American Disruption, Tech’s Manufacturing History in Asia, The Power of Demand in an Uncertain Future

Ben and Andrew return to discuss Liberation Day whiplash, Apple’s history in China and tech’s history in Asia, and the various challenges inherent to the efforts to rejuvenate America’s industrial capacity. At the end: Ben recaps a visit to a Formula 1 race in Japan.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:04Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing?

• 0:16Ben Thompson?

  I can't decide if we timed this perfectly or terribly. We've gotten a lot of inbound inquiries. Where is Sharp Tech? We said we were going to miss last Thursday and Monday for reasons that we may get into later in the podcast, but here we are. And basically, you know, we're worlds the same as it was a week ago. So we're all good, right?

• 0:37Andrew Sharp?

  It was a very chill week across the board. I am leaving my Bloomberg terminal to talk to you for the next hour. I'll check back periodically throughout the pod. Yeah, a wild ride, you know? I'm excited to get into it. Any thoughts on the way in?

• 0:54Ben Thompson?

  Well, I mean, it's been, it's been, it's been an interesting week, to say the least. I wrote two articles. I put a little thing in my second article of the week, how I'm breaking some rules. Basically, I was on vacation last week and all of this news happens, these, these broad based tariffs. And I think one of the challenges with the Trump administration, this was certainly the case the first time around, it's the case the second time around, a good friend of ours is, you know, remarked continuously that his primary objection is the complete inability to like rest and be normal for like any extended period of time while Trump is president.

• 1:36Ben Thompson?

  And so that is certainly an impulse on one hand, like, well, you know, let's see what actually happens in the long run. On the other hand, there is a bit where the danger of crying wolf, of getting worked up so often is when something truly destructive happens, you want to sort of have it all in your, you want to have a full ammo pack to sort of respond. And so on Monday, again, I was, I was on vacation last week. I didn't get back until Monday afternoon, again, for good reasons, which we, which we may get into. I did feel compelled to write and I wrote an article that I didn't feel awesome about. And the longer it was up, the worse I felt. And I got some feedback from people saying, look,

• 2:19Ben Thompson?

  this is one of your weaker articles in a while, which didn't hurt it just because I already felt that way. And it was one, I guess another lesson that I I've temporarily forgot and needed to keep in mind is I need to not publish until I feel good and have to say what I want to say. And I felt better about what I wrote on Wednesday. It was a mulligan. I don't try to take them too often, but yeah, they're like, again, but here we are. Like I said, I, I, I try to resist the urge toward solipsism. Too much writing in general is just people like articulating their inner demons and feelings. And I'm like, that's not what stratechery is. Stratechery is not about me. But here I am.

• 3:01Andrew Sharp?

  Well, exactly. You had broken the seal on solipsism on Wednesday. You're keeping it going with this podcast, but you wrote that article on Wednesday. To answer your question at the top, I think it was perfect timing for a week long vacation because the story was changing every four or five hours for the last week or so. And so I don't know that we would have been able to say anything coherent that wasn't immediately outdated. And you wrote your article on Wednesday morning, and then low and behold, the story changed again midday Wednesday. So that's where we're going to begin. A note from President Trump on Truth Social at 118 Eastern Time.

• 3:42Ben Thompson?

  About four hours and 18 minutes after I posted. Yes.

• 3:44Andrew Sharp?

  Exactly. It was perfect. He wrote, based on the lack of respect that China has shown to the world's markets, I am hereby raising the tariff charged to China by the United States of America to 125% effective immediately.

• 4:01Ben Thompson?

  I mean, just an incredible opening clause there, but yes.

• 4:05Andrew Sharp?

  The lack of respect that China has shown to the world's markets.

• 4:08Ben Thompson?

  Yeah, I mean, definitely no other lack of respect being shown to markets this week.

• 4:12Andrew Sharp?

  A little bit of projection. That's no problem. At some point, hopefully in the near future, China will realize that. The days of ripping off the USA and other countries is no longer sustainable or acceptable. Conversely, and based on the fact that more than 75 countries have called representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to trade, trade barriers, tariffs, currency manipulation, and non-monetary tariffs, and that these countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States.

• 4:53Andrew Sharp?

  I have authorized a 90-day pause and substantially lowered reciprocal tariff during this period of 10%, also effective immediately. Thank you for your attention to this matter, which is how he's signing off a lot of his posts these days.

• 5:08Ben Thompson?

  It does amuse me every single time. It's a great catchphrase.

• 5:13Andrew Sharp?

  So, Trump, in a press conference later Wednesday afternoon, was asked whether the activity in the bond market spurred some of these changes and said, "I was watching the bond market. The bond market is very tricky. I was watching it. But if you look at it now, it's beautiful. The bond market right now is beautiful. I saw last night where people were getting a little queasy, and I can attest, I was one of the people getting a little queasy looking at Treasury charts on Tuesday night. You had to explain to me what a basis trade was, or the basis trade. All part of the fun."

• 5:49Ben Thompson?

  This is the Trump problem, right? Did you even know that a 10-year Treasury chart existed before, like, 48 hours ago?

• 5:57Andrew Sharp?

  I did, because I was aware it was a source of anxiety for members of the administration. But three months ago, the answer is no.

• 6:06Ben Thompson?

  Yeah, by and large, if the equity markets are in trouble, you would expect, sort of, people to be fleeing to bonds. Like, the safest investment in the world... Historically is US treasuries. And if people are going into the bond market, then the the interest rate should be dropping. Because you're bidding or you're buying bonds and and the what you're willing to pay is based on what those bonds are going to return. Well, if there's tremendous demand for bonds, then the interest rate that you have to offer to the person buying it has to be lower and lower. Or sorry, if there's tremendous demand, then you're not going to get a great interest rate on it because everyone wants it, right?

• 6:46Ben Thompson?

  And so the problem is that in this case, even though the equity markets were way down, bond prices were rising. And that is could be some combination of a large sovereign selling, which people were wondering if it was China. It could be, and maybe the most disturbingly, an expression of a lack of confidence in the US in that, what is this like?

• 7:09Andrew Sharp?

  Are they going to pay their debts?

• 7:10Ben Thompson?

  Repaid? Yeah. And then there's this basis trade, which is basically, it's a sort of a this hedge fund sort of arbitrage. Where you're buying long term bonds, but then shorting sort of them in the short term. And the problem with this is it's a way to just eke out little bits of profit. But those are subject to margin calls. They're subject to risk calculations. And the fact that this big spike sort of happened around midnight, when all these risk calculations are sort of run. And it looked, it very well could have been like a lot of automated selling based on these these sort of pre prescribed rules of when you have to get out of a trade or not. That is the that's the that's the unwinding of that trade.

• 7:55Ben Thompson?

  That was probably what was happening. But again, the problem with bonds is it's also like the most liquid market in the world.

• 8:00Andrew Sharp?

  Right.

• 8:01Ben Thompson?

  This is like cash, right? I think someone asked me, it might have been you, is like, what do we know of China selling? I was like, no, we don't. Like, do we know what cash is being exchanged in a drug deal on the southern border? No, it's cash. It's not tradable, right? That is kind of like what bonds are to the financial markets.

• 8:15Andrew Sharp?

  Right. Well, it would have been a big problem if a bunch of hedge funds had their basis trade blow up.

• 8:21Ben Thompson?

  Yeah, well, this is the problem with these huge moves in the stock market is stuff blows up. It that's just what happens. Right, like always, every time, of course, everyone has risk management, blah, blah, blah, blah, blah. The reality is, nothing is perfectly hedged. People don't expect drops of this magnitude in this short amount of time. And that's how these things tend to spiral is, is there's a big drop and then something blows up and then things go on and then, then, and then you're looking in the long run at a real freeze up somewhere in the system, having real credit issues. And yeah, it's basically move, large movements of ten year treasuries in particular are bad.

• 9:00Ben Thompson?

  Large movements in the wrong direction are very bad. So that is, it's always the best way at the end of the day to get anyone's attention.

• 9:07Andrew Sharp?

