Learning Takeaways — The Impact of Smartphones on the U.S.-China Rivalry
On July 8, the Association of Foreign Press Correspondents in the United States (AFPC-USA) hosted a podcast episode produced in partnership with the Hinrich Foundation. The episode focused on the US-China tech rivalry, specifically on how smartphones have influenced the contentious relationship between the two nations amid global trade tensions.
The episode was hosted by Vlad Savov, the Technology Editor for Bloomberg News in Hong Kong. The podcast guest was Michael Enright, the Pierre Choueiri Family Professor in Global Business at Northeastern University, who specializes in international competitiveness and business strategy. He recently published a paper for the Hinrich Foundation that dove into the smartphone issue, sharing key insights that demystify another dimension of the sensitive matters impacting global trade.
This episode was produced in partnership with the Hinrich Foundation. AFPC-USA is solely responsible for the content of this podcast episode. The transcript for this podcast can be found HERE.
Enright responded that the article was driven by the sheer significance of smartphones, calling them “by far the largest export category out of China into the U.S. and quite frankly, rest of the world.” He emphasized that smartphones are “at the cutting edge” of not just mobile technologies, but also advanced chip and semiconductor technologies. According to Enright, both China and the U.S. are eager to dominate these sectors. He noted that Chinese brands now hold about 60% of the global smartphone unit market, and he sees smartphones as a “canary in the coal mine” for broader East-West technology competition.
Savov then turned the conversation to how Chinese brands managed to overtake other once-dominant players in the Android ecosystem like HTC, LG, and Sony, before even challenging giants like Apple and Samsung.
Enright explained that a pivotal factor was Android's open operating system, introduced in 2008. Unlike Apple’s closed ecosystem, Android allowed new entrants to build on existing software. At the same time, the essential hardware—semiconductors from companies like Qualcomm, NVIDIA, Intel, and Samsung—was widely available on the market. Many of these chips were manufactured by TSMC, enabling even smaller firms to compete.
Enright emphasized that the smartphone industry, particularly in the Android segment, quickly became “a manufacturing game.” By the time smartphones surged in popularity around 2010–2011, China was already a powerhouse in electronics manufacturing, a capacity built in part by Samsung and Apple’s earlier investments—most notably through Foxconn.
He pointed out that Chinese firms leveraged these pre-existing supply chains and infrastructure, originally designed to serve foreign companies, to produce their own devices at scale. Since the software and chips were no longer proprietary barriers, Chinese manufacturers could rapidly scale up. While Samsung remains an exception due to its ability to differentiate its devices through features and technology, most of the Android market, according to Enright, became “a game that the Chinese have mastered.”
Savov brought up a key point from Enright’s article—namely, the significant role that government industrial policy played in boosting China's smartphone industry. He asked Enright to expand on how policy helped make China’s rise possible.
Enright said that the transformation wasn’t just due to foreign investment, but also a long-standing, coordinated effort by domestic Chinese firms and the Chinese government to build tech expertise. He pointed to massive state investments, especially since 2010 and 2014, to build indigenous chip capabilities. One standout initiative, Made in China 2025, was launched in 2015 and has since committed “hundreds of billions of dollars” to advancing Chinese tech.
Michael Enright
Enright also explained how this “political-industrial process” pushed foreign companies to source more components from the Chinese mainland, and noted that over half of Apple’s final assembly in China now takes place in PRC-owned or PRC-acquired factories. This effort spans national, provincial, and municipal levels and reflects a long-term, targeted industrial strategy.
Savov then circled back to Made in China 2025, asking if the program had been successful—even though it’s no longer frequently mentioned.
Enright said he jokingly called it “Made in China 2035” when it launched, but recent reporting (e.g., in the South China Morning Post) suggests that around 85% of the program's goals have been met. The reason the name has fallen out of use, he explained, is the international backlash it provoked—especially from the EU and later the U.S., after its explicit focus on government subsidies and domestic and global market share targets for Chinese firms. That backlash, in turn, spurred more aggressive U.S. policies.
