June 5, 2025 • 19 mins
Tesla shares slumped 14% on Thursday as President Donald Trump proposed ending Elon Musk's government contracts and subsidies after his onetime adviser attacked the Republican's tax-policy bill. Musk also said he would end the use of SpaceX's Dragon spacecraft and called for Trump's impeachment. The Tesla move weighed on US benchmarks Thursday that had earlier risen as Trump and China's President Xi Jinping agreed to further trade talks. Trump said talks would begin shortly at a location to be determined as the countries aimed to resolve disputes over tariffs and rare earth minerals. We take a look at how markets are digesting the headlines with Robert Schein, Chief Investment Officer at Blanke Schein Wealth Management.
Plus - during President Trump's first term, he famously toured a Texas factory and claimed credit for bringing Apple Inc's production back to America. Except the plant had been running long before he took office. And it was an "unmitigated fiasco." Workers in China had to be flown in to help fix the mounting manufacturing issues encountered in the US heartland. We're joined by Bloomberg Opinion's Catherine Thorbecke, for a look whether a China exit is plausible for the iPhone maker amid tariff threats from Washington.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. Welcome to the Bloomberg
Daybreak Asia podcast. I'm Doug Chrisner. So the public feud
between Elon Musk and President Trump erupt it today and
it cost Musk thirty four billion dollars in net worth.
(00:23):
Also today, President Trump and Chinese President Chi chen Ping
agreed to further trade talks after a ninety minute phone
call and a big question, will Apple be able to
successfully relocate its supply chain outside of China. We'll check
in with Bloomberg opinion columnist Katherine Thorbeck, but we begin
this morning with a look at market action. Joining me
(00:43):
now is Robert Shine. He is the chief investment officer
at Blanky Shine Wealth Management. Robert is on the line
from Palm Desert, California. Good of you to make time
to chat with us. I want to begin with this
public feud between Elon Musk and President Trump. It seemed
to just explode today into threats and recriminations. It began
(01:04):
when Trump accused Musk of trying to tank the tax
bill because, in Trump's words, it eliminates electric vehicle credits
and that in turn is going to hurt Tesla's bottom line,
the stock was down quite a bit today. Tesla I
think was off about fourteen percent, but later in the
day the damage may have been greater because Trump proposed
ending Musk's government contracts and subsidies, and that's when Musk
(01:27):
shot back and said he was going to immediately decommission
the SpaceX Dragon spacecraft. So Robert, first question, is this
simply a distraction or do you believe this is a
worrisome sign.
Speaker 2 (01:40):
Well, quite honestly, at first I didn't think it would
escalate as quickly as it certainly did in real time.
That was I think shocking to everybody, and you know,
just watching and following along today's public and very you know,
very public political circus. My advice is, you know, the
(02:02):
Trump versus Musk. I believe there's only one person who
will able to be able to settle this right now,
and that, in my mind is the great Joe Rogan.
Joe's going to have to either sit them down in
a three hour face off in a podcast or put
them in a rink together because this this got escalated
very quickly and very you know, quite personal, and it
(02:27):
was sad to see. So hopefully we're going to turn
the corner on this.
Speaker 1 (02:30):
Do you believe this is going to have any impact
on what the Senate is doing right now with respect
to the tax bill the charge that Musk is making
that this simply blows out the deficit in a very
very harmful way.
Speaker 2 (02:43):
If you actually take a step back from what they're
saying and take out their personal jabs, they're both on
the same side. They both agree, I think this Senate. Also,
if you look at top senators, they were asked about
it later this afternoon, they are in a gree too.
There's a lot of spending, too much spending that needs
(03:04):
to be addressed. And let's quite frankly, this is sort
of the first round, the first week of what the
Senate is looking at. And everyone, and you know this,
everyone in Washington puts in their you know, their favorite
pet project and see if they could pass with nobody
being able to have time to read it and just
push the pass button. This shines a light squarely on
(03:27):
sort of a sobering moment and gets everyone attention to saying, hey, guys,
time out. We're all on the same page. There's too
much spending.
Speaker 1 (03:34):
Very interesting in terms of the way in which the
day began because President Trump on truth social discussed the
fact that he and President She had a phone call
and they agreed to further trade talks. Do you think
that's a positive sign or maybe there's a little bit
too much optimism being expressed by the President and we've
got a long, long road ahead in terms of this
(03:57):
trade war.
