I'm sure if you included the effective subsidies China-homed conglomerates enjoy, the ratio of COGS between e.g. Apple and Huawei could be as high as 4:1. Huawei can certainly afford to make phones cost 1/4th as much, although Apple could also afford to cut prices by 38 percentage points (as per their margins).
On the other hand, China-homed companies aren't responsible to public markets (Wall Street really) in the same way US-homed are. You could book a 1% margin, but your family owns the company, so the board isn't going to take away your private jet, let alone dump you as CEO.
In the US, the "family owned" (in the sense of being management controlled) mega-techs like Facebook and Snapchat are actually suffering greatly due to their poor accountability. It's truly bad for equities, even while Facebook and Snapchat book ever-growing revenues.
It will be an interesting reckoning. Not the change in consumer tastes in China, mind you, which doesn't really matter for share prices. It'll be an inevitable change in corporate culture.
After all, there are millions of extraordinarily talented people in China who will want the kinds of riches and glamor only a certain privileged minority get to experience. If the bottom line doesn't motivate public accountability, ambition will. That's healthy for everyone, but it will signal the end of sclerotic, state sponsored corporations in China.
So as always, the Chinese consumer is the victim. They get to enjoy phones that cost 1/4th as much as an iPhone. But in exchange, they forfeit a certain kind of life fulfillment that, in my opinion, they deserve.
I'm sure if you included the effective subsidies China-homed conglomerates enjoy, the ratio of COGS between e.g. Apple and Huawei could be as high as 4:1. Huawei can certainly afford to make phones cost 1/4th as much, although Apple could also afford to cut prices by 38 percentage points (as per their margins).
On the other hand, China-homed companies aren't responsible to public markets (Wall Street really) in the same way US-homed are. You could book a 1% margin, but your family owns the company, so the board isn't going to take away your private jet, let alone dump you as CEO.
In the US, the "family owned" (in the sense of being management controlled) mega-techs like Facebook and Snapchat are actually suffering greatly due to their poor accountability. It's truly bad for equities, even while Facebook and Snapchat book ever-growing revenues.
It will be an interesting reckoning. Not the change in consumer tastes in China, mind you, which doesn't really matter for share prices. It'll be an inevitable change in corporate culture.
After all, there are millions of extraordinarily talented people in China who will want the kinds of riches and glamor only a certain privileged minority get to experience. If the bottom line doesn't motivate public accountability, ambition will. That's healthy for everyone, but it will signal the end of sclerotic, state sponsored corporations in China.
So as always, the Chinese consumer is the victim. They get to enjoy phones that cost 1/4th as much as an iPhone. But in exchange, they forfeit a certain kind of life fulfillment that, in my opinion, they deserve.