Despite the rebranding, Enright said, Made in China 2025 is still very much alive—“on steroids,” even. The strategy is embedded in China's 14th Five-Year Plan, as well as in provincial and municipal development plans, including those of tech hubs like Shenzhen.
Savov also asked whether the U.S. trade hostilities that began around 2018—particularly actions against Huawei—were a direct response to Made in China 2025.
Enright said yes and clarified that pushback actually began earlier, citing a 2016 warning from the European Chamber of Commerce in China that the initiative violated WTO norms. While the U.S. responded later, the real issue wasn’t that China had industrial goals—it always has, Enright noted—but that Made in China 2025 included explicit domestic market share targets, massive subsidies, and, most alarmingly to the West, a growing belief that China could actually achieve those goals. This, he said, was the “warning bell” that reshaped global views of China’s technological ambitions and capabilities.
Savov noted that the U.S.–China trade war has increasingly shifted toward a tariff-centric debate. He posed a central question: Given that China can both produce and consume smartphones largely domestically, unlike U.S. companies like Apple, does this give China an advantage in a prolonged economic split between the two countries?
Enright responded that timing is key. While China is well positioned in terms of manufacturing and domestic consumption, most Chinese smartphone makers remain dependent on foreign technology, especially semiconductors and the Android operating system, both of which rely on U.S. intellectual property. He cited Huawei as a case study—after U.S. sanctions in 2018–2019, Huawei’s smartphone market share collapsed overnight, even though it had just overtaken Apple and Samsung in China.
According to Enright, Huawei is now the only major Chinese brand that is relatively self-sufficient in chips and software. Other Chinese players still lean heavily on Qualcomm, NVIDIA, Intel, and Samsung. He emphasized that matching current chip technology is one challenge, but keeping up with its rapid six-month innovation cycles is another, and China hasn’t proven it can do that yet.
He noted that although the U.S. doesn’t do much domestic smartphone assembly, supply chains can move—pointing to Samsung, which has little to no final smartphone assembly in China, instead using countries like Vietnam and India. That said, China still dominates when it comes to end-to-end supply chain depth and engineering expertise, which makes it hard to replicate quickly or cheaply elsewhere.
Enright added that a true tech bifurcation—cutting off both products and tech—would be costly and slow, but ultimately possible. “Assembly can be moved,” he said. The real strategic asset China holds is its “entire supply chain and engineering expertise.” However, companies like Apple and Samsung still possess the know-how to build alternative systems because, in his words, “they’re the ones who helped build the Chinese system.”
Still, the mutual dependence remains clear. China “still needs foreign tech,” and U.S. firms “still need China” for manufacturing and market access. Enright pointed out that even during the most heated moments of the trade war, both sides selectively exempted key sectors: China exempted the semiconductors it couldn’t replace, and the U.S. exempted consumer electronics like smartphones, which it couldn’t source elsewhere immediately.
Ultimately, Enright described it as a “complicated game,” where both sides remain strategically entangled, despite intensifying rhetoric and tariffs.
Savov noted that despite headlines about trade tensions, private sector executives from both U.S. and Chinese firms—like Google, Qualcomm, and Honor—often speak of each other with "very warm terms," emphasizing collaboration rather than conflict. He found it striking that it’s difficult to get any of these companies to even acknowledge a trade war.
Enright agreed, saying this reflects political savvy and economic pragmatism. Both U.S. and Chinese companies rely heavily on each other’s markets, and most are “not particularly nationalistic in their outlook.” He acknowledged that Chinese firms face more political constraints, but they also benefit from state support. Still, companies like Google — which earns licensing fees for Android — have a strong incentive to maintain relationships with Chinese manufacturers, who now account for a majority of Android users globally.