  Exactly. It got my attention on Tuesday night. I knew that the market had been struggling, but looking at the charts on Tuesday night, it was like, okay, so we could have some sort of Lehman moment here and I have no idea what happens next. And clearly it got President Trump's attention and the market rebounded on Wednesday. Given the updates after you publish your article, do you have any general thoughts on where we are now? And how this has played out at least as of Wednesday night at nine 30 Eastern time?

• 9:37Ben Thompson?

  No, and I think my article is still fine. It still stands up and, and my point and goal.

• 9:46Ben Thompson?

  Basically, my, the Monday article, the one I sort of regret, I don't, I stand behind what I wrote. It was just a poor article that would, that didn't really have an overarching theme and not a very good conclusion. My sort of point there was the frustration I had over the weekend was a lot of the, I sort of took it as a given. Yes, this is bad and I failed to articulate fully why this specific thing was bad. But I also felt a lot of the response was head in the sand. It's like, why can't we just keep things the way they were? And what I wanted to point out is the way things are is long-term problematic.

• 10:27Ben Thompson?

  The, the, the reality is, is the US is deeply dependent on another country that is a peer.

• 10:37Andrew Sharp?

  Not just a peer, an enemy at this point.

• 10:40Ben Thompson?

  Well, I mean, that's to be determined. I think I, I maybe, you know, I still have a streak of optimism that, you know, goes back to, I wanted to revisit my article last November, which I think holds up very well. That article I wrote back in November, number one, Worries about Trump killing the golden goose. Number two lays out why this is particularly bad for tech. The particularly big problem for tech is that Asia goes hand in hand with technology. Technology is software. I talk about zero marginal cost. All my talking by and large is about software. But that is enabled by this, this, this old principle that of you're making your compliments cheap or free. The things that you need for your product, if someone else is making them, ideally they're

• 11:24Ben Thompson?

  widely available, they're cheap, they're free. So if you're a Facebook, right? And you want to connect the whole world, it's really good for you if everyone in the world has a mobile phone. The mobile phone is a complement to Facebook. So Android, for example, is one of the greatest things that happened to Facebook because, because it dramatically drove down the price of phones, of, of high end smartphones such that there could be that many more people using these devices and then they could be on Facebook. That, that's a classic comment. And if you zoom out, this is tech as a whole, going back 40, 50, 60 years. The rise of Asia is about tech hardware, at least in a, in a, in a tech context.

• 12:08Andrew Sharp?

  Sure.

• 12:09Ben Thompson?

  And having an entire region of the world dedicated to producing your compliments, most of which are commodities and thus the price drives down to the marginal cost and competing with each other to make them more and better and scale out and all these sorts of things is an amazing thing for US tech. And, and for that to be threatened is bad for everyone. Even if you're a business SaaS provider, it's bad for you. And the mistake I made, the reason I, I circled back to this, as I mentioned, the optimism note is I was very worried about this in the light of Trump's election.

• 12:48Andrew Sharp?

  Well, and can I just say that I remember recording a podcast about that article you're referencing, A Chance to Build? And going into it, having read the title, I was like, this is going to be really optimistic and we'll see what America could build. And then Reading through section by section, it was like, man, Ben doesn't sound all that optimistic about any of this.

• 13:11Ben Thompson?

  So I mean, in retrospect, I should have just leaned on the pessimism, right?

• 13:14Andrew Sharp?

  Yeah.

• 13:14Ben Thompson?

  This is bad. Uh, the, I was trying to be optimistic. I want to be optimistic. I want to believe that, um, that America can figure this out. Like we, we put it on the tin. We are Americans. We want America to succeed. And so I wanted to end things on a positive note. What that actually did was obscure my warning and prediction. So I sort of like self sabotaged that one as well. And so, uh, is, is the, so this is why I, I really wanted to, so you go back to Monday. I wanted to make the point that, look, this is a bad idea, but the answer isn't to do nothing.

• 13:56Ben Thompson?

  There is something that needs to be done and the fact that nothing has been done is what has opened the playing field to someone to come in. Who doesn't really understand software, doesn't appreciate that an iPhone coming from China drives far more value to the US than it does to China. Right? Like China's, the value add of assembly is like six or $7 or something like that. That's counted in trade calculations as a $400 deficit or whatever it might be to China. Meanwhile, Apple's profit on that phone is like $500. So there, there, the, the problem with this over indexing on these trade deficit calculations.

• 14:36Ben Thompson?

  It's missing a huge part of the puzzle and that huge part of the puzzle is absolutely dominated by the US. And, and if you don't, if you're not cognizant of that, and if you're going to create a policy that is completely indexed on those specific goods numbers. You're going to, by definition, be suboptimal for all the parts that are positive in the US. Anyhow, that's why I came back Wednesday. I'm like, look, no, let's step back and walk through. And let's do it in a framework that I think is both correct and also resonates with the statutory audience.

• 15:14Ben Thompson?

  Why it is that a blanket assertion that this stuff can be made in the US not only isn't plausible, but also isn't desirable. And all those things do still hold.

• 15:29Ben Thompson?

  Today. And so, yeah, I'm fine with this. I'm very fine with this change. You know, particularly given, you know, I have money in the stock market. Who doesn't? But the, but I don't, I don't regret rewriting and putting that out there.

• 15:44Andrew Sharp?

  Okay. Well, let's start with what you wrote on Wednesday, and I want to start with a specific example you cited. You wrote, "Apple has probably done more than any other company to move China up the curve in terms of the ability to manufacture components, often to the detriment of suppliers in the US, Taiwan, South Korea, Japan, et cetera. From Apple's perspective, spending time and money to bring Chinese component suppliers online provides competition for its most important suppliers, giving them greater negotiating leverage. From the US's perspective, this means a host of technologies and capabilities downstream from the smartphone, which is to say nearly all electronics, including those with significant military applicability like drones, are being developed in China."

• 16:29Andrew Sharp?

  So I think that is an interesting place to start since China is still facing 125% tariffs here. With Apple, big picture, what does Apple look like in the 21st century if they never develop this supply chain in China?

• 16:45Ben Thompson?

  Well, one of the great ironies of Apple being so China-dependent and arguably more than any US company, the driver of Chinese technological development, is that Apple, more than any tech company, tried to be US-only. Like, they really did. Apple computers were made in the US. They had this big facility in Texas. And then Steve Jobs, when the Mac came out, like, he presided over this. I mean, like, so you think about Apple Park. Apple Park is this beautiful, like, spaceship of a headquarters. You talk to any Apple employee that works at Apple Park, they hate it.

• 17:28Ben Thompson?

  It's like, it's like not, they find it not ideal for the way that they work. It's great if you're executive walking around, you have beautiful views of greenery and you could check in on anyone. Not so great for sort of day to day, day to day operations.

• 17:41Andrew Sharp?

  Is it just too spread out?

• 17:43Ben Thompson?

  It's, well, I think it's also not big enough. So there's like too many people crammed in and it's all open, which isn't, you know, and it's just, every single Apple employee that I've talked to that works there hates it.

• 17:55Andrew Sharp?

  Looks better in keynotes than it is in practice. Good note for all of us.

• 17:58Ben Thompson?

  It's a great, great keynote stage. Yeah. This was the Fremont Mac factory that Steve Jobs built in the eighties. It was this beautiful, pristine futuristic factory, as advanced as it could be, super automated, real shades of when Tesla was building the Model three factory and they had all these problems because they tried to like over automate things. And Musk came back and said, yeah, we, we, we sort of need to be a progression and he gave this figured out. And, uh, and there's this really famous anecdote about Steve Jobs specifying a specific type of paint that actually ended up like screwing up a bunch of the machines or something along those lines.

• 18:39Ben Thompson?

  So, uh, what the, the core problem was though, was they built this factory to produce a whole bunch of Macs. And they didn't sell that many Macs. That's a big problem. This, by the way, is an important thing to keep in mind. If you overbuild capacity, you need to use that capacity. If you don't, it's this albatross around your neck. And so Apple had this Mac alba, factory albatross around their neck. Steve Jobs gets fired, the Mac doesn't sell very well. And, and the, the costs of it not selling well were dramatically amplified by the fact they had this factory to build way more Macs than they were actually selling. He goes to Next and does the same thing.