Speaker 2 (03:58):
Yeah, let's not over react based upon the distraction today
on social media between Trump and Elon Musk, simply because
we did inch closer to at least sitting down at
the table and a trade deal with China. I think
that would be extremely bullish for the market and healthy
(04:18):
to have a more normal relationship with China going forward
and with every partner around the world. I do believe
we're going to see a positive outcome and a measured
progress as a result. And I think this is a
great step forward, even though it's incremental.
Speaker 1 (04:35):
I'm wondering whether we have reached, not just from the
US side, but from the China side as well, a
threshold for pain that can no longer be ignored by
both sides, and it's in both parties' best interest to
find a resolution as quickly as possible.
Speaker 2 (04:51):
Yeah, both sides can self induce a recession to their economies.
And I don't think either one of them politically speak,
it's the smart thing to do or it's the right
thing to do. They just have to both put aside
their differences and sit down and start making some progress
for the people they all represent.
Speaker 1 (05:12):
So we've talked about two things that essentially put the
FED into a box. We've got the budget situation and
we've got the trade war. Talk to me about what
your expectations are for FED policy in the next couple
of months.
Speaker 2 (05:25):
I think it's going to be the next couple of
days and weeks, you know. The Federal Reserve, we do
believe they have the window of opportunity to start another
round of rate cuts, simply because I believe that the
macro data that we're going to see in the weeks
and months ahead will be showing a slower and a
(05:47):
cooling economy. Again, we see labor market in play, and
you know, jobs and wages are kind of, you know,
trending in the direction that the Federal Reserve needs. Obviously,
they're going to have to choose between inflation and jobs.
But at this moment, with all the uncertainty that we've seen,
and a lot of what the small business owners have
(06:07):
been doing, which is sitting on their hands. Everyone's waiting
for the tax bill, everyone's waiting to see the tariffs
and the shakeout from that. So I think there's going
to be some slowing in the economy that's going to
surface in the eco data that could give the Federal
Reserve in the next couple of months sort of the
opportunity to make a move.
Speaker 1 (06:27):
So we've sketched out some of the issues that markets
are grappling with right now. I'm curious, Robert, to get
your strategy of how to kind of play the terrain,
so to speak.
Speaker 2 (06:38):
Well, most important for anybody, stay focused and valuation and
discipline matter in markets like these. And let's be honest,
the earnings why markets are close to all time high
since April are the earnings are coming back and bouncing back,
if you will, and holding in there. In fact, we're
(06:58):
just seeing, you know, obviously, the concerns the markets about
inflation and tarras, and that has translated translated into the
analysts lowering their estimates for the second quarter this year
for US companies by way of four percent. Historically speaking,
we haven't seen something that large in the last five,
(07:21):
ten and fifteen years on average, they would lower estimates,
especially in the second quarter, by two point six percent.
That being said, earnings are hanging in there. The only
sector that didn't last quarter have a year over year
increase was industrials. Every other sector is improving by double
digit earnings, and even if we take out the mag seven,
(07:44):
we have growth in the US companies, So that could
be a positive for the markets. That's one of the
reasons why the markets are still hanging in there with
all of these distractions. So instead of the word of
the year uncertainty, I think the word of the year
is going to be resilslliency of the markets as well
as the economy. And if investors stay focused and keep
(08:06):
some cash on the sidelines, jump on some opportunities that
come their way. And trust me, we've already had plenty
of opportunity and for our clients, we put some money
to work and we're in great spot, so we're ready
to jump on that once again if there's more volatility.
Speaker 1 (08:20):
Well, to your point about valuations, we had Broadcom going
into the day to day trading at around thirty five
times projected earnings over the next twelve months. Then we
heard from the company after the bell and Broadcom gave
somewhat of a lackluster forecast for revenue in the current
quarter fifteen point eight billion. That's only about one hundred
(08:41):
million above expectation, but the stock got hit about four
and a half percent in late trading. So, especially when
you deal with some of these companies that trade in
the tech space semiconductors. Here, in the case of Broadcom,
valuation perhaps the most important criteria.
