Tariffs push Apple closer to Asia and Alibaba challenges DeepSeek

Nikkei Asia

01-05-2025

Hello everyone! This is Lauly, sending greetings from Taipei.
Usually, people in Taiwan enjoy a four-day holiday at the beginning of April -- Children's Day and Tomb-Sweeping Day (a bit of an odd combination, I know). But this year was different, at least for people involved in the tech and media industries, thanks to Donald Trump's "reciprocal" tariffs. An industry friend jokingly said that the U.S. president had turned the holiday into a real "tomb-sweeping day."
Personally, the first two weeks after Trump's announcement were a nightmare as I chased sources across the supply chain for their reactions, tried to comprehend myself what was going on, and on top of that took care of my son, who was sick the entire time.
I was particularly stunned when I found out that a scoop my colleague and I had drafted the night before had become nearly useless the next morning after Trump suddenly said that every country except China would have a 90-day grace period on the new tariffs. We had to start over, going back to sources and reworking the story. I shared my feelings with a long-time industry friend and he said, "Now you know how we have felt everyday since April 2."
Almost everyone I've met recently has had big dark circles under their eyes. Paul Peng, chairman of leading Taiwanese display maker AUO, said: "People asked what we should do. I have only two pieces of advice: Eat well and sleep well." I think such a calm mindset is what I needed, too.
After working feverishly for three weeks, including weekends, I left everything behind and made a spontaneous short trip with my family to Sun Moon Lake in the central Taiwanese city of Nantou last week. It was the best decision I made recently. The weather was perfect and the turquoise lake, stretching out toward misty, forested mountains, radiated tranquility. Sun Moon Lake always has a magic ability to immediately relax your muscles, make your breath deeper and calm your mind. If you ever come to Taiwan, I highly recommend a trip to Sun Moon Lake.
The short trip -- which included a wonderful nighttime firefly tour that my son absolutely loved -- helped recharge my energy and reset my exhausted brain. The tariff war was just as chaotic when I returned to work this week, but I feel I have more capacity to cope with the uncertainties.
And nothing lasts forever, after all. A senior executive with an Apple supplier who has been in the industry for more than 40 years told me he thinks the tariff war will de-escalate in two or three months and then the supply chain should have a clearer picture of what to do next. "And let's see," he added, "whether the tariff war will 'Make America Great Again' or "Make America Great Alone.'"
In other news, #techAsia will be taking a break next week due to the Golden Week holiday in Japan. We will be back to our regular schedule on May 15. See you then!
Opposite outcome
What was the first response by Apple when the Trump administration escalated tariffs on Chinese imports to as high as 145%? Instead of rushing to bring production home, it doubled down on Southeast Asia and India. The Cupertino-based tech giant's immediate strategy to deal with the tariff war shows just how far off a "Made in America" iPhone remains, even if Trump and his commerce secretary, Howard Lutnick, insist otherwise, write Nikkei Asia's Lauly Li and Cheng Ting-Fang.
Apple helped suppliers to buy equipment to boost production, told suppliers that the majority of U.S.-bound iPhones, MacBooks and iPads need to be made in India and Vietnam, and rushed more component production to Thailand, as Nikkei Asia first reported in mid-April.
However, the reality is that even Southeast Asia and India -- where Apple and other electronics makers have been pushing hard to diversify production for years -- still struggle to compete against China and its ultra-efficient supply chain, never mind moving such manufacturing to the U.S.
Shifting an entire supply chain is extremely challenging. For instance, while some MacBooks, Mac Mini and iMacs are now labeled "Made in Vietnam" or "Made in Thailand," not all of the components were produced or all of the assembly carried out there due to lack of sufficient technicians, skilled workers, while some low-margin components are not yet feasible to be moved out of China.
Cluster effect
Chinese tech giant Huawei is making strides in the artificial intelligence chip market, having started deliveries of its advanced AI "cluster" to domestic clients, writes the Financial Times' Zijing Wu.
The move comes as Chinese companies face increasing limitations on accessing Nvidia's high-end semiconductors because of tightening U.S. export controls. Sources indicate that Huawei has already sold over 10 sets of its CloudMatrix 384, a system that interconnects a substantial number of AI chips. These initial deliveries are destined for data centers serving various Chinese tech firms.
Industry analysts have been impressed by Huawei's rapid development and deployment of CloudMatrix.
"The development of Huawei's CloudMatrix 384 means China now has an AI system capable of beating Nvidia's," said Dylan Patel, founder of chip consultancy SemiAnalysis.Huawei has told clients its CloudMatrix performs significantly better than Nvidia's popular NVL72 cluster in terms of computing power and memory, according to a company presentation reviewed by the Financial Times and people with knowledge of the matter.
CloudMatrix 384 does have several disadvantages, including higher energy consumption and more demanding software maintenance. But given China's abundant power resources and engineering talent, it still represents a compelling alternative for clients now restricted from Nvidia's most advanced technology, said people with knowledge of the sales.
AI optimism
Unimicron, Taiwan's leading supplier of chip substrate and printed circuit boards, expects strong demand from high-end AI data centers to drive higher growth -- if the tariff war between the U.S. and China does not escalate further, Nikkei Asia's Cheng Ting-Fang and Lauly Li write.
"So far, we don't see any customers adjusting their orders due to the tariffs, but overall we do have concerns that higher tariffs or escalating geopolitical tensions could hit global demand and eventually, directly or indirectly, impact orders," company chairman T.J. Tseng said.
Unimicron, which counts Nvidia, Intel and Apple among its customers, is currently building its first manufacturing facility in Thailand, with plans for it to enter production in the second half of this year.
Tseng said his company has been considering investing in the U.S. in response to recent geopolitical developments, but has no concrete plans to do so at the moment given the lack of a supply chain and customer demand to support such a move.
Alibaba's DeepSeek riposte
The AI model race in China is getting hotter and hotter. E-commerce giant Alibaba released Qwen3, the latest generation of its open-source large language model family, in a bid to challenge DeepSeek in artificial intelligence capabilities and efficiency, writes Nikkei Asia's Cissy Zhou.
Alibaba said Qwen3 sharply reduces computing power compared with its peers and that its flagship Qwen3-235B-A22B outperforms a number of models released by major rivals -- namely DeepSeek-R1, OpenAI-o1, Grok-3 and Gemini-2.5-Pro -- in a range of benchmark tests. These include mathematical reasoning, coding proficiency, and tool and function calling capabilities, a measure of a model's ability to select and use the best external tools for a task.
The highly anticipated release, which local media says took around seven months of work, comes as competition heats up among Chinese AI companies, particularly since the emergence of DeepSeek early this year. Last week, Baidu released two new AI foundation models that it claims cost "a fraction" of comparable offerings from DeepSeek.
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