• 19:23Ben Thompson?

  Builds his, lets him build his beautiful manufacturing facility. The problem is Next was a startup. Like that basically all but bankrupted them trying to do all their own manufacturing. And you fast forward and Steve Jobs goes back to Apple and Apple at this point is a mess. They're on the verge of going bankrupt. They're what 60 days away or, or something along, along those lines. You have that wired cover, pray. Steve Jobs hires Tim Cook and. Over time, Apple wasn't the first into China or the first with Taiwanese suppliers, who were really the sort of the foundation of this. A lot of the PC industry had been going there. And why had it been going there in the PC industry?

• 20:04Ben Thompson?

  Well, you had this standardization of components that was happening around the Windows Intel Core. And for all the reasons we've talked about, right? You want to gain scale. It is in the interest of Windows to drive, we're going to support everything. Why? Because if we support everything, then everything can run Windows. And then we get a much greater return on our upfront investment. These themes we talk about come up again and again and are applicable to things like manufacturing. So you have this shift over time in all these components being made in Asia, particularly by these Taiwanese companies. And some was made in Taiwan, but the Taiwanese companies were also the first into China to build sort of the factories there.

• 20:47Ben Thompson?

  This is why Taiwan is such a ridiculously wealthy country. Like, and kind of a weird economy. You have all this money from building in China that is just like sitting in Taipei. And so Cook helped save the company, like this progress. And Apple had all these product lines, which Jobs famously shredded, but in collaboration with Cook, they had all this inventory that's sitting there. Inventory, you've paid money for the stuff and you haven't gotten money from customers yet. It like, it's just, it's, it's, and it's all diminishing in value on a daily basis. And so Tim Cook completely cleans up the supply line, supply chain, or sorry, the, the, this inventory problem.

• 21:30Ben Thompson?

  And they moved their manufacturing to China. They, they closed down their Texas facility. They had a large facility in Ireland that they dramatically slimmed down and basically made it to a tax haven. They did, but basically, this is, this was the shift that happened. And this was when it was just the Mac. This was even before the iPod came around. And

• 21:52Ben Thompson?

  What you could do is you could offload all this risk onto other companies in other countries. And then you could rationalize your supply chain so you and make sure you only bought what you could actually sell.

• 22:09Andrew Sharp?

  Right.

• 22:10Ben Thompson?

  And that's so obviously beneficial from a business perspective. We talk about this in the context of the cloud, right? It like to build up your own data center, which number one, you're not using all the servers. So that's just a waste, but then you get a big rush, big growth. You can't build a new data center fast enough to serve your new customers. The, the ability to scale up and down with an AWS or something like that is why you pay the big AWS bills. It's not really about saving money and like if you, if you measure on a one-to-one basis, you're, you can save money running your own hardware. Like the Basecamp guys have been doing this. They've shifted all their stuff to their own hardware and they keep tweeting about, wow, we save so much money by doing this. Well, that works.

• 22:50Ben Thompson?

  Basecamp has a pretty stable customer base. They know how large they are. They know what compute they need. Makes sense. More power to them. If you're an entity with, that's moving loads or you have scalability, like say you always scale up during certain buying seasons and you scale down at other times. This flexibility is worth a lot. And this is, that's what Apple got by going to China. They got this sort of flexibility and they could scale. And along with that scalability capability, you got things like we can come up with the idea of an iPod in February, when John Rubenstein goes to Japan and Toshiba shows him this new disk drive that no one wants to buy

• 23:33Ben Thompson?

  because it's, it's slow and, and not very big. And he's like, we could put a device around that. That could be an iPod. And eight months later, Apple can ship it. That is a function of having a supply chain that can do that. And this is a key thing that's different about manufacturing. Like we think about and worry about and bemoan the loss of manufact- US manufacturing. But a lot of the US manufacturing that existed previously was integrated with the product itself. It was a factory that made this specific thing. And in China now, it's much more flexible. Factories, here's another analogy. The other analogy I would draw is the Intel TSMC one, right?

• 24:16Ben Thompson?

  Intel, part of the challenges they had, or part of the opportunity they had, is they both designed the chip and manufactured the chip. What this meant was, in practice, is they could often change things in the design to accommodate the manufacturing, so they could reuse old equipment, say, for example, or they could work through a problem and you could fix it in, like in this case, fixing it in software is fixing it in the design of the chip to work around it. And you can push on the frontier the more pieces that you control. TSMC, on the other hand, was much more flexible and much more standardized. Here's the defined things that we can do. You can get these IP blocks, it became much more like Lego building.

• 24:59Ben Thompson?

  And you can put these pieces together, but on a one-to-one basis, the Intel chip would be more performant because it was like fully integrated, it's like maximize and pull out the potential of that. The problem with this is, because everyone ended up on TSMC, TSMC ended up with way more volume than Intel, which meant they had way more money, way more R&D, they could invest pushing further. This scalability and flexibility means you become a shelling point for everyone to pile in and basically collaborate on R&D. Everyone collaborates to push chip production forward by buying from TSMC. And then TSMC invests all this money to sort of push things forward. Intel is just serving just themselves.

• 25:39Andrew Sharp?

  And this was China as a whole, is TSMC, basically.

• 25:43Ben Thompson?

  Exactly, exactly. That's right. And so that's why you end up, you know, over time, this starts with scale, more scalable things. And so we're going to build the same motherboard for a gazillion people, or whatever it might be, and you add this standardization in PCs. But with this standardization, you got more and more sort of modularity in the system, so that today, if you're, say, a startup, You can call up China and there will be factories that can make you an order and get it to you in a matter of weeks because they've developed these these systems that are super flexible because they're meant to serve a whole bunch of people and so they're horizontally very scaled and and this is how manufacturing works today is you have the the sort of broad.

• 26:28Andrew Sharp?

  It's more of a client service business today than it was 50 years ago in the United States.

• 26:34Ben Thompson?

  That's right. That's right. Absolutely. To go back to the iPod, you could spin up the capability to make an iPod and actually ship it within eight to nine months and and you fast forward to the iPhone and you have famous stories of Apple. I can't remember which I think was the first iPhone. It was gonna be a plastic screen and they changed it to glass at like the last minute.

• 26:55Andrew Sharp?

  Yeah.

• 26:55Ben Thompson?

  And they did it and it's it's amazing that they did it and that capability is worth a lot. So is there the reality, the the true answer to this question is we can sit here and critique Apple and I have some criticisms of Apple in terms of their China dependence. But there's a good argument that Apple does not exist without China, that that they just go under in the late 90s because you needed to offload the risk of manufacturing to even do the turnaround that they did.

• 27:30Andrew Sharp?

  And it's interesting, until I started hosting this podcast and hosting Sharp China, I was under the impression that Apple in China was purely about exploiting a more favorable cost structure and cheaper labor. But everything you just laid out there, some of that was new to me, some of it was familiar, but there was also a great Financial Times article a couple of years ago. I can link it in the show notes, but I mean, like China, the the abilities that they had on the manufacturing side made certain technologies in the iPhone more viable and it's just the sort of thing that wouldn't have been able to be replicated in any other manufacturing market. And so it wasn't really just labor. There was manufacturing

• 28:15Andrew Sharp?

  and expertise that Apple spent billions of dollars investing in in China over the last 15 or 20 years. And so the symbiosis has been part of the story the whole way.

• 28:27Ben Thompson?

  You know, it's tricky like how to try to get to this point. It did start with, I mean, this in November, I talked about chips. And there's this, like, the reality is, is that connecting wires for a chip, which is how you did assembly, you had the chip and to connect it to the substrate, you actually had people in there with tweezers connecting wires. That's how chips used to be made. And I wax poetic about zero marginal costs and chips were the natural, it's called Silicon Valley, even though it's software now, because chips were the first zero marginal cost product. And that's always been a little bit of a lie. You had this marginal cost, which was the labor to actually connect all these little wires and to test all these chips.

• 29:11Ben Thompson?

