Facebook’s anti China strategy is undermining its hardware ambitions

The company is now racing to escape.

This transition was more difficult that expected. While hardware giants like Apple have moved some production to places like India and Vietnam in recent years — in response to escalating tariffs, former President Donald Trump’s trade war, and rising wages in China — Facebook has hit the walls, say three people familiar with the discussions, who They spoke on condition of anonymity to describe internal conversations.

According to people, Meta executives had not considered China’s dependence on Oculus virtual reality headsets making a major concern until recently. The company’s main focus has always been on messaging apps and social media.

People claimed that all of that has changed since Meta rebranded itself to be a hardware company. Meta has been renamed from Facebook last year and launched augmented reality smart sunglasses. The company is also building a connected device that can be worn around the wrist. In October, the company I enteredMeta Quest Pro is the first in a line of headphones that are designed for collaboration.

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Domestic concerns about pushing the devices intensified in the past year, when some executives worried that an anti-China strategy — developed by executives in Washington and Menlo Park during the final years of President Donald Trump’s administration — would hurt its business ambitions and public perception. Given the company’s growing dependence on China for its future plans, regulators are not being hypocritical.

The executives discussed ways to shift components and manufacturing for a planned smartwatch from China so that the company could prove to US customs authorities that it deserves a Made in Taiwan label — rather than one that says Made in China. They believed that the Made in Taiwan Label would save the company customs duties and look better politically. But it was not easy. It is very difficult because the supply chain of smart electronic devices is in China. People said that countries like Vietnam, Taiwan, and India are just beginning to develop these capabilities.

The company’s leadership also hoped to acquire the Made in Italy brand smart glasses, created in partnership with Ray-Ban. However this was also impossible, the people claimed. The executives tried unsuccessfully to find a way to move Oculus manufacturing to Taiwan.

“Meta is building a complex hardware product. You can’t just run a dime and make it somewhere else,” said one executive.

Meta acknowledged that it was searching for new locations to locate manufacturing sites. Two people familiar with the plans of Meta say that the original smartwatch plan was abandoned but that the company is still working to create a wrist-worn device.

“Currently, consumer electronics for Meta are manufactured in China, but we are constantly reviewing and exploring supply chain opportunities around the world,” said company spokeswoman Ha Tai.

Responding to questions about whether the company has concerns about retaliation from China for its strategy, she said: “We believe the United States needs to rise to the competitive moment. That means ensuring we create an environment that fosters the innovation and investment needed to compete and win in defining the future of the Internet.”

Facebook’s public criticisms about China It began in 2019 when Zuckerberg, in a speech at Georgetown University, warned that China was exporting a dangerous vision of the Internet to the rest of the world — and suggested that Facebook had abandoned its efforts to break into that country’s market. The anti-China stance has become part of the corporate strategy. Nick Clegg, president of the company, wrote an opinion article attacking chinaThe Washington Post, 2020, was the same year Zuckerberg attacked China during a congressional antitrust investigation. Then there was the quietlyMeta has funded American Edge, a non-profit organization that runs online ads critical of the country, and TikTok, a Chinese-owned social media platform.

Facebook has quietly funded small, grassroots groups to fight its battles in Washington

Chinese commentators who are aligned to the government’s agenda were angered by the meta attacks. China’s nationalists have accused Zuckerberg, who used geopolitics to avoid regulatory scrutiny at home. Some Chinese analysts claim that Meta is resorting to desperate measures to counter TikTok owner ByteDance’s increasing dominance in short video.

Analysts believe it’s not clear if China will strike back at the fledgling hardware firm for its comments about China. The business is still small compared with players like Apple and Tesla. Chinese manufacturers are known for being very quiet about business dealings. Although Chinese consumers are not permitted to use Facebook, Chinese companies invest heavily in Facebook ads to reach consumers all over the world.

Ming-Chi Kuo is an analyst at TF International Securities, Hong Kong, who regularly speaks to GoerTek, Meta’s Chinese supplier. He also said that Meta’s Chinese partners are closely monitoring the situation. GoerTek declined to comment.

KC Quah is a senior analyst at Gartner which is a technology research and advisory company. He said Meta raises concerns. “How can they not be seen to be talking on both sides of the table, buying heavily from China in order to build a hardware business while also having an anti-China strategy?” He stated. He said that China produces eighty percent and 80 percent respectively of smartphone components and smart watches.

Facebook was once one of the companies that worked hard to get by. China is a huge market for consumer technology. Zuckerberg posted photos of himself wearing a mask in Beijing’s Tiananmen square in 2016, more recently. made a speech in Mandarin.

China rejected US tech companies such as Facebook’s attempt to enter the market. By 2018, many had given in. Zuckerberg acknowledged in his 2019 Georgetown speech that the China dream was dead. “I worked really hard to make it happen. We never came to an agreement about what it would take to get there. He warned that there was “no guarantee” that American values ​​of free speech would prevail.

The company’s position has changed dramatically in China. Zuckerberg will soon dig deeper.

As Washington takes a swing at TikTok, Beijing asserts control

Zuckerberg used his opening remarks to criticize China at the 2020 congressional antitrust hearing. He stated that “well documented evidence” shows that the Chinese government has stolen technology from American companies. He also reiterated his belief that China was “building its version of the Internet,” which is against American values. He called Facebook “proudly American”, and described it as such. He pointed out that TikTok was their fastest-growing competitor.

A few people claimed that the speech was driven by political opportunism. They claimed that executives at the company’s Washington office believed they could deflect mounting criticism by pointing fingers to China.

The executives also wanted to find ways to align with the anti China wing of Trump’s administration. This wing has waged a war against China and slapped tit for tat tariffs. It was also pursuing its own campaign against TikTok.

They were trying to find the right things [Zuckerberg]One person spoke out about how the company decided on its anti-China strategy. “If you don’t want to try to be there anyway, you can still use it to your political advantage and compare yourself to Apple or TikTok.”

Trump’s tariffs have been mostly kept in place by the Biden administration so far. Analysts believe that with anti-China sentiment rising between the two major parties in Washington, that is unlikely will change. This is because Trump doesn’t want to be accused of being soft on China.

Two of the respondents said that executives are still hopeful that bringing back the hardware-focused company will change the conversation away from critiquing its business on social networks.

They are also well aware of the political risks associated with relying on China to manufacture a growing number of smartwatches, virtual reality headsets, and other devices. China-manufacturing companies have been criticized Trade wars and other political escalations have affected shipping jobs overseas and their businesses.

One person said, “You are replacing one set if problems with another.”

She reported the arrival of a Taiwanese shepherd. Lyric Lee from Seoul contributed.