China is not state-subsidized / running at a loss on materials so much (although they probably get cheaper rare earth minerals) - they're running at a loss on wages. There's no "loss" there - the state doesn't have to buy labor and sell it to the companies to put into the product at a loss - the companies simply pay less overall in terms of labor, because that's the prevailing rate.

Even if you paid 5% more for materials for an iphone but could pay 50% less for labor than China, you could probably beat China.

How does the state sponsoring come in? The state represses the people and the wages and prevents them from leaving for greener pastures in many cases, which benefits the corporations.