  And the way that got shrunk down was absolutely by shipping it to Asia, where you had people that worked for 11 cents an hour, people in the US cost $2.25 an hour. People in the US wanted labor unions. Intel was voraciously anti-labor union. You know, all these ideas of we're going to make it up in volume and we have to be able to scale quickly up and down. There's real tension there with a labor, a union sort of parts-based system. And, you know, you think about a lot of union contracts that sort of lock in what is to be produced and when. It's that lack of flexibility that is actually completely anathema to these products and figuring out what works. And when it works, can you scale it super quickly?

• 29:55Ben Thompson?

  And can you make changes and all these sorts of pieces? So, you know, obviously, any labor question is going to be very controversial, but there were good, valid reasons that Intel was anti-union at that point. And you also had a, if you want to get really risque and dangerous, if you want to tiptoe into some cultural aspects. This is something that generally, Intel actually got a lot of traction in Hong Kong with Asian women who were just really good at these, would work long hours and would connect all these wires really well and really reliably with much higher yields than they were getting anywhere else. It wasn't just that it was cheaper, they also did it better. And That started it and meanwhile, the US was enabling this.

• 30:40Ben Thompson?

  They cut the tariffs that impacted this. They the laws were formulated to encourage this because you had Vietnam happening. You had South Korea a decade before that. There was a concern about communism in Asia, moving into these countries and giving them these economic opportunities was seen as a way to push back against that. And you know, you look at Hong Kong, you look at Singapore, you look, you look at Taiwan. That was, that was successful, but it's worth noting, this did start with the drive to save money.

• 31:13Ben Thompson?

  So I don't want to dismiss that.

• 31:15Andrew Sharp?

  Yeah, but it what's interesting is that it has evolved over the last 20 to 30 years and China and Chinese manufacturers have moved up the value chain themselves and become indispensable to Apple, at least historically.

• 31:29Ben Thompson?

  That's the disruption point, right? You, you had, you know, what is this, what is disruption? You have some sort of technological change that enables a new way of doing things. In this case, the technological change was you could fly across the ocean. You could make phone calls across the ocean and you had standardized shipping containers. Now the shipping containers didn't matter much for chips. Those, those are mostly flown in planes, given how small and valuable they are and the time that's important to them. But this technological change made this shift possible and you had this, this new market entrant, which was Asian manufacturing, competing on a different variable than the existing ones, which were bespoke, customized, tuned, local, all the things that came with, with

• 32:14Ben Thompson?

  local manufacturing. And what you had was this very classic story of the low end moving up and up and up this value chain until it sort of swamped what was there. And the reason it's worth observing this is

• 32:32Ben Thompson?

  We do need to make changes, but they need to be made with the awareness and humility that you don't just lift this entire ecosystem up and move it to the US.

• 32:44Andrew Sharp?

  Yeah.

• 32:44Ben Thompson?

  And, and if you don't get that, if you don't understand how we got where we are, and the sheer impossibility of going down. And it's not, it's not, it's not, the impossibility isn't Apple wanting to make more money. It's, it's like literally impossible. Like you and I are going to continually choose to sit here and podcast and not connect wires on an iPhone. Right? I mean, like now, we're, you know, and it was, oh, well, yeah, me, I'm, my job's important, but other people will go do that. Work your way all the way down. There, there's all the, the, these jokes online.

• 33:22Andrew Sharp?

  Skills as far as manufacturing is concerned, you couldn't flip a switch.

• 33:26Ben Thompson?

  Set aside the skills, right? Cause people will say, oh, there should have been more trained. There should have been all these sorts of things, all of which are true, by the way. I'm not dismissing those.

• 33:32Andrew Sharp?

  Yeah.

• 33:32Ben Thompson?

  I'm just saying on a fundamental economic level, no one in the US wants to do these jobs and for good reason. There's the like, this idea that you're going to be making iPhones in the US. You're going to have to get people to shift from jobs right now that are much higher paid. Okay. So Apple's going to have to pay way more. Okay. But then those people then are working in these factories. They're not doing these other jobs. So you've diminished your sort of capability otherwise. What are you going to do? Are you going to import a bunch of immigrants? I mean, that doesn't sound like President Trump's, uh, uh, I mean, that's one solution. I, I'm not sure that's amenable to the Trump administration. Uh, like there's, trade can be positive sum. Everyone can win.

• 34:14Ben Thompson?

  Saying everything has to be in the US is implicitly negative sum. Stuff that goes to manufacturing these iPhones in the US is stuff that's not going to something else.

• 34:23Andrew Sharp?

  Yeah, no, exactly. Um, and it's one of the reasons people are breathing a sigh of relief, at least to some degree. I don't want to get too excited because everything could change next week. Um, on Apple, because I want to come back to the re-industrialization point, uh, because I think that's. An interesting conversation in its own right with respect to China. But as far as Apple's uncertainty here, do you have any sense for how complicated this could be? I mean, there was a report that Apple plans to shift more iPhone production to India to avoid US tariffs on Chinese goods, which threatens $70 billion that China earns annually from Apple.

• 35:03Andrew Sharp?

  But I'm a, the future looks cloudiest for them and perhaps Tesla after this week.

• 35:10Ben Thompson?

  Yeah, I mean, Apple probably at, it's hard because

• 35:17Ben Thompson?

  on one hand, like this ecosystem sort of developed organically. On the other hand, Apple has also pushed this ecosystem forward, as I mentioned, right? Like, like, Apple, and you see this in any sort of supplier, you see this with TSMC. Like, let's use TSMC as an example again. One of the reasons why you have like the big five semiconductor manufacturers, and they used to be more specialized in what they did. Now they all kind of do everything.

• 35:45Andrew Sharp?

  Yep.

• 35:45Ben Thompson?

  And that's because TSMC continually sets them against each other. Because they don't want to have a single source supplier, right? D S B doesn't like the situation where they have to pay ASML a bunch of money because they're the ones that make EUV. So when it comes to etching, when it comes to mass making, when it comes to all these different pieces, they will say like, okay, we got this working with Lam Research, Toki Electronic. Why don't you get it to work too? Here's like, here's how you should do it. Here's X, Y, Z. They'll bring them up to speed. And then they go back to Lam Research like, yeah, Toki Electronic actually figured it out too, believe it or not. So, and they're willing to offer this price. How about you lower your price here, right? And again, this is just, this is the way TSMC is at the center of everything.

• 36:27Ben Thompson?

  They get to, you know, whoever is at the core of the value chain, they're the ones that get to sort of push their way around. This was sort of like Windows back in the day, right? Windows standardizing everything. It was, they loved it when everything was competing with each other because that meant there was more PCs, right? TSMC loves when their suppliers compete each other. This is what Apple does with the iPhone. They do it everywhere in the iPhone. I brought up this, just because this company I've always found interesting, Largan Precision. The makes the lens assemblies for the iPhone. And, you know, I think one of the more egregious sort of Apple bits, if you're sort of an Apple customer, was Largen Precision dominated lens assemblies. And they were this tremendously successful Taiwanese company that had huge profit margins.

• 37:10Ben Thompson?

  I pointed out years ago, like, they were worth almost as, or like, a fifth as much as Foxconn, despite the fact they made one component of the iPhone and Foxconn assembled the whole thing. Like, just to speak to how valuable this could be, Apple hates this. Like, every dollar that goes to Largen Precision.

• 37:24Andrew Sharp?

  For the love of God, we need an alternative, yeah.

• 37:27Ben Thompson?

  And so, Apple has been working for years to get an alternative Chinese supplier online here. There's lots of stuff that's not super cool here, but as I understand it, there was Largen Precision pushed forward to make a new seven lens assembly instead of six. And they had a committed partner in Huawei to buy it. The US kills Huawei's smartphone business. Suddenly, they're like, oh, no. They're like, well, Apple will buy it. Apple's like, you know what? We're getting really good at computational photography. We'll make six work, actually. And also, by the way, Sunny Optical in China has figured out how to make six lens assemblies. So, let's get some negotiation on price here. And of course, Apple was the one pushing Sunny Optical to be able to do that.

• 38:09Ben Thompson?

