Are we over estimating Apple? When Apple shows up, hasn't China already become a global center for manufacturing?
Was it Apple that taught the pharmaceutical industry precurson industry?
The Chinese were learning from the Taiwanese who had learned from the US but also from the Japanese and Europeans. Remember TSMC was very closely affiliated with Philips and, of course, Chang came from TI, I believe.
It is very important to point out, Apple's important contribution, but, I believe, a mistake to over emphasize it.
Great pushback, and you're right that China's manufacturing rise was multi-sourced. Morris Chang from TI, TSMC's early Philips relationship, decades of Japanese and European knowledge transfer... all hugely important foundations.
True, one shouldn’t say Apple taught China to manufacture. The argument is more that Apple acted as an extraordinary accelerant. The scale, speed, and precision demands of the iPhone supply chain intensified capabilities across hundreds of firms simultaneously, and that density then spilled over into EVs, batteries, robotics, and more.
So: foundations laid by many, catalyzed by Apple. Both parts of the story matter.
Thanks for pushing on this, it's exactly the nuance worth getting right!
This is one of the best articulations of the mindset difference between Asia and the West I've read. You nailed it Howard!
As an Asian immigrant to the US, this piece hits close to home. The jingoism, the arrogance, the condescension coming from Washington right now, t's dismaying to watch. Your piece is a welcome counterbalance
The "patient money" framing resonates deeply, though I'd say it goes further. It's patient everything. Patient capital, patient labor, patient pride.
You build things your grandchildren will inherit. You take the apprenticeship. You endure the thin margins. Not because you're desperate ... because that's how mastery works. You learn, then you earn. The timeline isn't quarters. It's generations.
And the piece gets something else right that much of the Western narrative refuses to accept: nobody hid the playbook. Western companies walked in, taught everything, and called it a win because the margins looked great that quarter. China learned in plain sight. That's not theft. That's showing up to class while the other side celebrated graduation too early.
The demonization we see now isn't really about jobs or trade deficits. It's fear dressed up as outrage. It's the discomfort of watching someone you underestimated play a longer game—and win.
Two systems, two scorecards. Both got exactly what they optimized for.
I would like to relate to the topic of Sovereignty and National security.
Singapore gained independence in 1965 and is obsessed with building up a strong armed forces to defend its Sovereignty.
We were a colony of Britain for a long time until the ruthless Japanese army invaded and ruled us for several years.
After independence our founding fathers were well aware that we are surrounded by unfriendly neighbours waiting to pounce on us. We now have a respectable Singapore Armed Forces that is ready to punch above its weight. A poisonous RED Shrimp that warns all predators of the severe consequences if they dare attack.
In contrast EUROPE was protected by the U.S.A. through NATO alliance and never took efforts to build up a strong defence force.
Russia invasion of Ukraine is a wake up call and under US pressure every E.U. member states are now starting to build up that defence capability.
ISREAL military strength in defending its Sovereignty against the HAMAS terrorist organisation in Gaza , the HESBOLLAH terrorist in Lebanon , the HOUTHIS in South Yemen and the IRANIANS are a Stark warning to all that National Defence is your own responsibility and no one else.
CYBER SECURITY is the next threat to the world. How many more billions must we lose before we wake up and take defensive measures against media platforms ( Facebook / Instagram / Meta / Google etc ), state sponsored hackers , and greedy facilitators . Having the tough laws n punishment are a start to a safer world.
We pray for world peace and an end to hegemony practices.
Beautifully said, James. Singapore’s story really captures what “future readiness” looks like at the national level. There is an awareness of vulnerability turned into disciplined capability.
You’re so right: sovereignty today extends far beyond physical borders. The next frontier of national defense isn’t just about tanks or missiles, but cyber resilience, data integrity, and technological self-reliance.
I didn't make this connection earlier. But the same lesson applies to companies too. You can’t outsource your core capabilities and expect to stay secure.
Howard, this is a masterful articulation of the structural divergence between American and Chinese approaches to value creation. What strikes me most is the systemic nature of dependency: it’s not about intelligence or intent, but about the interplay of incentives over decades.
Apple and Tesla didn’t just transfer technology—they exported discipline, process, and ecosystem gravity. Meanwhile, the U.S. optimized for quarterly profit, leaving the foundational levers of supply vulnerable. Rare earths, batteries, semiconductors—the shocks aren’t surprises; they’re the predictable outcome of mismatched rulebooks.
The real lesson for leaders is clear: if you want resilience, you have to invest in the unglamorous muscles—the supply, the process, the patience—not just the headlines.
