What Apple would have to do to comply with Donald Trump's American-built mandate

AppleInsider

President-elect Donald Trump has pushed a protectionist proposal that could to force Apple "to build their damn computers and things in this country." It's a suggestion that has been outright dismissed by most observers -- but should it be?

Worker prepares iPhone for final assembly. | Source: Apple Supplier Responsibility Report

Editor's note: This article was originally published by AppleInsider in January when Trump was a Republican candidate for president. It has been updated and republished to reflect his election. Trump's campaign promise is based in part on the imposition of a 35 percent tariff on products manufactured overseas. This would, he believes, give companies a significant economic incentive to bring manufacturing jobs back to the U.S. There are more than a few holes in this line of reasoning: It would be diplomatically disastrous, and there's no data to suggest that an American manufacturing sector built on a foundation of heavy industry would be nimble enough to take on this kind of challenge at a large scale. Nonetheless, the president does have the power to impose protectionist tariffs, so let's see how Apple could handle it. Before you read on, it's important to note that we're performing a somewhat naive analysis: We're focusing on what essentially constitutes final assembly, and ignoring the very real economies that come from having nearly the entire supply chain around the corner.

Cheap labor gets expensive

Employee wages are almost always the first factor cited when discussing manufacturing in the developing world. Shenzhen has one of the highest wage floors in China, and its minimum statutory wage clocks in at around ?2,000 -- about $300 per month. That's less than a quarter of what it would cost for an employee working a nominal 160-hour month at Wyoming's $5.15-per-hour minimum wage, the lowest in the U.S. If we assume the fully-loaded cost of a single employee is 1.5 times their salary, that works out to around $1,200 per month. One U.S. employee costs four times as much as a single Chinese employee. Of course, Apple would likely continue to contract with third parties for their hypothetical new U.S. assembly plant -- as they've done with Flextronics in the Mac Pro's Texas facility -- making them responsible for a smaller portion of employees' compensation. That's still a significant jump, though. So how to solve it?

I, for one, welcome our new robot overlords

The easiest path forward would be to erase labor costs entirely by building fully-automated factories. They've certainly got the pedigree; Steve Jobs spent exorbitantly to build a robotic factory for NeXT in the company's formative days. Unfortunately, it's not as easy as just calling ABB and ordering a few 'bots. Each robot must be programmed -- and in many cases, designed from the ground up -- for its specific task, and there are some jobs that still require levels of dexterity that robots simply can't achieve. They're also expensive, with basic off-the-shelf models coming in at $10,000 to $20,000 each and more complex versions running as much as $100,000. Taiwan-based Foxconn is thought to have around 350,000 employees dedicated to iPhone assembly -- that's $12.25 billion worth of robots, assuming an average cost of $35,000. Of course, the richest company in the world could afford it, but it wouldn't help much when you consider that many supply chain guesstimators currently peg labor costs at no more than $5 per iPhone. Don't forget that they'll also have to make Macs, iPads, Apple Pencils, Magic Trackpads, and the rest of Apple's product line -- which means more robots and more infrastructure.

Apple's manufacturing facility in Cork, Ireland

So what then?

No matter how creative Apple gets in restructuring its manufacturing operations, there's simply no way they could absorb a 35-percent increase in overhead. That cost would be passed on to consumers, making the $649 base-model iPhone $876. And those same consumers would also have less money to spend, because the massive multi-billion dollar investment in industrial robotics will likely have put at least a few more blue collar workers out of a job.

tralalalalalala

The poor and lower middle class who have been left out of the economy for the past two decades due to globalist elites might still be worth supporting. (note: all wealth gain has gone to the top 1% in the US since the 1970s) Because our current system (and that proposed by the dems) is that it is better to not have a job than have a job that you don't want (one reason the dems voicing support the US economy losing 2 million people in the workforce due to the affordable care act), it could be an improvement to actually raise costs and reduce taxes. Consider: walmart pays their workers next to nothing because of the tacit agreement with the elite that their workers will be subsidized an additional $18 or so from our taxes in the form of earned income tax credits (for example). tl;dr: We could raise costs and lower taxes and improve the quality of life for Americans. Is it worth propping up the anti-human right Chinese govt. with our innovative technologies and growing their economy while our 99% suffer?

morky

The robotics solution will play out eventually, regardless of mandates.

robin huber

On the one hand it seems silly to even dignify Trumps ridiculous ravings with a serious consideration such as this. But I agree with Tralala that it would be better if we did get serious about technical education in this country and re- start manufacturing. 

knowitall

Apple will be kicked out of China and lose its most important (future) market. Apple will not be able to sell to other future markets like Brazil and possibly India. In short it will be the end of Apple.

frankie

tralalalalalala said:

The poor and lower middle class who have been left out of the economy for the past two decades due to globalist elites might still be worth supporting. (note: all wealth gain has gone to the top 1% in the US since the 1970s) Because our current system (and that proposed by the dems) is that it is better to not have a job than have a job that you don't want (one reason the dems voicing support the US economy losing 2 million people in the workforce due to the affordable care act), it could be an improvement to actually raise costs and reduce taxes. Consider: walmart pays their workers next to nothing because of the tacit agreement with the elite that their workers will be subsidized an additional $18 or so from our taxes in the form of earned income tax credits (for example). tl;dr: We could raise costs and lower taxes and improve the quality of life for Americans. Is it worth propping up the anti-human right Chinese govt. with our innovative technologies and growing their economy while our 99% suffer?