Enright broke down some key figures: Apple holds about 20% of the global smartphone market, while Huawei’s Harmony OS accounts for roughly 7% globally and 15% in China. The rest—around 75%—runs on Android, primarily through Chinese OEMs other than Samsung. So, Google’s largest customer base is in China, and it must tread carefully. Similarly, Apple is deeply dependent on Chinese manufacturing and Chinese consumers, with China being its second-largest market.
Enright also emphasized mutual respect between the companies. He described today’s Chinese brands like Xiaomi, Huawei, Oppo, and Vivo as producing "high-end" smartphones that can “match or exceed” Samsung and Apple in terms of features—a far cry from the tech gap that existed 10 or 20 years ago. He believes this evolution has generated "grudging respect" between competitors, even amid broader geopolitical tensions.
Shifting focus, Savov asked how consumers in the U.S. and Europe perceive Chinese smartphones, given repeated messaging from Western governments that such technology may be untrustworthy.
Enright noted that Chinese brands have made little headway in the U.S., holding less than 10% of the market, but in Europe it’s closer to 25%, and in Asia (excluding China) around 50%. He argued that most consumers focus on brand recognition and ecosystem compatibility rather than politics. For instance, Apple performs strongly in the U.S., while Samsung dominates Android sales there.
However, Enright believes that over time, brand perception will shift. Just as consumers eventually accepted Japanese and then Korean electronics, he expects they’ll also realize that many phones—regardless of brand—share the same components, software, and even manufacturing plants. He drew a comparison to TVs, microwaves, and CD players, where the distinction between brands faded once manufacturing converged. Enright called smartphones the “cutting edge” of consumer tech, unlike TVs now, but said the industry is following a familiar path of globalization and convergence.
Savov circled back to Enright’s essay for the Hinrich Foundation, highlighting Enright’s point that the smartphone industry reflects the broader arc of China’s development. He invited Enright to elaborate.
Enright replied that the smartphone industry is a "microcosm" of how China has industrialized over the past few decades. Initially, the foreign firms like Apple and Samsung and Taiwanese contract manufacturers brought production to China because of its strengths in consumer electronics assembly. That helped create China’s manufacturing base and supply chains.
From there, the Chinese government saw an opportunity and executed a long-term plan to build technological self-sufficiency. Once China could assemble the products, it made sense to invite suppliers to relocate, and local talent—often former employees of firms like Foxconn or Samsung—began to learn, adapt, and eventually innovate. Enright described this process as being “supercharged by massive government investments”, leading to a system where foreign know-how fused with localized expertise and industrial policy, creating a formidable, self-sustaining ecosystem.
He emphasized that this isn’t unique to smartphones. Enright has written similar analyses of China’s automotive sector, especially electric vehicles (EVs), where foreign firms were required to enter joint ventures and localize production. Over time, domestic firms leapfrogged the foreign ones, especially in EVs, which are now a space where China leads globally. He cited a similar trajectory in telecom infrastructure, where companies like Huawei and ZTE now supply about 90% of China’s needs and 40–50% of global demand—another example of the strategy succeeding across sectors.
According to Enright, the Chinese government strategy is simple and consistent: entice foreign companies with the promise of access to China’s market, require local manufacturing and/or joint ventures, use that to build up domestic capabilities, support those capabilities with massive state investment, and eventually, displace the foreign firms with indigenous competitors.
He contrasted this with foreign firms’ logic, particularly American ones, noting that decisions made between 2004 and 2010 to manufacture in China paid off tremendously—Apple becoming the most valuable company in the world being a case in point. These decisions were driven by short- to medium-term economic logic, where firms prioritized cost efficiency and access to skilled labor and scale, even if it meant helping build future competitors.
The consumer, Enright pointed out, wants the best product at the lowest price, and in that sense, is aligned with the companies, not national policymakers. But that’s where tensions emerge: governments in the U.S. and EU have long designed their policies to favor consumers over producers, and are now finding themselves “hamstrung” by that history. In Enright’s view, their slow reaction to China’s strategic industrial planning reflects the limits of that philosophy. He said the policy mismatch—between China's long-term industrial focus and the West’s consumer-first approach—is at the heart of the ongoing economic and technological competition.