Thank you, Vidya. Beautifully said. It really was never about ideology but incentives. The U.S. chased speed, China built staying power. Over time, that shaped two different kinds of excellence. Very much like you said, real resilience lives in those unglamorous strengths.
"America consumes, China produces" has driven this trend for nearly half a century. Decoupling will mean the need for hard truths and hard resets. How did China reach this level of self sufficiency? It was dearly bought with the physical and mental health of the people who worked in mines and factories, yet if not for their toil, would China have seen the progress we see today? For the US to bring its supply chain home, it will have to cultivate, or force, a similar appetite for hardship in at least one generation of workers. And the problem of broken career ladders spans both shores. China's youth unemployment rate was 18% this year, to the US' 9%. Both shocking figures. I've heard anecdotally that career wise, it's very hard to find white collar employment over 40 in China too. Lots of issues that are universal due to oversupply of university graduates.
Beautifully put, Hwei Yi. China’s rise was indeed built on decades of relentless, often brutal, industrial discipline.
The question now is whether democracies can reindustrialize without that same social cost. Future readiness isn’t about repeating the past hardship, but reinventing what resilience looks like in a new era of long-term sustainability.
Yup! Otherwise we are training our future competitors against ourselves! And not allowing "our kids" to be selected to top MBA. I understand it might not be fair but in this foreseeable war we must be pragmatic and defend our interests and our values (freedom and democracy. Liberté, égalité et fraternité)
Excellent article, Howard. A handful of observations -
1. Should we infer the historic profits from "The Loop" are a direct capital fuel for the current US lead in AI? Does decoupling pose an immediate threat to America's future technological dominance?
2. The US has played a strategic role in non-profit-driven R&D (e.g., DARPA, Operation Warp Speed). Also, there is an intense profit-motive of China's own tech giants (like Tencent, Alibaba) and internal pressures to manage debt and deliver economic returns. Isn't there a hybrid of these two models on both sides?
3. Isn't the next loop already forming? The new loop is about AI-driven manufacturing and materials science. China, having mastered at-scale production, is perfectly positioned to apply its own AI development to that physical domain (e.g., AI-optimised factories), creating a new competitive advantage that the "asset-light" West maybe completely unprepared for.
Excellent reflections, George! You’re right. The Loop funded the AI boom. I didn't think of that earlier. But the profits American firms made from China became the capital base that now fuels the U.S. lead in AI and semiconductors. The same system that outsourced the hard parts is now financing its own decoupling.
Both sides mix profit and purpose, but the center of gravity differs. The U.S. runs market first and intervenes in crisis, while China runs state first and uses markets as tools. That difference in reflexes explains why one side moves faster when priorities shift.
And yes, the next loop is already forming. AI-driven manufacturing will blur the line between software and hardware. China’s edge is that its factories are the data. Every weld, defect, and sensor feeds its models. The West leads in algorithms; China owns the data environments.
The next decade will not be about chips or code alone. It will be about who can fuse AI into the physical world first. Awesome input again! Thanks!
Very well written. As I’m sure you’re aware, the US is pretty determined to reduce its dependency on China across the board and has a few weapons of its own to deploy.
Thanks, Saul. Yes, the U.S. is clearly shifting from efficiency to resilience. Export controls, subsidies, and friend-shoring are all part of that new toolkit. The CHIPS Act and IRA show how Washington is trying to bring key industries back home.
And yes, I’ve read Alex Campbell’s latest posts. He’s doing great work showing how industrial policy is changing on both sides of the Pacific. It’s a good reminder that this isn’t just an economic rivalry. It’s really a contest over how the modern world runs.
Indeed-the "war' is really about who gets to run the 21st century (or at least the first part, where we can at least the contours).
Regarding the pharma side (which I know a little about): there are really two axes to frame the issue: As you state China is the source of many of the generic drugs that account for 90% of prescriptions ("boring but critical" stuff). Second, China is now a source of innovation in its own right and there has been a steady stream of deals from China-US in the past 18 months or so. This undercuts US innovation and threatens US leadership in Biopharma. As a consequence several US VCs have paused investment in certain areas (and companies) due to the threat of Chinese-backed companies.
Excellent points, Saul. You’re absolutely right that pharma now runs on two tracks. On one hand, China anchors the global supply of generics and active ingredients, the boring but critical foundation of modern medicine. On the other, it’s becoming a genuine source of biotech innovation. The steady deal flow between U.S. and Chinese firms over the past year shows how fast that shift is happening.
You’re also right about the investment chill. Many U.S. VCs are holding back, worried that cross-ownership or joint R&D could bring future regulatory risks.
