Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
This is a subject that has come up first in the comments with the @jameslileks post “Watching the CCP Press,” and which @iWe explored further by asking “whether one would trade with Nazi Germany.” We need additional information, indeed hard data, to even begin to look at the practicalities. Some here have mandated that we somehow absolutely cease trade with China. Others (and indeed most, I should think) would argue that an absolute embargo is both undesirable, and indeed impossible in any situation short of open warfare, but that we should certainly reevaluate what we are trading with China, and how we are doing so.
But to even have that discussion we need to know something of the extent of what we buy from China (and really, from everywhere else too), and how that really affects us, otherwise, should the absolutists be granted their immediate wish and all trade cease, the results may be distinctly unpleasant. I own and run a company that manufactures electronics, and so, at least as far as electronics go, I do have rather a lot of insight into what exactly comes out of China, and whether alternatives exist. I have done a Country of Origin query on the bills of materials (BOMs) for a couple of my products, and will detail those below, and what the implications are.
Product one has a total of 27 separate parts, with 16 unique component types (i.e., several are used multiple times).
- It uses 4 different resistor values, and a variable potentiometer (an adjustable resistor). The fixed resistors are made in Israel, the pot is made in Japan. There are substitutes made in Japan, China, Taiwan. Resistors are commodity parts.
- It uses a single capacitor, which is made in Japan. This is a specialized part, sole source.
- It uses 1 schottky diode and 1 zener diode. These are commodity parts, but 90% of these are now made in China, with the rest made in Taiwan.
- It uses a transorb made in Morocco (with dies made in Europe)
- It uses a single 8-bit microcontroller made by NXP (who bought out Freescale, who was spun out of the ruins of Motorola in the early 2000s) in Taiwan. This is a sole-source part.
- It uses a single power MOSFET. This is made in Malaysia, but the dies actually come from Europe.
- It uses several stamped and plated brass terminals. These are made in Pennsylvania.
- The circuit board is made in Illinois.
- The aluminum enclosure is made 20 minutes from my shop (and ask Alcoa where the metal came from).
- The adhesives holding it together are made in Cleveland, Ohio.
Product 2 has 42 different components, with 27 unique part numbers.
- It uses 3 different resistor values. The resistors are made in Israel (see above).
- It uses 4 different values of resistor arrays. The arrays are made in Japan.
- It has 1 tantalum capacitor, which is made in El Salvador (but others in this same series are made all over the place).
- It has 3 different ceramic capacitor types, which are made in Malaysia and China.
- It has a capacitor array which is made in Mexico.
- Same diodes as above.
- Same transorb as above.
- Transorb array also made in Morocco (with dies from Italy)
- All LEDs come from China (China has basically cornered the world market on LEDs).
- The microprocessor was assembled in the Philippines, and while I do not know for certain where the die came from, I’m guessing Europe.
- The OpAmp was assembled in Malaysia, but the die came from the USA.
- The regulator came from Mexico
- The power MOSFET came from China (sole source, no other options available)
- The connector came from Mexico
- The circuit board from India
- The plastic case from a local plastics shop
- The adhesives from Cleveland and New York
- The wiring harness assembly came from China (I could have gone domestic, but at 4x the cost, which for this type of product would price me out of the market).
Okay, this doesn’t look too bad, right? And we’re assembling this all here in Ohio too. But that is not the end of the story.
During the COVID wave’s first crash through China, a number of component manufacturers started putting out ECNs (engineering change notices) when they could not obtain needed materials or supplies from China. Most of the components listed above ship on what look like rolls of movie film, with the parts in tiny pockets on the miles of tape. There is always a clear-plastic cover tape running over the pockets to keep things in place too. The tape material ranges from paper to plastic. And these reels of parts themselves are shipped either singly or in stacks in cardboard sleeves and boxes. Turns out that Wuhan is one of China’s paper hubs, and they were making the cardboard that plants all over the region were using, and when then was unavailable then other sources had to be found in a hurry, and then (this being a high precision field) qualified. Delayed some parts shipments by weeks, or even months. Some of the plastics too came from China, though plastics (unlike forests of trees) are fungible and rather easily sourced.
Diodes are very old technology — they predate (and indeed made possible) the radio — so unwinding that from China is theoretically easily feasible, but economically senseless at the moment. Yes, you could adapt Intel’s state-of-the-art fabs here in the US to made diodes by the billions if you needed to (and do so quickly), but they have most of the world market on high-end computer CPUs, and it’s better that they continue to focus on those. Everything else on my list that comes from China? It’s either old-tech too, or (like the wiring harness) labor-intensive. No US or Mexican cable house could come close to China’s prices on those, and that harness’s cost is already is 50% of the product cost — going domestic would force me to raise prices to an uncompetitive level. Only other option there would be putting in my own harness shop, but that would require me to hire another 5 people, and/or make a capital equipment investment in highly automated cut-strip-terminate-insert equipment (well into the six figures) — I don’t make enough other wiring harnesses to ever pay for that.
Mind you, this is just a microcosm of worldwide manufacturing, and I did not even touch on the raw materials used in these parts (Conflict Minerals regulations mandate I trace those too, by the way), which come from all over the world. Tantalum, a material used in high-precision small capacitors, only comes from 2 major regions of the world: Russia and Congo. A lot of the world’s tungsten comes from China. Put simply, the further upstream you go in the supply chain, the murkier the origins get, and the more the sources cross paths back and forth with each other.
The Chinese government is tyrannical. The CCP is immoral. They are a strange and frightening blend of Maoism, Nazism, and Wilhelmine vainglory — a sort of horrific reincarnation colonial-era Europe with modern methods. Can we totally embargo them? Not anytime soon, and not if you insist on keeping your current standards of living and disposable income. China took over 20 years to get where it is in the world economy, and goods and services ebb and flow through there more than you might guess. Should we reconsider what we buy from China, what we sell to China, and how much control they have? Absolutely; you’d be amazed to learn what US companies are owned by Chinese fronts now. But before you attempt anything drastic, take some time to learn where the things you use and rely on every day actually come from — a total embargo now could leave you in the dark and stuck at home.
Trade is complex, and attempts to control it too heavily always are disasters.Published in