Speaker 2 (08:59):
Right, yeah, but Broadcom today closed out an all time high,
so they're you know, having them sell off based upon
you know, some a weak guide, and every management team,
whether you're in the chip sector or across the sp
five hundred, you're going to use this opportunity in your
conference call to use the word uncertainty ahead because that
(09:19):
gives you cover given if the economy starts, you know,
continuing to slow down and accelerate. But let's not forget
the AI spent for twenty twenty five, just in the
mag seven is two hundred and forty billion dollars. And
at this end of the day, Broadcom and Navidia are
in the chips, storage and power space, so they're squarely
(09:41):
focused on just executing. You know, I obviously the valuation
on Broadcom is a little bit rich right now, but
that was the anticipation of earnings. But if you just
be patient on some of these companies, let the market
bring you to a better valuation. Uh, there's still a
long term growth strategy and good companies to be investing in.
Speaker 1 (10:03):
Robert, we'll leave it there, Thank you so much. Enjoy
the weekend. Robert Chaine, chief investment officer at Blankie Shine
Wealth Management, joining on the line from Palm Desert, California
here on the Daybreak Asia Podcast. Welcome back to the
Daybreak Asia Podcast. I'm Doug Chrisner. So, last month, President
(10:27):
Trump threatened to slap tariffs on Apple over its reluctance
to bring manufacturing back to the US, and at the
same time, Trump was very critical of Apple's move to
create more iPhone production in India. Now we know the
President has placed smartphone production in the spotlight as part
of his global trade war and his vision to re
(10:49):
shore manufacturing back to the United States. But in the
case of Apple, is this really feasible, especially when you
consider the company's relationship with China. Let's take a close
to look with Bloomberg's Catherine Thorbeck, Bloomberg opinion columnist who
joins from Tokyo. The history of making iPhones in China,
I think goes back to around two thousand and nine,
(11:10):
and over that period, I would think that the relationship
between China and Apple has been tightly forged, and it's
not going to be easy for Apple to extricate itself
from this situation.
Speaker 3 (11:21):
Right, That's absolutely right, Doug. And we actually got even
more bad news for Apple and China this week. The
Financial Times actually reported that the rollout of Apple Intelligence,
these AI features for the iPhone was delayed even further
by regulators in Beijing. And that's this long awaited partnership
between Apple and Ali Baba and China to bring AI
features to the iPhone in that massive market for Apple,
(11:44):
and apparently regulators in Beijing are halting their approval of
this even further due to the trade war. And I think,
taking a step back, what's interesting here is that it's
not the US that's using this sort of crown jewel
of Silicon Valley as a chip in the trade war.
It's China. I think the reality is China has immense
leverage over Apple right now. And I actually wrote about
(12:05):
this new book called Apple and China by Patrick McGee
that very convincingly argues that Apple's biggest existential threat right
now is not Trump and is constant nagging about tariffs,
but Beijing and the hold and the sway that Beijing
has over Apple. And really, over the course of decades,
it's been Apple's been chasing sort of short term profits
by making really small decisions that have led to where
(12:27):
it is now, which is pretty much entirely relying on
China to produce its products.
Speaker 1 (12:31):
So when I read your column and you referred to
Apple and China, the Patrick McGee book, I thought of
Chipwar by Chris Miller and his history of the semiconductor industry,
first design and built in Silicon Valley, and then very
quickly moving production to Asia, first Hong Kong. I believe
Japan was involved there, along with South Korea and eventually Taiwan.
(12:54):
So what you begin to understand is the intricacy of
the supply chain, and I would imagine that Apple is
very very reliant.
Speaker 3 (13:02):
On that absolutely. I mean, at this point, Apple's you know,
all of its marquee products are pretty much entirely reliant
on suppliers in China, and I think, you know, with
Trump now, he's been very insistent on threatening all these
tariffs on Apple and asking them to move production back
to the US. I just don't think that's possible. And
(13:24):
for a number of reasons. You know, I think this
the supply chain ecosystem in China was built up sort
of as Beijing was playing the long game, So it
was built up over decades, and that's going to be very,
very hard to replicate in the US. But I also
think at this point, you know, Apple can't really move
away from China without irking and upsetting Beijing. So it
has to do so sort of very slowly so as
(13:45):
not to upset regulators in China. But also it can't
go too slow because then it, you know, will be
harder to inevitably get it done. So this book, which
is you know, a very gripping read on how we
sort of got here, but it sort of argues that
it basically argues that this technology transfer that was facilitated
by Apple through you know, setting up its supply chain
(14:09):
in China, actually made Apple one of the biggest corporate
the biggest corporate backer of President Chijin Pings Made in
China twenty twenty five plan, which was this really ambitious
goal to sever reliance on foreign technology, and Apple's upscilling
of workers in high tech manufacturing over the years have
actually given birth to these homegrown tech companies like Huawei.