It’s an odd moment where decoupling and interdependence are happening at the same time. Very cool observation you gave. Thank you so much!
Brilliantly written. I have a close friend who was part of apples team in China and your narrative is exactly the same he used to tell me. China through deliberate action is in a league of its own. No one comes close in terms of supply chain ecosystems. Having said that, it has its own internal issues as well. Will be fascinating to see how this plays out.
Your friend's first hand account adds so much weight to the story. Thanks a lot for sharing. Yes, I totally agree with you, China has a host of issues it has to overcome too. This piece is really more of a critical American perspective... the other side, I didn't really explore at all. Sharp call out! Thanks again.
+1! When folks here in the US complain about low quality of "cheap Chinese stuff" they completely overlook the role of the corporate buyers from companies like Walmart in this. Chinese companies are perfectly capable of producing very high quality devices, parts, or clothing etc, but why would they when the main criterion of their US customer (again, the Walmarts of this world) is a low, low price, never mind finish and longevity? A focus on quality increases manufacturing costs, and if good quality is of no or low interest to the customer, producers adopt.
The added up observations are just getting better here! I mean I sort of think that is the way you described but having multiple readers pulling a collective picture here is really powerful. Thank you!
That’s a great story, Neil. It captures the mindset gap perfectly. I’ve heard so many versions of that same moment over the years.
One side obsesses over mastery and long-term capability. The other focuses on margin and speed. Multiply that across industries, and you get the power shift we see today.
Thanks for sharing such a vivid example. It says more than a spreadsheet ever could.
To appease the buyers with different mindsets, the manufacturer cultivated mastery and long-term capability which results in greater margin and speed... Although it took time, it now seems insurmountable.
Striking & insightful - thanks as always for your excellent analyses Howard!
OMG. Thanks again! It’s readers like you who keeps me going and trying!
Are we over estimating Apple? When Apple shows up, hasn't China already become a global center for manufacturing?
Was it Apple that taught the pharmaceutical industry precurson industry?
The Chinese were learning from the Taiwanese who had learned from the US but also from the Japanese and Europeans. Remember TSMC was very closely affiliated with Philips and, of course, Chang came from TI, I believe.
It is very important to point out, Apple's important contribution, but, I believe, a mistake to over emphasize it.
Great pushback, and you're right that China's manufacturing rise was multi-sourced. Morris Chang from TI, TSMC's early Philips relationship, decades of Japanese and European knowledge transfer... all hugely important foundations.
True, one shouldn’t say Apple taught China to manufacture. The argument is more that Apple acted as an extraordinary accelerant. The scale, speed, and precision demands of the iPhone supply chain intensified capabilities across hundreds of firms simultaneously, and that density then spilled over into EVs, batteries, robotics, and more.
So: foundations laid by many, catalyzed by Apple. Both parts of the story matter.
Thanks for pushing on this, it's exactly the nuance worth getting right!
This is one of the best articulations of the mindset difference between Asia and the West I've read. You nailed it Howard!
As an Asian immigrant to the US, this piece hits close to home. The jingoism, the arrogance, the condescension coming from Washington right now, t's dismaying to watch. Your piece is a welcome counterbalance
The "patient money" framing resonates deeply, though I'd say it goes further. It's patient everything. Patient capital, patient labor, patient pride.
You build things your grandchildren will inherit. You take the apprenticeship. You endure the thin margins. Not because you're desperate ... because that's how mastery works. You learn, then you earn. The timeline isn't quarters. It's generations.
And the piece gets something else right that much of the Western narrative refuses to accept: nobody hid the playbook. Western companies walked in, taught everything, and called it a win because the margins looked great that quarter. China learned in plain sight. That's not theft. That's showing up to class while the other side celebrated graduation too early.
The demonization we see now isn't really about jobs or trade deficits. It's fear dressed up as outrage. It's the discomfort of watching someone you underestimated play a longer game—and win.
Two systems, two scorecards. Both got exactly what they optimized for.
Thanks for writing this, Howard.
The rare earth chart is mindblowing.
An excellent article.
I would like to relate to the topic of Sovereignty and National security.
Singapore gained independence in 1965 and is obsessed with building up a strong armed forces to defend its Sovereignty.
We were a colony of Britain for a long time until the ruthless Japanese army invaded and ruled us for several years.
After independence our founding fathers were well aware that we are surrounded by unfriendly neighbours waiting to pounce on us. We now have a respectable Singapore Armed Forces that is ready to punch above its weight. A poisonous RED Shrimp that warns all predators of the severe consequences if they dare attack.
