Tech can't quit China

Hey, this is Debby in Taipei. Stringent tech regulations and Covid Zero lockdowns are challenging tech’s ties to China. But first...Today’s [View in browser]( [Bloomberg]( Hey, this is Debby in Taipei. Stringent tech regulations and Covid Zero lockdowns are challenging tech’s ties to China. But first... Today’s must-reads: - CNN+ streaming service [will shut down]( after less than a month - Elon Musk has a mixed record as a [free speech champion]( - Sheryl Sandberg was accused of [using her influence to quash]( two negative stories about her former boyfriend, Activision chief Bobby Kotick Where will the supply chain go? In the beginning of the Trump administration, the U.S. president talked a lot about buying fewer Chinese imports. I have vivid memories of speaking with business leaders in China at the time: None of them thought anything would change. But one by one, U.S. companies began to [move]( at least some capacity out of the country due to new tariffs and security concerns. Now, under two U.S. presidents, a long string of businesses have slowly moved to unwind a decades-long trend of centralizing production in China. While Trump did not manage to convince many companies to reshore manufacturing to the U.S., places like India, Mexico, [Taiwan]( and [Vietnam]( have all benefited from the shift away from China to varying degrees. For example, Apple Inc.’s three major iPhone assemblers—Foxconn Technology Group, Pegatron Corp. and Wistron Corp.—have set up operations in India. Now, with many companies sustaining losses from Beijing regulation and facing unpredictable risks from China’s relentless pursuit of Covid Zero, there’s renewed energy in discussions about bulking up manufacturing capabilities elsewhere. Chief Executive Officer Cheng Ping of [Delta Electronics Inc](bbg://securities/2308%20TT%20Equity)., a key parts supplier to Apple and Tesla Inc., was unusually blunt earlier this week when commenting on the impact from widespread lockdowns in the eastern Chinese city of Suzhou, where his company operates factories. “We will continue to add more capacity outside of China in the long run to mitigate risks including tariffs and lockdown-induced disruptions,” Cheng told reporters in the northern Taiwanese city of Hsinchu on Tuesday. Foxconn is also acquiring 40 acres of land in Chennai in order to make products for India’s domestic market, according to a person familiar with the matter, confirming a [report]( in India’s Economic Times earlier this week. But it will be difficult, if not impossible, for any other country to replace China in the global supply chain given the sheer scale of its manufacturing power. Take Foxconn’s iPhone City campus in central China, which currently employs some 200,000 workers according to a recent [report]( in the official Henan Daily. A skilled labor pool of that size for a single employer would be hard to find anywhere else. A comprehensive ecosystem matters too. While Foxconn and its peers have deep pockets and can create a presence in a large number of markets, their smaller suppliers will struggle to follow them. That will make it challenging for gadget assemblers to build substantial capacity outside of the country. Flex Ltd.’s [struggle]( to make the Mac Pro in Texas serves as a classic cautionary tale. And not every country wants to create those ecosystems: Persistent labor issues [dogging]( major electronics makers may also lead other governments to think twice about whether subsidizing these companies’ presence at home is worth the trouble. Most important, though, even as manufacturers start to think again about insulating against future disruptions, for now centralizing everything in the world’s No. 2 economy remains the cheapest option. “China is still our biggest manufacturing base,” Delta’s Cheng said. He added that the company is planning to build a new facility in (where else?) central China. —[Debby Wu](mailto:dwu278@bloomberg.net) The big story Elon Musk has lined up the money to take over Twitter. On Thursday, the Tesla CEO said in a regulatory filing he had [secured commitments]( of $25.5 billion in debt financing from Morgan Stanley and other financial institutions, and he pledged to contribute an additional $21 billion of his own money. As he also [considers a tender offer](, Musk’s bid for the company is getting more serious. What else you need to know Former President Barack Obama warned that the way Americans communicate on social media networks has [weakened democracy](. The fate of Chinese ride-hailing giant Didi is in limbo as Beijing officials object to a [set of punishments]( proposed by the nation’s cybersecurity regulator. Roblox isn’t just for kids. The company is luring pro game developers to the platform (where they’re [competing with kids](). More people are [using Snap](. Follow Us More from Bloomberg Dig gadgets or video games? [Sign up for Power On]( to get Apple scoops, consumer tech news and more in your inbox on Sundays. [Sign up for Game On]( to go deep inside the video game business, delivered on Fridays. Why not try both? Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights.​​​​​​​ You received this message because you are subscribed to Bloomberg's Fully Charged newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](