Speaker 1 (14:28):
Here you right about how in the early days it
was Apple engineers from the United States that were going
to China to help train Chinese workers, and how that's
kind of turned around.
Speaker 3 (14:39):
Right, So I remember, I think we all remember during
President Trump's first term, he famously toured that Texas factory
and he claimed credit for bringing Apple production back to America.
Except some workers that were quoted in this book actually
called that plant an unmitigated fiasco, and they say that
workers in China had to be flown in to fi
(15:00):
all of the manufacturing issues that were really encountered in
the US heartland. And I thought that was a really
interesting anecdote sort of at the end of this book,
because up until then, the entire book was about how
Apple flew engineers from Coupertino to China to sort of
work with suppliers in Asia and build out these high
tech manufacturing ecosystems, and now the tables have it seems
(15:22):
like irreversibly turned.
Speaker 1 (15:24):
Yeah. The other thing that's very interesting. During the first
Trump trade war, I think Apple was put on notice
that it needed to diversify its supply chains, and the
company began to deepen its relationship with India. How does
that enter into this story, right?
Speaker 3 (15:39):
So, I think even more recently we've seen Apple try
to sort of move towards India and set up its
supply chain over there. But I think now that's going
to be very, very difficult for a number of reasons.
And one issue is that China does a really good
job of sort of suppressing labor issues. So, you know,
(16:01):
I think Apple suppliers in China were able to sort
of suppress any labor unrest and Beijing was able to
sort of quell any media reports of it. And there
was a Samsung plant that was set up in India
a couple of years ago, and I believe last year
there was a very big strike and that made international headlines,
and that kind of thing doesn't really happen in China.
You know, we saw during the COVID lockdowns at the
(16:23):
iPhone factory there that the protests were very very quickly
quashed in China, and so I think that that's going
to be hard to set up in India. And on
top of that, I mean, just like I said, they
built the supply chain ecosystem in China over the course
of decades, and so recreating that in India is going
to take about the same amount of time, if it's
even possible, and it's going to be very very expensive.
(16:44):
But at this point, you know, it's not just sort
of the first tier suppliers, but it's the second tier
suppliers and all the engineers, and just recreating that somewhere
else right now is a very very tall task for Apple,
and I think it's pretty much impossible in America.
Speaker 1 (16:59):
We know that Apple's manufacturing partner in China is Fox Cohn,
and the company that is known in China as han Hi,
its founder Terry Guo, is really to be credited with
building this organization into quite the powerhouse, and I would
imagine that's another thing that would be very very difficult
for Apple to walk away from.
Speaker 3 (17:20):
That's right, And so I think you know, we've all
heard of the sort of legendary partnership between Johnny Ive
the designer, and Steve Jobs, who really made the iPhone
such a unique product. But I think perhaps a more
revolutionary partnership was between Tim Cook and Terry Go who
really brought the iPhone to the masses and made it
so that it could be you know, manufactured at scale.
Speaker 1 (17:41):
And Terry Go.
Speaker 3 (17:42):
Was very very wise. You know, he was obsessed with
cutting costs.
Speaker 1 (17:46):
You know.
Speaker 3 (17:46):
One source in this book described him as worth two
billion dollars in nickels and dimes, and he would always
sort of dilute the hand soapen factories with water. So
he was very very frugal. But at the same time,
he recognized that working with Apple wasn't just about making profits.
It was sort of the tacit knowledge and the learning
that his team would would receive from the Apple engineers
that were flown over. So he understood that sort of
(18:09):
even losing money if it meant getting these Apple orders
was very very valuable, and I think sort of as
a result of that, he's sort of trained up this
whole army of engineers, these Fox cont engineers that really
have this sort of tacit knowledge that they can use
to make the iPhones, and now in China are sort
of being used to sort of launch some homegrown competitors
(18:31):
that are actually really a concern for Apple right now.