When asked whether the industrial strategy that has propelled China’s tech dominance could work for smaller countries, Enright responded that while other nations have tried, they often failed. In places like Brazil and India, similar import substitution efforts led instead to rent-seeking and stagnation. What sets China apart, Enright argued, is not just its scale, but its unique combination of factors: a massive domestic market, a cost-effective labor force, a long-term, committed government policy, and an intensely competitive domestic environment.
He emphasized that in China, firms don’t just have to compete with Apple, they also "have to compete against each other", leading to fierce internal competition. That’s in contrast to places like the U.S., where duopolies like Apple and Samsung dominate with little pressure to slash margins.
Enright noted this strategy has been consistent for decades, dating back to China’s opening in the 1980s, and he plugged his book written with the Hinrich Foundation on China’s use of foreign direct investment (FDI) as a development engine.
Savov shifted the focus to the electric vehicle (EV) sector, comparing it to smartphones. He pointed out that BYD’s rise over Tesla came amid stiff competition from multiple Chinese EV startups, and asked if Enright saw a valid analogy there.
Enright said yes, drawing a strong parallel. Like smartphones, China’s EV sector combines selective state support for national champions—BYD, Huawei, etc.—with "cutthroat" competition among domestic players. This dual system, he said, is often misunderstood by outsiders, who assume state-backed firms enjoy monopolies. In reality, Chinese firms often accept “zero profits” and compete for positive cash flow alone, something modern capital markets in the West would never tolerate.
He pointed out that Apple and Samsung collectively earn 90–95% of global smartphone profits, meaning 60% of global smartphone shipments are made at no profit, largely by Chinese firms. That’s only possible, he said, because of state financing and support, allowing Chinese companies to sustain aggressive pricing that would bankrupt competitors elsewhere.
He also critiqued Western misreadings of Chinese policy language, especially a statement from the Third Plenum of the 18th Party Congress, where the phrase “the market will be decisive” was widely misinterpreted. Western observers took it to mean China was embracing open markets, but missed the fine print: that the Party sets the direction, the state implements it, and markets are only decisive after the central state has defined the boundaries.
This dynamic, Enright argued, has played out repeatedly—in telecom infrastructure, autos, and smartphones. He cited Samsung’s collapse in China not because of direct targeting, but because domestic firms using Android outcompeted it on price and features.
Wrapping up, Enright painted a stark contrast between China’s long-game industrial strategy and the policy challenges in the U.S. and EU. Western governments, he said, are boxed in: Their corporations want low costs and large markets, their consumers want choice and cheap products, and their policymakers who worry about long-term economic health and industrial sovereignty often find themselves isolated.
Ultimately, the “quandary”, as Enright put it, is structural: Western systems prioritize short-term profits and consumer choice, while China plays a long-term game rooted in centralized planning, state support, and competitive nationalism.
Savov mentioned past Bloomberg reporting that Foxconn sent Chinese workers back from India, allegedly under orders from the Chinese government, possibly as retaliation against Apple’s move to shift production away from China. He asked Enright whether this signaled a more confrontational Chinese approach.
Enright agreed that China has already begun flexing its muscles. As early as 2022, Beijing had placed restrictions on exporting production equipment, aiming to slow the relocation of manufacturing out of China. “It’s at the very minimum a shot across the bow,” he said, and at most, it’s a clear message: “If you want to do this, your operations in China are under threat.”
