[Aurornis]

The top voted comments I see are all supportive so far.

There are a lot of comments asking why they don’t move manufacturing to Seattle. This theme is common among people who don’t understand how manufacturing works right now: They don’t realize that a product like this has many different parts from different places, down to the dozens of little SMT capacitors. You can’t just move the factory and avoid tariffs because the parts still come from other places.

[exmadscientist]

I don't think there's enough manufacturing capacity in Seattle to absorb this. There are plenty of CMs here but they're small and midsized, not the big boys. And they're not in the habit of running mostly empty.

[bigfatkitten]

And they’re not the sort of places where you get boards for consumer electronics made. They’re doing microwave/high frequency boards for companies like Boeing.

[exmadscientist]

They'll absolutely do consumer product assembly. It's short-run versus mass-production that's the real problem, most of them just aren't set up for high volume.

Board fab though, not so much. I don't think we have a PCB fab left in the area after losing Prototron. I'd be more sad about that, except that I don't think I ever had a single order with Prototron that actually went smoothly and came back correctly.

[wickedsight]

I also find it interesting that there's this apparent idea that the US needs companies to move manufacturing to the US to improve... Something.

The US is 9th in GDP per capita and has a historically low unemployment rate. I really don't understand what problem they're trying to fix here.

[AnthonyMouse]

> This theme is common among people who don’t understand how manufacturing works right now: They don’t realize that a product like this has many different parts from different places, down to the dozens of little SMT capacitors. You can’t just move the factory and avoid tariffs because the parts still come from other places.

This argument doesn't make a lot of sense.

Suppose your company only does final assembly. Then whatever the value add of final assembly is, that's how much of the tariffs you can avoid by moving your own factory. You can eliminate as much as comes from your own contribution to the cost of the product. Meanwhile the company that makes the capacitors can avoid the tariffs on their value add by moving the factory that makes the capacitors. The fact that these are two separate companies doesn't really change much. Each one can move the part that they do.

In fact, it actually helps. Suppose the capacitor company can't move for some reason, but the final assembly can. Well, then at least you can avoid the tariffs on final assembly instead of neither if they were both made by some conglomerate that refused to move either one. Not only that, suppose other companies make the capacitors in Japan as well as China, and then the company can do the final assembly in the US and avoid the tariffs on capacitors from China by buying the ones from Japan.

[lucianbr]

So moving one factory helps reduce the impact of tariffs on the final product from 145% to 135%, and to reduce it to zero you would have to move hundreds of factories, with tiny gains at each step.

I think the original argument makes a lot of sense, and yours does not. "Just move two hundred factories on a different continent" might as well be "just invent a time machine".

[AnthonyMouse]

> So moving one factory helps reduce the impact of tariffs on the final product from 145% to 135%, and to reduce it to zero you would have to move hundreds of factories, with tiny gains at each step.

This is ignoring two things. First, for the earlier components in the supply chain, it isn't a reduction from 145% to 135%. It's a reduction to 0%, because the inputs are fungible commodity raw materials made in dozens of different countries, so moving the factory removes the entire tariff for the company selling that input to some other company. Which is what the manufacturer (i.e. the component seller) cares about, and they're the one who would be moving the factory.

And second, the later stages of the supply chain tend to contribute the most value. Suppose you haven't moved the factory that makes the capacitors, but you move the factory that makes the phones. The phone costs $500 retail, how much of the contribution was the wholesale price of the capacitors? A dollar? 145% of <1% is tiny.

So you both have a large incentive to move the early stages, because the tariff you avoid is on ~100% of the selling price from the perspective of the company making it, and a large incentive to move the later stages, because the later stages are the largest share of the final price.

> "Just move two hundred factories on a different continent" might as well be "just invent a time machine".

Why is moving 200 factories harder than moving one factory, when there are also 200 companies and they each only have to move one factory?

[JumpCrisscross]

> can’t just move the factory and avoid tariffs because the parts still come from other places

Trump has already started blinking on the China tariffs. It would be madness to move operations in the midst of this chaos—you’d immediately be undercut by cheaper competition.

[hshdhdhj4444]

He’s already said they will reduce the tariffs on China. He insisted there will be some tariffs but 145% is too high and it will come down.

A company moving their production anywhere based on what the policy is right now would be foolish because the policy could change in the next 5 mins, but will almost certainly change within minutes if there are empty shelves.

[herbst]

In the same sense any company still operating in a environment like this and not moving their operation to a stable country is foolish to begin with

[teagoat]

Are you suggesting moving operations to the US with this comment? It's the US adding all the uncertainty and instability to this environment. Having your operation based in the US makes this worse. You still have tariffs being applied to most of the components you need to assemble your product. You're now subject to more laws and rules changing overnight without the ability to plan ahead for them. If you're a company selling this product worldwide, you now have 100% of your operations subject to uncertainty vs. say 30% that was destined for the US market to begin with.

[herbst]

Absolutely. To be fair I don't am in this situation (gladly) but I would assume the best way is to focus on other markets and wait this out.

[spuz]

This is why you won't hear many reports of companies paying these huge tariffs. Wyze is big enough to eat the high costs on some of their imports. Most companies will redirect their shipments to Europe and Africa and pause sales in the US until the situation becomes more stable.

[lurkshark]

In another reply Wyze said they too paused most of their shipments but decided to eat the cost of this one because it was for a commitment to a retailer.

[Timshel]

In a way it's worse since, you can't make plan to move if they become obsolete in 2 months but can you afford/survive waiting ...

[netsharc]

Hah, so Trump II is comparable to the start of the Covid pandemic: "we'll just have to hunker down and wait".

[rsynnott]

Oh, yeah, that is _very_ much how the markets are treating it. The idea that these tariffs might be _permanent_, is very much not priced in, at least not for the moment.

[SAI_Peregrinus]

Even if they are permanent it'll be smarter for many companies to move manufacturing out of the US rather than in. If they're permanent the retaliatory tariffs other countries instituted in response to US tariffs mean that it'll be cheaper to build outside the US if selling outside the US. And the market of "not the US" is much bigger than the US market, so investing in the not-US market is more likely to lead to growth than investing in the US market.

[netsharc]

I'm looking more at the amusing angle of "Sir, the markets are comparing your reign as president to the pandemic.".

[spaceman_2020]

This has been the most annoyingly infuriating part of the manufacturing conversation.

People simply don't understand the scale and complexity of modern supply chains. By one estimate, it will take $40T to move all of China's existing manufacturing capacity and supply chains to the US, and it will take 20+ years if you're really motivated.

People still think that order goes in and a factory makes the finished goods. In reality, individual parts can move across borders dozens of times before they're ready to be placed into a bigger product.

Heck, I remember reading that Ford cars built in Canada cross the Canada-US border 11 times before they're finished

[creer]

> By one estimate, it will take $40T to move all of China's existing manufacturing capacity and supply chains to the US, and it will take 20+ years if you're really motivated.

Which also simply cannot happen because even if the US don't want stuff manufactured in "China", the rest of the world does. So the US, with higher local costs, cannot reclaim the economy of scale that went into the current chinese supply chain. Seems to me, at best the US can split it: a high cost chain in the US, a low cost chain in the rest of the world. What the US MIGHT achieve (on a long time frame) is move most of the chinese part to other low cost countries. That was already well under way.

The US also don't have the available population to run these factories.