Speaker 1 (18:36):
So maybe Apple is making a small step because recently
Bloomberg News reported that the company is planning to source
more than nineteen billion chips from the US this year
as part of a plan to diversify its global supply chain,
maybe reduce its reliance on China a little bit and
give the Trump administration something that it's looking for. We'll
(18:57):
see whether that develops into a bigger story. Catherine, Thank
you so much. Bloomberg Opinion columnist Katherine Thorbeck joining from
Tokyo here on the Daybreak Asia podcast. Thanks for listening
to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets, finance,
(19:18):
and geopolitics in the Asia Pacific. You can find us
on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
else you listen. Join us again tomorrow for insight on
the market moves from Hong Kong to Singapore and Australia.
I'm Doug Chrisner, and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio news. Welcome to the Bloomberg
Daybreak Asia podcast. I'm Doug Chrisner. So the public feud
between Elon Musk and President Trump erupt it today and
it cost Musk thirty four billion dollars in net worth.
(00:23):
Also today, President Trump and Chinese President Chi chen Ping
agreed to further trade talks after a ninety minute phone
call and a big question, will Apple be able to
successfully relocate its supply chain outside of China. We'll check
in with Bloomberg opinion columnist Katherine Thorbeck, but we begin
this morning with a look at market action. Joining me
(00:43):
now is Robert Shine. He is the chief investment officer
at Blanky Shine Wealth Management. Robert is on the line
from Palm Desert, California. Good of you to make time
to chat with us. I want to begin with this
public feud between Elon Musk and President Trump. It seemed
to just explode today into threats and recriminations. It began
(01:04):
when Trump accused Musk of trying to tank the tax
bill because, in Trump's words, it eliminates electric vehicle credits
and that in turn is going to hurt Tesla's bottom line,
the stock was down quite a bit today. Tesla I
think was off about fourteen percent, but later in the
day the damage may have been greater because Trump proposed
ending Musk's government contracts and subsidies, and that's when Musk
(01:27):
shot back and said he was going to immediately decommission
the SpaceX Dragon spacecraft. So Robert, first question, is this
simply a distraction or do you believe this is a
worrisome sign.
Speaker 2 (01:40):
Well, quite honestly, at first I didn't think it would
escalate as quickly as it certainly did in real time.
That was I think shocking to everybody, and you know,
just watching and following along today's public and very you know,
very public political circus. My advice is, you know, the
(02:02):
Trump versus Musk. I believe there's only one person who
will able to be able to settle this right now,
and that, in my mind is the great Joe Rogan.
Joe's going to have to either sit them down in
a three hour face off in a podcast or put
them in a rink together because this this got escalated
very quickly and very you know, quite personal, and it
(02:27):
was sad to see. So hopefully we're going to turn
the corner on this.
Speaker 1 (02:30):
Do you believe this is going to have any impact
on what the Senate is doing right now with respect
to the tax bill the charge that Musk is making
that this simply blows out the deficit in a very
very harmful way.
Speaker 2 (02:43):
If you actually take a step back from what they're
saying and take out their personal jabs, they're both on
the same side. They both agree, I think this Senate. Also,
if you look at top senators, they were asked about
it later this afternoon, they are in a gree too.
There's a lot of spending, too much spending that needs
(03:04):
to be addressed. And let's quite frankly, this is sort
of the first round, the first week of what the
Senate is looking at. And everyone, and you know this,
everyone in Washington puts in their you know, their favorite
pet project and see if they could pass with nobody
being able to have time to read it and just
push the pass button. This shines a light squarely on
(03:27):
sort of a sobering moment and gets everyone attention to saying, hey, guys,
time out. We're all on the same page. There's too
much spending.
Speaker 1 (03:34):
Very interesting in terms of the way in which the
day began because President Trump on truth social discussed the
fact that he and President She had a phone call
and they agreed to further trade talks. Do you think
that's a positive sign or maybe there's a little bit
too much optimism being expressed by the President and we've
got a long, long road ahead in terms of this
(03:57):
trade war.
Speaker 2 (03:58):
Yeah, let's not over react based upon the distraction today
on social media between Trump and Elon Musk, simply because
we did inch closer to at least sitting down at
the table and a trade deal with China. I think
that would be extremely bullish for the market and healthy
(04:18):
to have a more normal relationship with China going forward
and with every partner around the world. I do believe
we're going to see a positive outcome and a measured
progress as a result. And I think this is a
great step forward, even though it's incremental.
