How Western Tech Companies Are Avoiding China

Summary

WSJ Tech News Briefing: How Western Tech Companies Are Avoiding China

February 19, 2025

In this episode of the Wall Street Journal's Tech News Briefing, host Charlotte Gartenberg explores two pivotal developments in the technology sector: Meta's innovative AI-powered Ray Bans and the strategic realignment of Western tech companies distancing themselves from China amidst escalating geopolitical tensions.

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Meta's AI Ray Bans: Enhancing Accessibility for the Visually Impaired

Charlotte Gartenberg begins the discussion by introducing Meta's latest venture into assistive technology—AI-powered Ray Bans aimed at supporting visually impaired individuals. Priced at $300, these smart glasses maintain the classic Ray Ban design while integrating advanced features such as a camera, microphone, speakers, and an AI assistant.

Practical Applications and User Experiences

Tom Greida, a tech editor at the Wall Street Journal, provides insights into how these glasses are being utilized:

“Actually, a lot of people who are visually impaired, they're using them to see objects around them. You might use it to open your freezer or your fridge to help identify what's there” (01:29).

Users report significant improvements in daily tasks. For instance, Allison Pomeroy shares her experience:

“You could read a menu. It can help you sort your laundry... reading books to her granddaughter” (02:01).

These functionalities illustrate the potential of AI-enhanced eyewear to provide greater independence and quality of life for visually impaired users.

Safety Concerns and Criticisms

Despite the benefits, there are notable safety concerns associated with the glasses. Tom Greida highlights several issues:

“These glasses were not designed for medical use... you could be using them and you're walking and that could be dangerous because it takes up some of your brain power to be managing this thing” (02:24).

Additionally, the reliance on imperfect AI systems poses risks of misinformation:

“AI is not perfect, so there could be errors or so called hallucinations... you wouldn't know that. And so it might give you wrong information and you're acting on it, which could be risky” (02:24).

These criticisms suggest the need for further testing and refinement to ensure user safety and reliability.

Meta's Response and Enhancements

In response to user feedback, Meta has taken proactive steps to enhance the functionality of their Ray Bans:

“Meta told us that they tried to build products with accessibility in mind... once they started to hear about this from those kinds of users and their supporters, they saw that this was a use case that was important and started to look into ways to improve the product” (03:14).

A significant collaboration with Be My Eyes, a free app that connects visually impaired individuals with volunteers through video calls, has been integrated into the glasses. This allows users to receive real-time assistance without needing to hold a phone:

“You could say, hey Meta... the volunteer would see through the camera on the glasses and be telling you through the speakers on the glasses what is in front of you” (03:14).

This integration marks a substantial advancement, offering hands-free support that enhances the user experience.

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Western Tech Companies Shifting Production Away from China

The second major segment of the briefing addresses the intensifying shift of Western technology firms moving their manufacturing operations out of China. This realignment is driven by rising US-China tensions and the broader strategy to diversify supply chains.

Beyond Assembly: Relocating Entire Supply Chains

Lisa Lin and producer Julie Chang discuss the depth of this supply chain migration:

“The first thing you need to think about is when you move your factories, you need to find logistic networks to bring your components in and to deliver your products out” (07:33).

Unlike previous moves that involved only relocating assembly lines, companies are now transferring entire factories and the associated component manufacturing processes. This comprehensive shift is largely irreversible due to significant investments in machinery and infrastructure.

Challenges in Relocating Manufacturing

Julie Chang outlines the multifaceted challenges involved in moving production:

“You have to find new suppliers... adjust to a new working culture... cost of investment, cost of moving, and additional costs if something goes wrong like production stoppages or delivery delays” (07:33).

These obstacles underscore the complexity and financial implications of relocating manufacturing operations.

Southeast Asia as the Preferred Destination

Southeast Asia emerges as a favored region for relocation due to several advantages:

“Lower energy costs, lower water costs, utility cost... it's pretty close to China” (08:24).

The proximity to China facilitates easier shipping of components, while the region offers cost-effective manufacturing environments. However, Southeast Asia lacks a comprehensive component ecosystem comparable to China, necessitating continued sourcing from Chinese suppliers.

Impact on China and American Companies

The migration has profound implications for both China and American businesses:

• For China:

  Julie Chang notes the economic repercussions:

  “China's plan to get out of that slowdown is to rely on more manufacturing. And in this case, manufacturing is leaving China and taking jobs that would have gone into China away to the new locations with them” (10:36).

  This exodus exacerbates China's economic challenges, as manufacturing outflow undermines efforts to stimulate growth.

• For American Companies:

  Increased operational costs are a significant concern:

  “Switching them from China to a different country will cost him as much as 15% more” (11:08).

  Additionally, the decoupling accelerates the distancing from the Chinese manufacturing base, complicating supply chain dynamics and increasing dependency on alternative regions like Southeast Asia.