  Now, this is one where Apple, it's not the best example, because Apple did get burned. Sunny Optical had some real production problems. I don't know if this was combined to some of the issues they had with Face ID and stuff like that. This might be a different one. There was something that happened there, too, I think, with a supplier. But basically, Largen ended up coming back, and they still now do still dominate. But supposedly, Sunny Optical is going to be back this year in maybe some MacBook lenses or something like that. I don't know.

• 38:36Andrew Sharp?

  The key takeaway is that Apple has been investing in Chinese competitors to other companies around the world.

• 38:43Ben Thompson?

  Another well-known one is Yangtze Memory, where Apple basically funded all the R and D and provide, what was Apple? The reason for them to do this is Apple's a guaranteed buyer. And so, Yangtze on this super advanced DRAM that would have given Apple an alternative supplier to SK Hynix.

• 39:00Ben Thompson?

  And Micron and memory is the most expensive component in iPhone. It's very much in Apple's favor to have a Chinese memory supplier that's going to undercut these other suppliers. This was one where it got the US's attention. They're like, Apple, you'd better not buy memory from from Yance. And but the problem is all that R and D existed today. Yance is is is uh doing very well or they're starting to figure out HPM, high bandwidth memory, which is important for AI chips. They're they're supplying Huawei. This is downstream of Apple investment like Apple wasn't investing in high bandwidth memory specifically. They were investing in Yance generally, which which made them a much uh brought them up to speed as a competitor.

• 39:41Ben Thompson?

  And this is a very good example of how Apple wasn't doing anything anything wrong from a corporate perspective. But this was pretty damaging to you talk about things like chip controls, right? Like like like you talk about things like drones, all like all all these pieces of investing and pushing. And you can look, Apple puts out the supplier list for the iPhone every year and Chinese companies used to be a minority. Now they're a majority all by definition that is replacing Taiwanese companies. That's replacing Japanese companies, replacing German companies, right? And and Apple's doing it to because they have the power. One more point on this. Demand controls supply.

• 40:27Ben Thompson?

  Apple promises massive demand and can bring to bear money to support that because they control demand. This gets into my whole thing about Intel, about chips, about how the US, the way you spur innovation is not by shoveling money. It's by the carrot of demand, but by bringing to bear that aspect. That's the point of the article generally. The US, I there is an argument to remake trade for national security reasons, if nothing else. But you have to understand that it's not going back to the US. Formulate a sphere that you trust of influence and start directing things using

• 41:09Ben Thompson?

  demand and guaranteed buying. Like, like, the US does have demand and demand does control supply at the end of the day. The answer, the problem with these tariffs is it was demand destructive. It was destroying the US's capability, even as it was like an atomic bomb for, for, for China. So, so yes, changes need to be done. Not this change. Leverage your demand. Lean into it.

• 41:34Andrew Sharp?

  Right. Well, let's talk about US manufacturing because Alex wrote in and said, I live in Cleveland, where I drive past hollowed out warehouses and factories every day. I desperately want to see new factories and jobs flooding into the Rust Belt, but it's unclear how these policies do that. Half of US imports are used by US manufacturing. Those imports just got more expensive and they're going to translate to layoffs and reduced manufacturing output. How does shutting off US manufacturing from the global supply chain address our strategic problems with China? So you wrote about this on Wednesday. How are you thinking about

• 42:14Andrew Sharp?

  the problem that Alex highlights there? His email came in before the broad-based tariffs were paused for 90 days, but a lot of the manufacturing inputs come from China. So I don't think that that problem goes away all of a sudden. What do you think? How should that factor into the equation here?

• 42:34Ben Thompson?

  I mean, the problem with talking about this is you're sort of veering dangerously close to like centralized planning, right? It's like, we're gonna choose to control here and control there. But with that sort of out of the way, that acknowledgement out of the way, you realize and identify what inputs you have that are dependent on China. And you Put scheduled tariffs on those. These are going to be tariffed over time. This is, and the problem with that is a schedule needs credibility. And I'm not sure this week, this week did a lot

• 43:13Ben Thompson?

  to engender maybe fear of craziness. I'm not sure it did a lot to engender credibility. But at least sort of, so with that, you know, another acknowledgement out of the way.

• 43:24Andrew Sharp?

  Well, it's also frankly, a challenge of the US democratic system. Presidents change every four years. And so it's hard to develop coherent industrial strategy.

• 43:35Ben Thompson?

  Well, there's the whole question of are these tariffs even constitutional, right? They are revenue driving. That's supposed to be Congress's job. They're being done under an emergency act authorization.

• 43:43Andrew Sharp?

  Seems like a broadened exercise of authority from President Trump the last couple of weeks. But yeah.

• 43:50Ben Thompson?

  But I mean, it is kind of an emergency. We do have a national security problem, right? And so, yeah, that's a whole nother vein, which I'm not going to wade into about the constitutional questions. But yeah, what you do is you acknowledge, realize, identify, you start one channel to spur the creation of these capabilities in the US or in a trusted ally. There does seem to be an overarching, you look at the list of trade numbers, all the like, the 10% ones were like Anglosphere, the Americas, and like Middle East. Like, that's kind of a signal, I think, of what the US sees as its fear in the long run. And

• 44:32Ben Thompson?

  this is the power of demand. Is, so you're on the China side, you're like, okay, they have the scheduled tariff, they're going to keep buying this from us, but they're clearly trying to usurp us. And you know what they're going to do?

• 44:45Andrew Sharp?

  Keep selling.

• 44:45Ben Thompson?

  They're going to keep selling you the stuff, right?

• 44:47Andrew Sharp?

  They need customers.

• 44:48Ben Thompson?

  Think about like newspapers putting their stuff on Google or going on to Facebook, right? Like all the things that we talk about in the media. The power of an aggregator is you deliver so much demand that suppliers have to come to you on your terms, even though they hate it.

• 45:04Andrew Sharp?

  Yeah.

• 45:04Ben Thompson?

  Now, again, this isn't an aggregation story. The aggregation is very explicitly about zero marginal cost items. Manufactured items are not that. But the power of demand, this is hardly original to me. Like Keynes's whole thing was demand matters more than supply, right? Like the power of demand is.

• 45:21Ben Thompson?

  I think it's viable to actually have a structured plan that advertises the fact. The point of this plan is to diminish our reliance on China, which we have right now. So we're going to keep buying from China and buy parts from China to help us get away from China. And China is going to look at that and say, yeah, that really sucks. Well, guess we'll sell to you anyway, because we have to sell. We have the factories, we have the capability. We took, we rerouted our property bubble into export investments. Like, we have to keep selling.

• 45:51Andrew Sharp?

  So here's my question, though, because that seems to be in conflict with what you were laying out about binding China to the chips in Taiwan as a hedge against an invasion anytime soon.

• 46:06Ben Thompson?

  Yeah, the chips thing is, that's its own thing. That's the, uh, trump card, no pun intended, that China has. And it's like the most horrific trump card in the world because it entails-

• 46:18Andrew Sharp?

  But I just mean in terms of like having an existential urgency in order to get some of these industries off the ground, maybe what's required to move forward, because it's not all that attractive as an investment.

• 46:30Ben Thompson?

  Yes, but I, I think chips are special. Chips are so essential and we're so dependent on Taiwan that here you really do need, you know, you ideally you want to bind, look, the best thing for everyone, economically anyway, is that the system keeps, the reason why this is so hard is we have like a perfect system, right? Asia makes all this stuff, we make all this software, it, everyone gets rich, the US gets richest of all. Like, everything is amazing, except for the national security problem of us having total dependency on what I will call our peer and what you will call our enemy. And that's, that's the fly in the ointment.

• 47:11Andrew Sharp?

  Let's be a little bit more diplomatic, um, but yeah, I mean-

• 47:14Ben Thompson?

  I think that's implied in peer, right? It, it's not someone that we get to push around. Uh, and I think that, and I think it's an important, I think peer would be a big step for the US. Like, there, there's, there's a lot- There's a lot of thought and thinking of China as this, you know, upstart little brother. And they're not like they can make stuff that we can't. And a lot of that stuff has national security implications. And you look at things like AI. AI is going to be manifested in the real world through robotics. Almost everything that goes into robotics, China dominates in. Like, like it's not just that we're, we're challenged with what exists today. We're behind the eight ball when it comes to the future.