Speaker 1 (04:35):
I'm wondering whether we have reached, not just from the
US side, but from the China side as well, a
threshold for pain that can no longer be ignored by
both sides, and it's in both parties' best interest to
find a resolution as quickly as possible.
Speaker 2 (04:51):
Yeah, both sides can self induce a recession to their economies.
And I don't think either one of them politically speak,
it's the smart thing to do or it's the right
thing to do. They just have to both put aside
their differences and sit down and start making some progress
for the people they all represent.
Speaker 1 (05:12):
So we've talked about two things that essentially put the
FED into a box. We've got the budget situation and
we've got the trade war. Talk to me about what
your expectations are for FED policy in the next couple
of months.
Speaker 2 (05:25):
I think it's going to be the next couple of
days and weeks, you know. The Federal Reserve, we do
believe they have the window of opportunity to start another
round of rate cuts, simply because I believe that the
macro data that we're going to see in the weeks
and months ahead will be showing a slower and a
(05:47):
cooling economy. Again, we see labor market in play, and
you know, jobs and wages are kind of, you know,
trending in the direction that the Federal Reserve needs. Obviously,
they're going to have to choose between inflation and jobs.
But at this moment, with all the uncertainty that we've seen,
and a lot of what the small business owners have
(06:07):
been doing, which is sitting on their hands. Everyone's waiting
for the tax bill, everyone's waiting to see the tariffs
and the shakeout from that. So I think there's going
to be some slowing in the economy that's going to
surface in the eco data that could give the Federal
Reserve in the next couple of months sort of the
opportunity to make a move.
Speaker 1 (06:27):
So we've sketched out some of the issues that markets
are grappling with right now. I'm curious, Robert, to get
your strategy of how to kind of play the terrain,
so to speak.
Speaker 2 (06:38):
Well, most important for anybody, stay focused and valuation and
discipline matter in markets like these. And let's be honest,
the earnings why markets are close to all time high
since April are the earnings are coming back and bouncing back,
if you will, and holding in there. In fact, we're
(06:58):
just seeing, you know, obviously, the concerns the markets about
inflation and tarras, and that has translated translated into the
analysts lowering their estimates for the second quarter this year
for US companies by way of four percent. Historically speaking,
we haven't seen something that large in the last five,
(07:21):
ten and fifteen years on average, they would lower estimates,
especially in the second quarter, by two point six percent.
That being said, earnings are hanging in there. The only
sector that didn't last quarter have a year over year
increase was industrials. Every other sector is improving by double
digit earnings, and even if we take out the mag seven,
(07:44):
we have growth in the US companies, So that could
be a positive for the markets. That's one of the
reasons why the markets are still hanging in there with
all of these distractions. So instead of the word of
the year uncertainty, I think the word of the year
is going to be resilslliency of the markets as well
as the economy. And if investors stay focused and keep
(08:06):
some cash on the sidelines, jump on some opportunities that
come their way. And trust me, we've already had plenty
of opportunity and for our clients, we put some money
to work and we're in great spot, so we're ready
to jump on that once again if there's more volatility.
Speaker 1 (08:20):
Well, to your point about valuations, we had Broadcom going
into the day to day trading at around thirty five
times projected earnings over the next twelve months. Then we
heard from the company after the bell and Broadcom gave
somewhat of a lackluster forecast for revenue in the current
quarter fifteen point eight billion. That's only about one hundred
(08:41):
million above expectation, but the stock got hit about four
and a half percent in late trading. So, especially when
you deal with some of these companies that trade in
the tech space semiconductors. Here, in the case of Broadcom,
valuation perhaps the most important criteria.
Speaker 2 (08:59):
Right, yeah, but Broadcom today closed out an all time high,
so they're you know, having them sell off based upon
you know, some a weak guide, and every management team,
whether you're in the chip sector or across the sp
five hundred, you're going to use this opportunity in your
conference call to use the word uncertainty ahead because that
(09:19):
gives you cover given if the economy starts, you know,
continuing to slow down and accelerate. But let's not forget
the AI spent for twenty twenty five, just in the
mag seven is two hundred and forty billion dollars. And
at this end of the day, Broadcom and Navidia are
in the chips, storage and power space, so they're squarely
(09:41):
focused on just executing. You know, I obviously the valuation
on Broadcom is a little bit rich right now, but
that was the anticipation of earnings. But if you just
be patient on some of these companies, let the market
bring you to a better valuation. Uh, there's still a
long term growth strategy and good companies to be investing in.
