus on maximizing its own profit, which is NOT making them the enemy, but also not an ally.

Was I the only person who saw this article was by Pete Singer and was briefly deeply confused? Why does the OG EA guy care about ... Oh. No R.

Fun thing is, most of these semis end up in the trash because apple puts roadblocks on reuse!

Both Google and Microsoft had plenty of time, resources and reasons to develop their own industry, they didn't, instead held hostage an insane amount of cash

Now they pay the price

That's what happen when your government consists of clueless warmongers

"Oh no, Samsung is developing their own homemade industry, sabotage! quick!"

Tim Cook

> and more action needs to be taken by the federal government to rein in its control over the global electronics supply chain.

Yeah so here it is. The moment you start talking command and control economies you need to GTFO the room.

I find the article compelling. He cited a lot of other articles, isn't making outrageous claims, provided concrete numbers, and isn't spinning unrealistic conspiratorial claims. The only core feature of human behavior we need to accept to believe the article is that some people are very greedy.

The article makes sense to me. Apple has such a large marketing clout, they are able to set the prices.

So prices are so low, they can only be made using boarderline slave labor.

Two hundred years ago, it was understood that national borders were things that neither persons, nor goods, nor money, nor information should routinely cross. That understanding was correct and necessary, and must perforce be regained, after who knows what further unnecessary harm has been done.