• 47:58Ben Thompson?

  And I think the way to solve that is to start out by admitting where we are. And when you admit where we are, that entails realizing that China has done tremendous things in these supply chains, has built up something that we can't just lift and take. It's actually a problem. And why this is going to require so much subtlety and long-term thinking, all of which is maybe a little fanciful to hope for. But look, I said at the end, cut China off. Pull up the ladder on chips. It's depressing to me. I thought we were Americans. I thought we could like have a can do attitude.

• 48:43Ben Thompson?

  We're going to go settle the frontier. We're going to innovate. We're going to build new things. We're going to grow our way out. We're going to, Elon Musk is going to waste his time trimming social security. What a waste. Elon Musk builds stuff. America builds stuff. Why aren't we trying to innovate and create new things and grow our way out of our problems? That's how we solve things in America. And so many of our solutions are all predicated on just cutting off, cutting off protection, building up walls. That's not who we are. That's not who we've been. And that's, I find it a bummer.

• 49:19Andrew Sharp?

  Yeah, well, I mean, obviously, there's the risk of an invasion with Taiwan, which severs all of the trade relationships that the US has with China. And it seems like some of these policies, if they remain in place, again, like Xi could call Trump Friday, and all of this could look different a week or two from now. I'm not sure it can be walked back at this point, but that is one risk. The other concern is that China has become so dominant in manufacturing that they're hollowing out industries all over the world. And that is part of what the US is trying to counter with the tariff regime here.

• 50:00Andrew Sharp?

  And obviously, blanket tariffs all over the world would not serve anybody. And I never took that seriously as like a long-term plan for the Trump administration, even though members of the Trump administration said that they were gonna do that.

• 50:14Ben Thompson?

  Yeah, I mean, a lot of what happened to the Trump tariffs in the late 2010s is all that manufacturing, like, why is Trump, why is Trump blocking Vietnam? Well, because Vietnam is full of factories where, you know...

• 50:26Andrew Sharp?

  It was a transshipment hub for the last couple of years.

• 50:29Ben Thompson?

  And to be clear, like, there's stuff happening there. They are adding value, but a lot of these components go to Vietnam, are then assembled, and then shipped on, and then now it's from Vietnam. And then part of this gets at the whole calculation problem. The value add in Vietnam is very low relative to the value of the device as a whole. But when an AirPods comes from Vietnam, that's what, $150 negative in the trade deficit? Even though Vietnam added, what, $10 worth of value? Maybe not even that much. A lot of that value is actually China. And so, yeah, blanket tariffs stop that, right? Like, everything's gonna be higher priced.

• 51:10Ben Thompson?

  But that is so damaging to the US, too, because the problem is, that doesn't actually shift... The real issue is the components. It's not the final assembly. Like, if everything, if final assembly is going to be tariffed everywhere, then just keep all the component manufacturing in China.

• 51:24Andrew Sharp?

  No, instead of to move it, right?

• 51:25Ben Thompson?

  Yeah, exactly.

• 51:26Andrew Sharp?

  But honestly, though, what I wonder... Is whether those reciprocal tariffs were a starting place for negotiation and then part of the negotiations that will take place with a country like Vietnam will include limiting relationships with Chinese exporters and limiting transshipment. And that's very difficult for a country like Vietnam to do because they have their own

• 51:50Ben Thompson?

  They have a border with China.

• 51:51Andrew Sharp?

  China. Yeah, exactly. And so I don't know whether the Trump administration could possibly execute on that sort of an idea. But I do think that that is becoming the plan now. Was it the plan last week? Who's to say? Uh, but they're attempting to ring fence China to some degree as part of a Cold War 2.0 scenario here. And I agree with you. It there, it's sad that that's where we are. But I don't think China is blameless for ending up where we are, given what they've been doing on the export side with beggar thy neighbor policies for the last several years. I mean, it's gotten worse since people have complained about it a couple of years ago.

• 52:31Ben Thompson?

  Yeah, to be clear, China is the biggest free rider of all time. Right? Like, I think a great example is, is the, these, uh, the, the Houthis, Houthis, uh, thing going on in the Red Sea. The ships going through there are ships going from China to Europe.

• 52:46Andrew Sharp?

  Right.

• 52:47Ben Thompson?

  Like, very little US trade even goes through there. Why are we the ones fixing this problem? Right? Now, the reason we are the ones is that was the deal. We're going to be the global police force and, uh, and you're going to buy all our treasuries to pay for it. Right? It, it, this is my Monday, like, China was just so large, it kind of screwed up the system. It doesn't make sense for a company of that size and capacity to, like, there is, the reason the US debt has exploded in conjunction with Chinese entering the system, that's not an accident. Yes, China has stopped buying as many US treasuries over the last 10 years. It's a liquid market, as we talked about. They're buying a lot of, all their assets from this trade asset has to go somewhere.

• 53:30Ben Thompson?

  And it's going into these markets for assets. And payments have to balance. That, that is the most important thing. And These deficits are all intertwined together. Trade deficits, country deficits, all these things are interconnected. And China for sure has freeloaded off the whole thing. Again, by our design, we, all these problems go back to the 90s.

• 53:55Andrew Sharp?

  By our design, but our design is no longer viable.

• 53:58Ben Thompson?

  It's not viable.

• 53:59Andrew Sharp?

  It's not sustainable. Yeah.

• 54:01Ben Thompson?

  Right. The problem is, again, it's really easy to diagnose a problem. It's way harder to fix it. And you can definitely fix the problem by blowing up the whole thing. That's what wars do, right? If you want to fix the global trading problem, let's trigger World War III. That will fix it. That's one way to do it. I personally don't endorse that. I don't, and, and one of the core things to your point about blanket tariffs is,

• 54:32Ben Thompson?

  is the goal to reshore all manufacturing? Or is it to limit our dependence on China? Those are distinct, separate goals that require distinct, separate strategies. I think the full onshoring is not viable. It's not possible. The US has moved too far up the value chain. They're not going to go back down. So now, if you did want to do that, blanket tariffs are a good idea. Because just make everything crazy expensive and force everything on.

• 55:01Andrew Sharp?

  Incur pain. Yeah.

• 55:02Ben Thompson?

  Right. But I think that's, I think that's a terrible idea.

• 55:06Andrew Sharp?

  And I honestly, I don't know how serious that idea ever was, just for the record. I think Peter Navarro wanted to do that. And I, at no point over the last seven days.

• 55:15Ben Thompson?

  Ron Barra, or whatever his name is?

• 55:16Andrew Sharp?

  I, well, yeah, there's all sorts of people who've been popping up on different cable news shows. At no point over the last week did I think that that was what would end up happening at the end of all this. I think there were always going to be negotiations. And the question is, what does the shape of those negotiations come to look like in the weeks and months to come here? And how explicit are they about targeting China as part of an economic war? And I guess we'll have to wait and see.

• 55:45Ben Thompson?

  Yeah, I guess we'll have to wait and see. I mean, again, this is where the Taiwan bit. This is why I've been obsessed about the chip thing for years. Like, I've been writing about this for seven, eight, nine, I wrote about Intel ages ago, but about the Taiwan issue specifically, I think I started in 2016, 2017, somewhere around there, because this is, this is the one big piece that we have a really big dependency that we don't have control and we need to get control of. At the end of the day, we can, with other countries, figure out a way to make most things. Chips are a really important thing that is on Taiwan, which China doesn't want to compromise on.

• 56:29Ben Thompson?

  And the other thing about a global trade war is, I'll go back to my chips piece. Why do I want China buying chips from Taiwan? Because that's an incentive not to,

• 56:40Andrew Sharp?

  Right.

• 56:41Ben Thompson?

  you know, invade Taiwan. Why, this is the other problem with trying to reform the global system.

• 56:48Ben Thompson?

  There's so many downsides to China being tied into the world economy. The big upside is it is in China's interest to not screw that up. And the more we remove China from the global economy and remove them from this system, the less they have to lose from blowing up the system. And that's just a, you know, I don't, maybe this is me, where's my American can-do attitude? Why am I just wanting to kick the can down the road?

• 57:19Ben Thompson?

