Impact of "Restructuring 50,000 People"
In early March, when the Chinese New Year passed and the city regained its vibrancy, the "iPhone City" in China was singing with old birds.
Zhengzhou, Henan Province, which is said to "produce more than half of the world's iPhones" (Chinese media). Taiwan Hon Hai Precision Industry Group has a super-large factory. During the busy season when the number of migrant workers increases, the number of employees exceeds 400,000.
When I visited the shopping street around the factory, restaurants and supermarkets were forced to close one after another, and some of them were on Shutter Street. The man at the skewer shop grumbles in the shop where there are no customers. "If this situation continues, the store will collapse."
The cause is sluggish sales of the iPhone, which is represented by the new model launched last fall. The Zhengzhou factory was reported to have restructured 50,000 workers ahead of schedule.
The selling price of iPhone in China exceeds 10,000 yuan (about 170,000 yen) depending on the model. From the perspective of a typical Hon Hai factory worker, it is more than double the monthly salary. On the other hand, Chinese brands such as Huawei can be bought for thousands of yuan and have a full range of functions. It seems that the iPhone has become less attractive to Chinese consumers.
Early in the new year, the global stock market was hit by an "Apple shock." Apple in the US has revised its earnings forecast significantly downward due to sluggish iPhone sales in China. World stock prices have plummeted. "We believe the Chinese economy has been further affected by trade friction with the United States," said Tim Cook, CEO, in a statement, saying that the US-China friction was also a factor.
Since the 1990s, the evolution of technology such as the Internet has progressed, and multinational companies in developed countries have moved their manufacturing bases to emerging countries where wages are low, creating a global division of labor. Apple is a symbol of the benefits of this so-called "global value chain" supply network. It is extremely difficult to predict the impact of a trade war in an era of complex corporate "supply networks" around the world.
"Pay compensation!" Last November, Xiamen, Fujian Province, along the coast of China. When a maker of iPhone glass parts embarked on restructuring, more than 1,000 workers who had come to work went wild and threw a settee in the conference room. Local government officials rushed in to calm the situation, but dissatisfied people tried to occupy the airport near the factory.
After joining the WTO in 2001, China processed and commercialized imported raw materials, then built a trading system to export in large quantities, and became the world's second largest economy. It is one of the countries that have benefited most from free trade in the 21st century.
The Chinese government, which advocates "Made in China 2025," emphasizes cutting-edge fields such as next-generation information and communications. The shift from consumer goods made using cheap labor to advanced products is progressing, and we aim to join the ranks of "manufacturing powerhouses" by 2013. In late March, Prime Minister Li Keqiang addressed the world's political and business leaders at the International Economic Conference, arguing that "China advocates free trade and insists on fair trade." .. However, it is unlikely that China will change its trade practices, such as the preferential treatment of state-owned enterprises, and steer the rules of US-style free trade.
Affects factories in the disaster area
The "aftermath" of the Apple shock has been transmitted to various parts of Japan.
Akamae district in Miyako city, Iwate prefecture. At the time of the Great East Japan Earthquake, the factory of Hirose Electric's subsidiary, which stands on a hill near the sea, was flooded with tsunami.
The factory, which employs about 200 people, manufactures parts called "connectors" that connect the wiring of electronic devices such as smartphones, and the company is one of the world's leading manufacturers in this field. Fine parts with a length of several millimeters are sent to factories such as China, which are in charge of assembly, and are also incorporated in Apple products.
Nicknamed "Hirose of the World" in the local area, it is a major local company where several people get a job every year from the prefectural Miyako Technical High School, which is adjacent to the factory. In February of this year, Hirose Electric lowered its earnings forecast due to sluggish sales of products for smartphones and the slowdown of the Chinese economy due to the US-China trade friction.
According to a list of the top 200 suppliers released by Apple in March, there are about 800 factories that supply parts worldwide. China is the top with 380 bases, Japan is second with about 130 bases, and the supply sources such as the United States, Taiwan, South Korea, Israel, Norway, and Mexico are in 28 countries and regions around the world. With the sophistication of Chinese products, the number of bases in China is increasing.
Japan's suppliers also spread nationwide, from Hokkaido, Aomori, Akita, and Yamagata in the north to Kumamoto, Miyazaki, and Kagoshima in the south. If Trump spreads its tariff offensive, it could affect manufacturers scattered all over Japan.
More than 80% are parts from outside China, but when assembled, "Made in China"
This reality distorts the amount of trade deficit with China, which Trump considers problematic.
According to estimates by Shin Yu-chin, a professor at the National Graduate Institute for Policy Studies, the iPhone X, which sells for $ 999, costs about $ 409. Even if it is assembled in China, only about 15% of the parts are made in China. More than 80% of the parts are semiconductors and displays imported from Japan and South Korea. Even so, the finished product will be "made in China" as a whole, and if it is exported to the United States, it will be imported from China and will increase the trade deficit with China.
In addition, the remaining $ 590 worth of manufacturing costs is generated by intellectual property such as brands and software, but it does not appear in trade statistics. "President Trump doesn't like the trade deficit, but the United States actually makes a lot of money through intangible assets," he said.
According to a report by the Organization for Economic Co-operation and Development (OECD), the US deficit with China will be reduced by 40% when calculated based on which country was added value. The WTO and OECD point out that the world's manufacturing products today are "Made in the World."
[Read the next article] What is free trade in the first place, learning by seeing "God of baseball"?