Speaker 1 (10:03):
Robert, we'll leave it there, Thank you so much. Enjoy
the weekend. Robert Chaine, chief investment officer at Blankie Shine
Wealth Management, joining on the line from Palm Desert, California
here on the Daybreak Asia Podcast. Welcome back to the
Daybreak Asia Podcast. I'm Doug Chrisner. So, last month, President
(10:27):
Trump threatened to slap tariffs on Apple over its reluctance
to bring manufacturing back to the US, and at the
same time, Trump was very critical of Apple's move to
create more iPhone production in India. Now we know the
President has placed smartphone production in the spotlight as part
of his global trade war and his vision to re
(10:49):
shore manufacturing back to the United States. But in the
case of Apple, is this really feasible, especially when you
consider the company's relationship with China. Let's take a close
to look with Bloomberg's Catherine Thorbeck, Bloomberg opinion columnist who
joins from Tokyo. The history of making iPhones in China,
I think goes back to around two thousand and nine,
(11:10):
and over that period, I would think that the relationship
between China and Apple has been tightly forged, and it's
not going to be easy for Apple to extricate itself
from this situation.
Speaker 3 (11:21):
Right, That's absolutely right, Doug. And we actually got even
more bad news for Apple and China this week. The
Financial Times actually reported that the rollout of Apple Intelligence,
these AI features for the iPhone was delayed even further
by regulators in Beijing. And that's this long awaited partnership
between Apple and Ali Baba and China to bring AI
features to the iPhone in that massive market for Apple,
(11:44):
and apparently regulators in Beijing are halting their approval of
this even further due to the trade war. And I think,
taking a step back, what's interesting here is that it's
not the US that's using this sort of crown jewel
of Silicon Valley as a chip in the trade war.
It's China. I think the reality is China has immense
leverage over Apple right now. And I actually wrote about
(12:05):
this new book called Apple and China by Patrick McGee
that very convincingly argues that Apple's biggest existential threat right
now is not Trump and is constant nagging about tariffs,
but Beijing and the hold and the sway that Beijing
has over Apple. And really, over the course of decades,
it's been Apple's been chasing sort of short term profits
by making really small decisions that have led to where
(12:27):
it is now, which is pretty much entirely relying on
China to produce its products.
Speaker 1 (12:31):
So when I read your column and you referred to
Apple and China, the Patrick McGee book, I thought of
Chipwar by Chris Miller and his history of the semiconductor industry,
first design and built in Silicon Valley, and then very
quickly moving production to Asia, first Hong Kong. I believe
Japan was involved there, along with South Korea and eventually Taiwan.
(12:54):
So what you begin to understand is the intricacy of
the supply chain, and I would imagine that Apple is
very very reliant.
Speaker 3 (13:02):
On that absolutely. I mean, at this point, Apple's you know,
all of its marquee products are pretty much entirely reliant
on suppliers in China, and I think, you know, with
Trump now, he's been very insistent on threatening all these
tariffs on Apple and asking them to move production back
to the US. I just don't think that's possible. And
(13:24):
for a number of reasons. You know, I think this
the supply chain ecosystem in China was built up sort
of as Beijing was playing the long game, So it
was built up over decades, and that's going to be very,
very hard to replicate in the US. But I also
think at this point, you know, Apple can't really move
away from China without irking and upsetting Beijing. So it
has to do so sort of very slowly so as
(13:45):
not to upset regulators in China. But also it can't
go too slow because then it, you know, will be
harder to inevitably get it done. So this book, which
is you know, a very gripping read on how we
sort of got here, but it sort of argues that
it basically argues that this technology transfer that was facilitated
by Apple through you know, setting up its supply chain
(14:09):
in China, actually made Apple one of the biggest corporate
the biggest corporate backer of President Chijin Pings Made in
China twenty twenty five plan, which was this really ambitious
goal to sever reliance on foreign technology, and Apple's upscilling
of workers in high tech manufacturing over the years have
actually given birth to these homegrown tech companies like Huawei.
Speaker 1 (14:28):
Here you right about how in the early days it
was Apple engineers from the United States that were going
to China to help train Chinese workers, and how that's
kind of turned around.
Speaker 3 (14:39):
Right, So I remember, I think we all remember during
President Trump's first term, he famously toured that Texas factory
and he claimed credit for bringing Apple production back to America.