In contrast EUROPE was protected by the U.S.A. through NATO alliance and never took efforts to build up a strong defence force.
Russia invasion of Ukraine is a wake up call and under US pressure every E.U. member states are now starting to build up that defence capability.
ISREAL military strength in defending its Sovereignty against the HAMAS terrorist organisation in Gaza , the HESBOLLAH terrorist in Lebanon , the HOUTHIS in South Yemen and the IRANIANS are a Stark warning to all that National Defence is your own responsibility and no one else.
CYBER SECURITY is the next threat to the world. How many more billions must we lose before we wake up and take defensive measures against media platforms ( Facebook / Instagram / Meta / Google etc ), state sponsored hackers , and greedy facilitators . Having the tough laws n punishment are a start to a safer world.
We pray for world peace and an end to hegemony practices.
Beautifully said, James. Singapore’s story really captures what “future readiness” looks like at the national level. There is an awareness of vulnerability turned into disciplined capability.
You’re so right: sovereignty today extends far beyond physical borders. The next frontier of national defense isn’t just about tanks or missiles, but cyber resilience, data integrity, and technological self-reliance.
I didn't make this connection earlier. But the same lesson applies to companies too. You can’t outsource your core capabilities and expect to stay secure.
Thanks again!
Howard, this is a masterful articulation of the structural divergence between American and Chinese approaches to value creation. What strikes me most is the systemic nature of dependency: it’s not about intelligence or intent, but about the interplay of incentives over decades.
Apple and Tesla didn’t just transfer technology—they exported discipline, process, and ecosystem gravity. Meanwhile, the U.S. optimized for quarterly profit, leaving the foundational levers of supply vulnerable. Rare earths, batteries, semiconductors—the shocks aren’t surprises; they’re the predictable outcome of mismatched rulebooks.
The real lesson for leaders is clear: if you want resilience, you have to invest in the unglamorous muscles—the supply, the process, the patience—not just the headlines.
Thank you, Vidya. Beautifully said. It really was never about ideology but incentives. The U.S. chased speed, China built staying power. Over time, that shaped two different kinds of excellence. Very much like you said, real resilience lives in those unglamorous strengths.
"America consumes, China produces" has driven this trend for nearly half a century. Decoupling will mean the need for hard truths and hard resets. How did China reach this level of self sufficiency? It was dearly bought with the physical and mental health of the people who worked in mines and factories, yet if not for their toil, would China have seen the progress we see today? For the US to bring its supply chain home, it will have to cultivate, or force, a similar appetite for hardship in at least one generation of workers. And the problem of broken career ladders spans both shores. China's youth unemployment rate was 18% this year, to the US' 9%. Both shocking figures. I've heard anecdotally that career wise, it's very hard to find white collar employment over 40 in China too. Lots of issues that are universal due to oversupply of university graduates.
Beautifully put, Hwei Yi. China’s rise was indeed built on decades of relentless, often brutal, industrial discipline.
The question now is whether democracies can reindustrialize without that same social cost. Future readiness isn’t about repeating the past hardship, but reinventing what resilience looks like in a new era of long-term sustainability.
Very sharp observation.
Thank you for this interesting and wise article. I totally agree with you and I came to the same conclusion, even if with less sofistication.
I love INSEAD, and I owe them a lot, but don't you think business schools are doing the same? Aldo Sutter
Really appreciate that, Aldo. And you’re right! Business schools have also been shaped by the same forces of globalization.
The task now is to help leaders unlearn some of those old reflexes and build a new playbook for resilience. Sharp observation!
Yup! Otherwise we are training our future competitors against ourselves! And not allowing "our kids" to be selected to top MBA. I understand it might not be fair but in this foreseeable war we must be pragmatic and defend our interests and our values (freedom and democracy. Liberté, égalité et fraternité)
So true, Aldo. Openness made us stronger, but it also made us dependent. Now the challenge is to protect what matters without closing ourselves off.
That’s our biggest test of leadership today.
Wise words! Thank you for this interesting and pleasant exchange! Wish you all the best!
Happy to! Thanks again.
Excellent article, Howard. A handful of observations -
1. Should we infer the historic profits from "The Loop" are a direct capital fuel for the current US lead in AI? Does decoupling pose an immediate threat to America's future technological dominance?
2. The US has played a strategic role in non-profit-driven R&D (e.g., DARPA, Operation Warp Speed). Also, there is an intense profit-motive of China's own tech giants (like Tencent, Alibaba) and internal pressures to manage debt and deliver economic returns. Isn't there a hybrid of these two models on both sides?