  Roads can be longer than you think. Cans can go further than you think. And things can happen.

• 57:25Andrew Sharp?

  I mean, we had a friend that reached out.

• 57:27Ben Thompson?

  What's that gonna mean?

• 57:28Andrew Sharp?

  Yeah, we had a friend that reached out to me as the host of Sharp China. It was like, Sharp, do you think this makes it less likely that China goes to war with Taiwan because they're just economically devastated by all this? And I said, I mean, that's one read on it. But that's maybe too optimistic.

• 57:45Ben Thompson?

  China has a, one way to look at China's supply surplus is, They already have a wartime economy. They have a consumer market that is kind of in a quasi recession. It's not great. You add this massive excess of supply generation, which right now is being dumped on the world. One way to consume excess supply is to blow it up. Right? I mean, so like the war economies are not good. China's economy right now is not good. It's also like they're already like structured for this. It's not, it's not great.

• 58:20Andrew Sharp?

  Yeah, well, and also countries all over the world have been complaining about Chinese overcapacity. So the US is not the only country that has a problem with the current state of play in the global economy.

• 58:34Andrew Sharp?

  So I guess we'll see what happens. The market is back up and that's really, I guess, all that matters at this moment.

• 58:43Andrew Sharp?

  Well.

• 58:44Ben Thompson?

  No, it's the right statement because I think for the reality is for a lot of people, that's, that's true.

• 58:50Andrew Sharp?

  And all of this is so irrational. I mean, I, I want to be careful about assigning too much intent to the Trump administration. But you step back, they, I mean, Trump, what happened over the past week does follow his playbook to a T, where he sets out like some insane and unreasonable ask and convinces everybody that he's crazy. And then convinces everybody that he's making concessions and finally behaving reasonably as he imposes 125% tariffs on Chinese exports and a blanket 10% tariff. Ironically, it's a very Chinese way to negotiate here.

• 59:34Andrew Sharp?

  And then the market is like, oh my God, finally we can breathe a sigh of relief. Like if you had announced these policies two weeks ago, everybody loses their mind. But I guess for now, stability is here.

• 59:47Ben Thompson?

  Yeah, it is, it is true. Like the, the ball was moved and markets are, are mostly back.

• 59:55Andrew Sharp?

  And I don't have to spend all night checking the treasuries market, so I'll take that as well. Before we close, though, we did get this note from Greg. He said, "How nervous is Ben that Yuki is going to take the fight to Max and expose Max for the mediocre talent that he is?" So that's just a ridiculous question to ask.

• 1:00:19Ben Thompson?

  Also clearly written before this past weekend at Suzuka. So yes, I have a trip report, Andrew. I was at Suzuka over the weekend at the race, which obviously was on Sunday. I could not get back on Sunday. That's why I got back Monday afternoon. So there you go. There's the answer that we've been talking about. And I do have to say, lots of great Yuki merch. I got a great hat.

• 1:00:44Andrew Sharp?

  As host, can I just confirm to everybody Suzuka is an F1 circuit in Japan? And Ben attended three days of F1 with his family in Japan. I was insanely jealous the entire time. Take it from here as you give us your travelogue.

• 1:01:02Ben Thompson?

  Well, it was actually four days. So we did get, we stayed at Nagoya and did some, you know, went to Kyoto and did some things around Nagoya. Oh, there's this Toyota museum. That's the home of Toyota. There's this Toyota museum in Nagoya. There's actually two. There's one where you can actually see the assembly line. We didn't go to that one. That's outside the city. There's one inside the city that shows Toyota started as textile manufacturing. And it shows the development of all these machines over time, which is amazing. And then they do the same thing with cars, like not more, they more show modern processes. Like, and they have like actually like working machines there that, you know, they're not actually doing stuff, but they're moving around. And you could see it and you could see these robots like moving car pieces around and all these sorts of things.

• 1:01:48Ben Thompson?

  Awesome. Awesome museum. Like could not be more up my alley. Extremely highly recommended. So big, big thumbs up to that. But yeah, we actually had four days. So it's really hard to buy tickets in Japan. I've done it before. I think I did it like it was like a Taylor Swift concert ages ago. But like, Japan is just its own little world. It's like sometimes credit cards work, sometimes they don't. Everything's in Japanese, blah, blah, blah. So I did the lazy rich person thing. I bought from F1 Experience and. Because I got that, I also got a Thursday. So we're actually there four days.

• 1:02:25Andrew Sharp?

  I was wondering how you got the Thursday passes. Okay, so that was through F1. Okay.

• 1:02:31Ben Thompson?

  That was through F1. So on Thursday, so Suzuka is great. It's also not close to anything. It's like, it's an hour at best from downtown Nagoya. And then traffic can be insane, obviously, around the race. So it was a really tiring weekend, like just the driving back and forth.

• 1:02:53Andrew Sharp?

  Can I tell you, I had a lot of FOMO watching you and watching, seeing photos every day. And, you know, a couple of months ago, you told me you were going to this race and I thought about going. And then I did look up where exactly Suzuka is. And I was like, you know, it's gonna be a major pain in the ass, fly into Tokyo, take another flight and then get to Suzuka every day.

• 1:03:16Ben Thompson?

  Oh, take a train, but yes.

• 1:03:17Andrew Sharp?

  Well, I just didn't, I did not have the energy to do that. So I'm glad you did though. And it was a shorter trip for you.

• 1:03:24Ben Thompson?

  So Thursday, but so we just sort of got, again, I just wanted to get tickets to the race. But it came with things that actually ended up being incredible. Number one, we got to do like the truck ride around the track, which, I mean, it's amazing what you don't get from TV and like particularly like all the elevation changes and, and go, and then you watch it on TV later and you understand really deeply sort of like what's happening in different areas. I would love to do one of those truck rides around the track at every single track. I just am flying around the world. I just want to get the truck ride around the track because it adds so much to the viewing experience. Then we got to do a pit walk where you walked down, you saw them working on the cars. It's Thursday, they're not driving around.

• 1:04:07Ben Thompson?

  And I told, I warned my, you know, my daughter's gotten very into F1. I'm like, look, assume we're not going to see any drivers. Be pleasantly surprised if we did. We basically saw all the drivers. She actually got a selfie with Kimi Antonelli, which is in her age range, which is very concerning. You had like, you know, we saw, you know, Charles Leclerc, we were a foot away riding by on his bicycle. We drove on the tracks, Yuki on his bikes, George running. George Russell running on the track. We got a lot. We got to see a lot of drivers. It was super cool. Totally worth it. And also you got to like buy merch and all those sorts of things when there's no one there. It was, you know, because it's Thursday. So I was not, I'm like, okay, that's going to be too much. Not going to go on Friday. Well, everyone wanted to go on Friday. Uh, you know, just practice days. Uh, best day. Friday was so great.

• 1:04:51Andrew Sharp?

  Interesting.

• 1:04:53Ben Thompson?

  And so, so particularly the first practice was awesome. Uh, I was with my son and we sat at the intersection because Suzuka is a, is a figure eight track. And so we started out at that intersection of the bridge and the cars going under. And then we just slowly worked our way. You go under the track at some points and all these tunnels and things like that. Like we, we went to the hairpin, then went down, then walked all the way down. Uh, uh, 200R, which was my favorite corner. And there's a spot right in the middle where you see the car coming like right at you. And just the way they turn and then walked all the way down to Spoon and there's, there was a big pavilion there where you could eat and get things like that. That was amazing to just sort of like walk around during practice.

• 1:05:35Ben Thompson?

  We were going to do the other side during practice too. And there was like 47 grass fires. So that was a big, that was a big L. That was unfortunate, but anyhow.

• 1:05:44Andrew Sharp?

  Well, and the grass fires, again, for people who weren't watching, uh, that would just delay things for like 20 to 30 minutes.

• 1:05:51Ben Thompson?

  The clock keeps running too. So like, yeah, practice two was a total dud. That was unfortunate. Uh, day three, okay. So we go to day two. I'm like, okay, this is really good. We're going to go to the race on Sunday. This, this drive is so tough. I'm like, it's just qual, like we're going to be in the grandstand. The car's going to go by fast. We can watch qualify on TV. And my wife, uh, credit to her is like, no, we, I think we, we, we're going to go.