Chinese Companies Also Relocating

Interestingly, Chinese manufacturers are not immune to this trend. Many are relocating their operations overseas to maintain business continuity with international clients. For example, Eptolink Technology, a Chengdu-based optical transceiver manufacturer, expanded its Thailand factory to better serve overseas customers such as Meta and AWS:

“The idea was to increase supply to them to avoid any fallout from worsening geopolitical relations” (09:09).

This strategic move reflects the broader industry-wide adjustments in response to geopolitical pressures.

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Conclusion

The WSJ Tech News Briefing episode sheds light on significant trends shaping the technology landscape. Meta's AI-powered Ray Bans demonstrate the potential of technology to enhance accessibility, while the strategic relocation of tech manufacturing underscores the profound impact of geopolitical tensions on global supply chains. As Western companies continue to diversify away from China, the ripple effects will influence economic dynamics and technological innovations worldwide.

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Timestamps:

• 00:17 - Introduction by Charlotte Gartenberg
• 01:29 - Tom Greida on usage of AI Ray Bans
• 02:01 - User Allison Pomeroy's experience
• 02:24 - Safety concerns discussed by Tom Greida
• 03:14 - Meta's response and integration with Be My Eyes
• 07:33 - Challenges of relocating supply chains
• 08:24 - Reasons for Southeast Asia as relocation hub
• 09:09 - Chinese companies also relocating
• 10:36 - Impact on China's economy
• 11:08 - Increased costs for American companies

Note: Timestamps correspond to the provided transcript's timing for reference.

Transcript

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[Charlotte Gartenberg]

Welcome to Tech News Briefing. It's Wednesday, February 19th. I'm Charlotte Gartenberg for the Wall Street Journal. Meta's artificial intelligence powered ray bans are designed for the general public. We'll hear about why they're gaining traction. Visually impaired customers. Then a growing number of Western tech companies are saying, abc, anything but China, as US Chinese tensions rise and many multinationals shift production out of the country. But could this supply chain migration be permanent? Our China tech reporter and editor, Li Ze Lin, tells us what it means for both China and the U.S. but first, Meta's AI ray bans are appealing to a growing group of blind users. The smart specs retail for $300 and look, well, like regular Ray Bans. But integrated into them is a camera, microphone and speakers, as well as an AI assistant. While users say there are benefits when it comes to everyday tasks, some critics have safety concerns. Tom Greida, a tech editor at the Wall Street Journal, is here now with more. So, Tom, what are people using these glasses for?

[Tom Greida]

Actually, a lot of people who are visually impaired, they're using them to see objects around them. You might use it to open your freezer or your fridge to help identify what's there. So you don't need someone else to help you do that. They can identify the difference between regular Coke and Diet Coke simply by asking the assistant. And it uses the camera and the AI that's integrated to identify what's in front of you.

[Charlotte Gartenberg]

And this one woman, Allison Pomeroy, was talking about how she was using it for things like reading a menu.

[Tom Greida]

Oh, yeah, totally. You could read a menu. It can help you sort your laundry. Her in particular, she uses it to help her read books to her granddaughter, as well as getting everyday stuff what time it is and what the temperature is outside. By asking the assistant and would just.

[Charlotte Gartenberg]

Tell her, wow, that sounds like a potential game changer. But what are some of the safety concerns? According to, you know, some of the.

[Tom Greida]

Critics, these glasses were not designed for medical use. Right. This isn't like a medical device. So experts warn that you just have to be careful with that. They could be distracting. You could be using them and you're walking and that could be dangerous because it takes up some of your brain power to be managing this thing. And also because it is Powered by AI. AI is not perfect, so there could be errors or so called hallucinations, as they say in the AI world. And unfortunately, because your vision is impaired, you wouldn't know that. And so it might give you wrong information and you're acting on it, which could be risky. There's certainly some skeptics who think that this needs more testing. This is more of a consumer product being used for more of a medical use.

[Charlotte Gartenberg]

And what has Meta's response been to this new use of its glasses?

[Tom Greida]

Meta told us that they tried to build products with accessibility in mind, but they did not predict the impact that these ray bans would have on visually impaired people. Once they started to hear about this from those kinds of users and their supporters, they saw that this was a use case that was important and started to look into ways to improve the product. Meta partnered with a company called Be My Eyes that has a free app that connects people with poor vision through video calls, using volunteers that can help them find what they need. What Meta did was integrate this app into the glasses itself so that people who are visually impaired can use the app through the glasses. So you would say, hey Meta, whatever it is you're trying to do using Be My Eyes, and the volunteer would see through the camera on the glasses and be telling you through the speakers on the glasses what is in front of you. So you could then be hands free. You don't have to hold the phone anymore. For someone who's visually impaired, that's a significant advancement.

[Charlotte Gartenberg]

That was Tom Greida, a tech editor at the Wall Street Journal. Coming up, Western tech companies are shifting production out of China, perhaps for good. How this could impact everything from AI servers to consumer electronics. After the break.

[Oracle Representative]

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[Charlotte Gartenberg]

Tensions between the US and China are heating up and that's leading tech companies to accelerate their decoupling with China. In the past, companies moved only the assembly of products outside the country. Now businesses are shifting whole factories making components. WSJ China tech reporter and editor Lisa Lin spoke to TNB producer Julie Chang about this new anything but China trend among Western tech companies. Here's their conversation.