He emphasized that companies like Apple and Foxconn are deeply embedded in China, with highly interdependent systems that cannot be replicated overnight. Even Samsung, which assembles little to nothing on the Chinese mainland, is heavily reliant on Chinese supply chains. China, he warned, can disrupt the flow of production through its control of equipment, labor, and manufacturing ecosystems. For Apple in particular, reproducing its tight-knit engineering integration elsewhere would be extraordinarily difficult—Foxconn dominates Apple’s business because it is simply better at meeting its demands than other contract manufacturers.
Savov then asked directly about President Trump’s call to bring iPhone production back to the U.S., and whether that’s even feasible.
Enright replied, “I don’t know enough of the detailed economics,” but quickly added that while Apple could produce iPhones in the U.S. and still turn a profit, it could not match its current profits. The shift would likely require some sort of deal—perhaps tax incentives or other support—to make it work. But the broader problem, he noted, is systemic: the collapse of U.S. manufacturing has cut off paths to the middle class for millions of Americans.
He traced the loss back to China’s 2001 entry into the WTO, which saw U.S. manufacturing jobs drop by nearly half within a decade. However, he pointed out that the nature of manufacturing has since changed—much of it is now automated, even in China. As automation increases, the feasibility of reshoring production to the U.S. or Europe grows, even if the number of factory-floor jobs remains small.
What reshoring brings, Enright emphasized, is an entire ecosystem of support roles: software development, equipment maintenance, HR, finance, and more. For every single person assembling an iPhone, multiple additional jobs are created in surrounding fields. Thus, even limited reshoring can have a multiplier effect on the domestic economy.
The question, he argued, comes down to whether the U.S. is willing to embrace a “new social contract.” Would consumers pay more for products if it meant restoring local jobs? Would companies accept lower margins in exchange for rebuilding domestic capacity? And would the U.S. government put enough pressure or support mechanisms in place to make that shift viable?
Enright closed with a broader reflection: China has been playing this game for decades, combining industrial policy, protectionism, and global market leverage. Moves by both President Trump and President Biden suggest the U.S. is finally taking a page out of China’s playbook. The real test now is whether Western societies—with their fragmented politics and consumer-driven economies—can summon the “single-minded approach” necessary to rebalance the scales. If not, he warned, China’s lead in critical technologies may soon become unassailable.
As the conversation concluded, Savov asked Enright to share how he sees the US-China tech rivalry evolving, and if either country could change course from their current strategies.
Enright responded pragmatically, saying he doesn't foresee China fundamentally altering its policy trajectory, but emphasized that Beijing will adapt when its interests are threatened. For example, if the risk of being cut off from the U.S. market grows high enough, “China will react.” Already, he noted, there’s evidence that China has been willing to accept asymmetric tariffs—meaning tariffs that are harsher on one side—in exchange for continued access to critical technologies like semiconductor design.
Enright offered a key insight into how China negotiates: “China negotiates not on principles, but on interests.” That means any agreement is only as stable as the incentives behind it—if China’s interests change, so will its adherence to any deal. He stressed that this is not necessarily good or bad, but rather a function of how the Chinese system works.
Given that dynamic, Enright argued, U.S. negotiators must be clear-eyed: they should only make deals when the U.S. has unilateral means of enforcement. Without that, any agreement risks being hollow.
Looking ahead, Enright envisioned a tentative modus vivendi—a working arrangement between two rivals. He predicted the development of more resilient, possibly bifurcated supply chains, even if it increases costs. This reflects a growing corporate imperative to de-risk operations across geopolitical fault lines.
In his view, U.S. tech firms will likely remain leaders in advanced technologies over the next 5–10 years, keeping them competitive globally. Meanwhile, manufacturing will become more geographically dispersed, partly because China is no longer the ultra-low-cost labor market it once was.
He summarized the likely future as a delicate balancing act: both countries “will do what’s necessary to exert their position” while acknowledging the other’s existence. That means neither side may be able—or even try—to entirely block the other’s development.
Enright noted that walking this “tightrope” will be challenging for both governments and companies, as they must constantly weigh cost, competitiveness, and strategic independence in a rapidly shifting trade environment.