Except some workers that were quoted in this book actually
called that plant an unmitigated fiasco, and they say that
workers in China had to be flown in to fi
(15:00):
all of the manufacturing issues that were really encountered in
the US heartland. And I thought that was a really
interesting anecdote sort of at the end of this book,
because up until then, the entire book was about how
Apple flew engineers from Coupertino to China to sort of
work with suppliers in Asia and build out these high
tech manufacturing ecosystems, and now the tables have it seems
(15:22):
like irreversibly turned.
Speaker 1 (15:24):
Yeah. The other thing that's very interesting. During the first
Trump trade war, I think Apple was put on notice
that it needed to diversify its supply chains, and the
company began to deepen its relationship with India. How does
that enter into this story, right?
Speaker 3 (15:39):
So, I think even more recently we've seen Apple try
to sort of move towards India and set up its
supply chain over there. But I think now that's going
to be very, very difficult for a number of reasons.
And one issue is that China does a really good
job of sort of suppressing labor issues. So, you know,
(16:01):
I think Apple suppliers in China were able to sort
of suppress any labor unrest and Beijing was able to
sort of quell any media reports of it. And there
was a Samsung plant that was set up in India
a couple of years ago, and I believe last year
there was a very big strike and that made international headlines,
and that kind of thing doesn't really happen in China.
You know, we saw during the COVID lockdowns at the
(16:23):
iPhone factory there that the protests were very very quickly
quashed in China, and so I think that that's going
to be hard to set up in India. And on
top of that, I mean, just like I said, they
built the supply chain ecosystem in China over the course
of decades, and so recreating that in India is going
to take about the same amount of time, if it's
even possible, and it's going to be very very expensive.
(16:44):
But at this point, you know, it's not just sort
of the first tier suppliers, but it's the second tier
suppliers and all the engineers, and just recreating that somewhere
else right now is a very very tall task for Apple,
and I think it's pretty much impossible in America.
Speaker 1 (16:59):
We know that Apple's manufacturing partner in China is Fox Cohn,
and the company that is known in China as han Hi,
its founder Terry Guo, is really to be credited with
building this organization into quite the powerhouse, and I would
imagine that's another thing that would be very very difficult
for Apple to walk away from.
Speaker 3 (17:20):
That's right, And so I think you know, we've all
heard of the sort of legendary partnership between Johnny Ive
the designer, and Steve Jobs, who really made the iPhone
such a unique product. But I think perhaps a more
revolutionary partnership was between Tim Cook and Terry Go who
really brought the iPhone to the masses and made it
so that it could be you know, manufactured at scale.
Speaker 1 (17:41):
And Terry Go.
Speaker 3 (17:42):
Was very very wise. You know, he was obsessed with
cutting costs.
Speaker 1 (17:46):
You know.
Speaker 3 (17:46):
One source in this book described him as worth two
billion dollars in nickels and dimes, and he would always
sort of dilute the hand soapen factories with water. So
he was very very frugal. But at the same time,
he recognized that working with Apple wasn't just about making profits.
It was sort of the tacit knowledge and the learning
that his team would would receive from the Apple engineers
that were flown over. So he understood that sort of
(18:09):
even losing money if it meant getting these Apple orders
was very very valuable, and I think sort of as
a result of that, he's sort of trained up this
whole army of engineers, these Fox cont engineers that really
have this sort of tacit knowledge that they can use
to make the iPhones, and now in China are sort
of being used to sort of launch some homegrown competitors
(18:31):
that are actually really a concern for Apple right now.
Speaker 1 (18:36):
So maybe Apple is making a small step because recently
Bloomberg News reported that the company is planning to source
more than nineteen billion chips from the US this year
as part of a plan to diversify its global supply chain,
maybe reduce its reliance on China a little bit and
give the Trump administration something that it's looking for. We'll
(18:57):
see whether that develops into a bigger story. Catherine, Thank
you so much. Bloomberg Opinion columnist Katherine Thorbeck joining from
Tokyo here on the Daybreak Asia podcast. Thanks for listening
to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets, finance,
(19:18):
and geopolitics in the Asia Pacific. You can find us
on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
else you listen. Join us again tomorrow for insight on
the market moves from Hong Kong to Singapore and Australia.
I'm Doug Chrisner, and this is Bloomberg
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