[Lisa Lin]

So, Lisa, before companies moved only the assembly of products outside of China. Now it sounds like they're shifting whole factories there. Is that right?

[Tom Greida]

Yeah.

[Julie Chang]

So, Julia, I think we're seeing two different things happening here with the supply chain shift from China. The first thing we're seeing is companies who are moving assembly of their products outside. To give you some background, supply chains shifting from China isn't like a very immediate and very recent thing. Supply chains have been pretty much starting to migrate since the first Trump administration. And just after the pandemic, we saw a huge wave of companies moving out because China's COVID lockdowns had caused production snarls in a lot of products, everything from iPhones to cars. What we're seeing this time around, though, that's hugely important is it's not just the assembly of products that are moving, it's the supply chain supporting that assembly that's also moving with it. So think about if you're just making electronics, think about stuff like sensors that are moving, power electronics, printed circuit boards. All these are the components that go into consumer electronics such as laptops. So all these factories are moving out of China as well. And according to an analyst report, these moves pretty much make the relocation in supply chains away from China much more permanent and irreversible because of heavy upfront investment in machinery and parts. The second wave is really driven by geopolitical tension and friction because of the US Imposing export controls on advanced chips to China. What you're seeing is certain products that contain such chips cannot, cannot be made in China anymore.

[Lisa Lin]

What are some of the challenges associated with moving factories out of China?

[Julie Chang]

There are multiple challenges associated with this. Think about it. When you're moving the supply chain away from China, you're pretty much redrawing your entire supply chain, a supply chain that in the past has worked very efficiently for you and at a very low cost. So the first thing you need to think about is when you move your factories, you need to find logistic networks to bring your components in and to deliver your products out. You need to find new suppliers that can supply you at that new location. You need to adjust to a new working culture. So you know the challenges are multifold. Firstly, it's the cost of investment, the cost of moving, and then you have the additional things that rack up if something goes wrong. You have production stoppages or delivery delays, and all these at cost as well.

[Lisa Lin]

So a lot of these companies are moving their factories to Southeast Asia. Why there?

[Julie Chang]

So Southeast Asia is attractive for a few reasons. The biggest reason is the cost. Southeast Asia still isn't a very expensive place to manufacture in, and it's pretty close to China. That's the other reason. Southeast Asia is great for assembly, but it still doesn't have a component ecosystem. So a lot of the supply for the components still need to come from places like the south of China. So Southeast Asia has an edge because it's easy to ship components down from China to Southeast Asia. On top of that, you have lower energy costs, you have lower water costs, utility cost. So all that just makes Southeast Asia a very attractive region for manufacturers.

[Lisa Lin]

And in your reporting, you found that many Chinese companies are also moving out of China and overseas. Why is that?

[Julie Chang]

It's because when you move factories, you also want to move your suppliers to the vicinity of the factory. And the supplier ecosystem like the one you have in China, isn't easily replicated outside of China. It took China decades to become this manufacturing powerhouse. And China isn't just known for making one particular widget. It is known for making all sorts of variations of this particular widget. And you don't get that in Southeast Asia or Mexico or any of the other places that have become alternative manufacturing locations. So a lot of the Western manufacturers, for lack of better suppliers in the new places they're producing in, they've asked the Chinese manufacturers to move out and keep supplying the components to them. Let me give you an example example of a company that I came across. And there are many of these Chinese companies. You can see a lot of these statements in their filings to the stock exchange. One example I found was this company called eptolink Technology. It's a Chengdu based maker of optical transceivers for data centers. It expanded its Thailand factory just to increase supplies to overseas customers. And many of their overseas customers are major tech companies such as Meta and aws. And the idea was to increase supply to them to avoid any fallout from worsening geopolitical relations.

[Lisa Lin]

So companies moving factories out of China and to Southeast Asia, how big of a hit is this for China?

[Julie Chang]

It's hard to quantify the scale of the hit. But what's really important to note is that the Chinese economy is in its doldrums and it is actually suffering the worst economic growth in decades. And China's plan to get out of that slowdown is to rely on more manufacturing. And in this case, manufacturing is leaving China and taking jobs that would have gone into China away to the new locations with them. All in all, it's not a good sign for China.

[Lisa Lin]

And how big of a hit is this for American companies doing business with Chinese companies?

[Julie Chang]

Firstly, there's definitely the cost factor. I spoke to one supplier in Malaysia that supplies to chip equipment makers such as Applied Materials and Lam, and he says just getting his components and switching them from China to a different country will cost him as much as 15% more. The cost is the biggest thing. And the second thing, this just accelerates the decoupling between American companies and the Chinese manufacturing base.

[Charlotte Gartenberg]

That was WSJ China Tech editor and reporter Lisa Lin speaking with TNB producer Julie Chang. And that's it for Tech News Briefing. Today's show was produced by Jess Jubiter and Julie Chang with supervising producer Kathryn Millsop. I'm Charlotte Gartenberg for the Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.

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