• 1:06:15Andrew Sharp?

  We're here. Let's do it.

• 1:06:16Ben Thompson?

  She did not go on Friday, to be fair. So we get there and Saturday is why you're a sports fan. It's why you go to live events. Yes, just sitting there. Well, number one, it was startling. How much faster, you were in the same seats, right? The same seats on Saturday. And you, we got there in time for morning practice and then qualifying. And so we're on the straightaway and when they turn the engine modes up on those cars, it's tangible how much faster they go. It's pretty crazy. But, uh, The moment when, so you see it, it's really down. Q1, Q2 are fine. Yuki's out in Q2 is very sad. Um, the, the crowd, crowd is very bummed, but then what happened in Q3 is Max Verstappen pulls

• 1:07:00Ben Thompson?

  out this insane lap and you know, wins pole by 0.1 seconds in a slower car and all these sorts of things. And the rush and the whole crowd just erupting, like pumping your fist, super loud. It's like that.

• 1:07:14Andrew Sharp?

  Was it a Red Bull friendly crowd? Like, is that the favorite team there because of Yuki?

• 1:07:19Ben Thompson?

  Oh, because of Honda. Uh, there, it's also the Honda team. Um, so yeah. So once Yuki was out, everyone was full bore for Max. And just that, you know, it's kind of an F1 thing, right? It comes down to tenths of a second. And that tenth of a second, Max flies by, time pops up top of the sheet. Just like, I'm feeling emotional right now articulating this. The rush, the joy. It was awesome. Like, that was worth the whole weekend. All, and it is a good thing because then our driver like went totally the wrong way going back and we were stuck in traffic for like three hours. And I had to like use the bathroom really badly and it was all worth it.

• 1:07:59Andrew Sharp?

  Ben was floating at that point. Yeah. Well, and to lay out the stakes of exactly what happened, Max is in a car that is not competitive with the McLarens on most weekends this year. And he was not expected to get pole at Suzuka. Um, and the timing and the sequencing of it, like watching at home, the McLarens took pole initially in the session. First it was Oscar, then it was Lando. And that looked like the end of it. And then Max comes in.

• 1:08:31Ben Thompson?

  In the stands, you saw them winding up and Max was one of the last cars.

• 1:08:34Andrew Sharp?

  Exactly. He was the last one of the, of the actual contenders to cross the line. And he comes up with one of the best single laps that I've seen on TV for a really long time. Um, and it was you as the Max diehard. Um, I was happy that you were sitting in the stands. To watch that and then he handled his business on Sunday spoiler.

• 1:09:01Ben Thompson?

  One of the most boring races. My wife's like, this is it. I'm like, look, this was a pretty bad one. I have to admit. No one changed order.

• 1:09:10Andrew Sharp?

  Apologizing on behalf of the sport.

• 1:09:12Ben Thompson?

  Yeah, Max is up by 1.2 and 1.3 seconds every single lap of the race.

• 1:09:17Andrew Sharp?

  Yep.

• 1:09:19Ben Thompson?

  Sunday was pretty boring. Not gonna lie. We did get a nice view of, of, of the, the trophy presentation and things on those lines. I bought these specific tickets because I was worried about like my wife's coming and it rains on her. I'm going to be really in big trouble. So I have to get seats that have it covered. So, uh, so yeah, Sunday was, Sunday was pretty boring. Um, my, so I do have some broader F1 takeaways.

• 1:09:44Andrew Sharp?

  Okay.

• 1:09:44Ben Thompson?

  I would say, so this was so much better than Vegas. It was ridiculous. And I would say I can actually now more appreciate the value of sprint races. For city tracks. If you can't walk around, you're just going to sit in your seat. Sure. Do something that's more exciting. Like that, you know, like have, have some stakes because that can make it more interesting. If you're at a real track, practice is the best. The idea of not having to really pay attention, but be able to walk everywhere. And like now I really want to go to Austin to, to, to Circuit of the American, which you can do a similar thing on practice days. Don't make me pay attention. Yeah. I want to be there, see the cars going around, walk all over, get a sense of the track.

• 1:10:28Ben Thompson?

  Like that is amazing. So my broader F1 takeaway is I'm more in favor of sprints at road tracks, uh, city tracks. And never, there should never be a sprint race at a real track because the, the whole experience is to get there is to walk around. Like you're always, you're watching on TV anyway, right? They have big TVs there. Definitely get the radio thing. I got one from American Express. Thank you, American Express. They're handing them out to cardholders. Like, like listen to the English commentary.

• 1:10:54Andrew Sharp?

  It enhanced the qualifying session, right?

• 1:10:57Ben Thompson?

  Well, it did because it, it sounds like the, I did watch back like, like crafty and Sky were not paying very much attention to Sky, to, to Max. The F1 channel, which is what I had the radio of was very onto like, like Max is looking pretty good. He's like, this is like, he could do this.

• 1:11:12Andrew Sharp?

  He's got a shot.

• 1:11:13Ben Thompson?

  Yeah. You had a sense that, that it was coming. Um, so yeah, that, that, that's my, that's my overall takeaway. I. Also don't really have any desire to do that again. It was really tiring, that long drive every day. The problem is the best tracks are all out of the way in the middle of nowhere because it's six kilometers long. Like you have to like, you have to stick it somewhere. So yeah, but it was good. I'm glad I did it. Don't plan on doing it again. And that split second on Saturday is.

• 1:11:42Andrew Sharp?

  Wait a second, don't plan on doing it again ever?

• 1:11:44Ben Thompson?

  No, Suzuka.

• 1:11:45Andrew Sharp?

  Suzuka, okay, yeah, yeah. Yeah, they pull, you know, 23 other races on the calendar for you to check out.

• 1:11:51Ben Thompson?

  And I don't think I would, I don't think I want to go to, to any like city, any city tracks. I want to the real racetracks where you can walk around. That's where the cool stuff is.

• 1:12:00Andrew Sharp?

  Well, the one thought I have before we close out. It is really interesting to me that F1 has its own sort of business line. Basically bringing people inside the pit lane like over and over again throughout a weekend and charging for it. And to be clear, it's not cheap. But it's like if, if the NBA was selling tickets and allowed you to go walk in the locker room hallways. You don't, you don't actually like go in the garages, but you're right there.

• 1:12:30Ben Thompson?

  There's much more expensive packages that lets you like into the paddock and, and like, it's all like selling access. Like we were, this was definitely way too expensive, but also very plebe level, just to preserve some degree of like common madness here.

• 1:12:47Andrew Sharp?

  Yeah, no, there's some access.

• 1:12:48Ben Thompson?

  There was the truck rides. Yeah, on Friday, there were truck rides between practices that for the more expensive peoples. They have to go on Thursday. We had to go on Thursday because we were, we had, we had the low end package. So.

• 1:12:59Andrew Sharp?

  But it is, I mean, talk about the value of experiences. They've turned that into a pretty robust business over the last several years. And they certainly charged through the nose in America for Miami and Las Vegas and Austin. As far as F1 experiences is concerned. But Ben, perhaps we'll have to experience Austin together sometime soon. You can walk around down there.

• 1:13:22Ben Thompson?

  It's on the list for, yeah, because that's the one, that my impression of Austin, that's kind of like the US Suzuka in many respects. In that you get, number one, it's a super highly regarded racetrack. Number two, it's kind of a pain to get to, but number three. The reason why it's so great as a fan experience is the just go there, wander around, sort of like go wherever you want, sort of bit, which is definitely, definitely the best part.

• 1:13:49Andrew Sharp?

  Yeah, we'll need VIP passes. I'm not going to wait all day to get up in that tower, but I am gonna make it into that tower, one way or another. That's my goal. For now, we will be back on Monday and discussing the state of the world and also discussing some more traditional tech topics, I would assume. We have a lot of emails to work through in the weeks to come here, Ben. But it's good to see you. It's good to be back and enjoy the weekend. We'll keep it rolling next week.

• 1:14:18Ben Thompson?

  Sounds good. Talk to you later.