3. Isn't the next loop already forming? The new loop is about AI-driven manufacturing and materials science. China, having mastered at-scale production, is perfectly positioned to apply its own AI development to that physical domain (e.g., AI-optimised factories), creating a new competitive advantage that the "asset-light" West maybe completely unprepared for.
What do you think?
Excellent reflections, George! You’re right. The Loop funded the AI boom. I didn't think of that earlier. But the profits American firms made from China became the capital base that now fuels the U.S. lead in AI and semiconductors. The same system that outsourced the hard parts is now financing its own decoupling.
Both sides mix profit and purpose, but the center of gravity differs. The U.S. runs market first and intervenes in crisis, while China runs state first and uses markets as tools. That difference in reflexes explains why one side moves faster when priorities shift.
And yes, the next loop is already forming. AI-driven manufacturing will blur the line between software and hardware. China’s edge is that its factories are the data. Every weld, defect, and sensor feeds its models. The West leads in algorithms; China owns the data environments.
The next decade will not be about chips or code alone. It will be about who can fuse AI into the physical world first. Awesome input again! Thanks!
Very well written. As I’m sure you’re aware, the US is pretty determined to reduce its dependency on China across the board and has a few weapons of its own to deploy.
Also have you read Alex Campbell’s latest posts?
Thanks, Saul. Yes, the U.S. is clearly shifting from efficiency to resilience. Export controls, subsidies, and friend-shoring are all part of that new toolkit. The CHIPS Act and IRA show how Washington is trying to bring key industries back home.
And yes, I’ve read Alex Campbell’s latest posts. He’s doing great work showing how industrial policy is changing on both sides of the Pacific. It’s a good reminder that this isn’t just an economic rivalry. It’s really a contest over how the modern world runs.
Thanks for the sharp reminder!
Indeed-the "war' is really about who gets to run the 21st century (or at least the first part, where we can at least the contours).
Regarding the pharma side (which I know a little about): there are really two axes to frame the issue: As you state China is the source of many of the generic drugs that account for 90% of prescriptions ("boring but critical" stuff). Second, China is now a source of innovation in its own right and there has been a steady stream of deals from China-US in the past 18 months or so. This undercuts US innovation and threatens US leadership in Biopharma. As a consequence several US VCs have paused investment in certain areas (and companies) due to the threat of Chinese-backed companies.
Excellent points, Saul. You’re absolutely right that pharma now runs on two tracks. On one hand, China anchors the global supply of generics and active ingredients, the boring but critical foundation of modern medicine. On the other, it’s becoming a genuine source of biotech innovation. The steady deal flow between U.S. and Chinese firms over the past year shows how fast that shift is happening.
You’re also right about the investment chill. Many U.S. VCs are holding back, worried that cross-ownership or joint R&D could bring future regulatory risks.
It’s an odd moment where decoupling and interdependence are happening at the same time. Very cool observation you gave. Thank you so much!
Brilliantly written. I have a close friend who was part of apples team in China and your narrative is exactly the same he used to tell me. China through deliberate action is in a league of its own. No one comes close in terms of supply chain ecosystems. Having said that, it has its own internal issues as well. Will be fascinating to see how this plays out.
Your friend's first hand account adds so much weight to the story. Thanks a lot for sharing. Yes, I totally agree with you, China has a host of issues it has to overcome too. This piece is really more of a critical American perspective... the other side, I didn't really explore at all. Sharp call out! Thanks again.
+1! When folks here in the US complain about low quality of "cheap Chinese stuff" they completely overlook the role of the corporate buyers from companies like Walmart in this. Chinese companies are perfectly capable of producing very high quality devices, parts, or clothing etc, but why would they when the main criterion of their US customer (again, the Walmarts of this world) is a low, low price, never mind finish and longevity? A focus on quality increases manufacturing costs, and if good quality is of no or low interest to the customer, producers adopt.
That’s interesting! Didn’t think of this at all earlier. So true! Thanks again.
The added up observations are just getting better here! I mean I sort of think that is the way you described but having multiple readers pulling a collective picture here is really powerful. Thank you!
That’s a great story, Neil. It captures the mindset gap perfectly. I’ve heard so many versions of that same moment over the years.
One side obsesses over mastery and long-term capability. The other focuses on margin and speed. Multiply that across industries, and you get the power shift we see today.
Thanks for sharing such a vivid example. It says more than a spreadsheet ever could.
To appease the buyers with different mindsets, the manufacturer cultivated mastery and long-term capability which results in greater margin and speed... Although it took time, it now seems insurmountable.