Or we could actually make multibillion dollar corps actually pay taxes, living wages, keep jobs in America, and make BUYING that allows all these illegal.

thewhitefalcon

frankie said:

tralalalalalala said:

The poor and lower middle class who have been left out of the economy for the past two decades due to globalist elites might still be worth supporting. (note: all wealth gain has gone to the top 1% in the US since the 1970s) Because our current system (and that proposed by the dems) is that it is better to not have a job than have a job that you don't want (one reason the dems voicing support the US economy losing 2 million people in the workforce due to the affordable care act), it could be an improvement to actually raise costs and reduce taxes. Consider: walmart pays their workers next to nothing because of the tacit agreement with the elite that their workers will be subsidized an additional $18 or so from our taxes in the form of earned income tax credits (for example). tl;dr: We could raise costs and lower taxes and improve the quality of life for Americans. Is it worth propping up the anti-human right Chinese govt. with our innovative technologies and growing their economy while our 99% suffer?

Or we could actually make multibillion dollar corps actually pay taxes, living wages, keep jobs in America, and make BUYING that allows all these illegal.

So...communism then. Or fascism. At any rate, the government would control everything. 


We conservatives are doing our best to stop this maniac, but we're probably going to have to destroy the GOP to do it, so...buckle up. 

bloggerblog

It's not about labor costs, in the end they're negligible, that is a fact that has been proven accurate over and again. Besides, cheap labor is not the majority of the operation and the number of laborers is usually imposed by governments to increase their workforce. The real problem, as Tim and Jobs said in the past is INFRASTRUCTURE!

mike1

frankie said:

tralalalalalala said:

The poor and lower middle class who have been left out of the economy for the past two decades due to globalist elites might still be worth supporting. (note: all wealth gain has gone to the top 1% in the US since the 1970s) Because our current system (and that proposed by the dems) is that it is better to not have a job than have a job that you don't want (one reason the dems voicing support the US economy losing 2 million people in the workforce due to the affordable care act), it could be an improvement to actually raise costs and reduce taxes. Consider: walmart pays their workers next to nothing because of the tacit agreement with the elite that their workers will be subsidized an additional $18 or so from our taxes in the form of earned income tax credits (for example). tl;dr: We could raise costs and lower taxes and improve the quality of life for Americans. Is it worth propping up the anti-human right Chinese govt. with our innovative technologies and growing their economy while our 99% suffer?

Or we could actually make multibillion dollar corps actually pay taxes, living wages, keep jobs in America, and make BUYING that allows all these illegal.

Communist/Socialist drivel.

farmboy

frankie said:

tralalalalalala said:

The poor and lower middle class who have been left out of the economy for the past two decades due to globalist elites might still be worth supporting. (note: all wealth gain has gone to the top 1% in the US since the 1970s) Because our current system (and that proposed by the dems) is that it is better to not have a job than have a job that you don't want (one reason the dems voicing support the US economy losing 2 million people in the workforce due to the affordable care act), it could be an improvement to actually raise costs and reduce taxes. Consider: walmart pays their workers next to nothing because of the tacit agreement with the elite that their workers will be subsidized an additional $18 or so from our taxes in the form of earned income tax credits (for example). tl;dr: We could raise costs and lower taxes and improve the quality of life for Americans. Is it worth propping up the anti-human right Chinese govt. with our innovative technologies and growing their economy while our 99% suffer?

Or we could actually make multibillion dollar corps actually pay taxes, living wages, keep jobs in America, and make BUYING that allows all these illegal.

Sorry, the issue is so complex at this point that it will never be put back in that "Made in USA" box, ever again. 

Fcastle

thewhitefalcon said:

frankie said:

Or we could actually make multibillion dollar corps actually pay taxes, living wages, keep jobs in America, and make BUYING that allows all these illegal.

So...communism then. Or fascism. At any rate, the government would control everything. 


We conservatives are doing our best to stop this maniac, but we're probably going to have to destroy the GOP to do it, so...buckle up. 

You clearly have no knowledge or understanding of communism or fascism. Read a book, for crying out loud.

farmboy

tralalalalalala said:

The poor and lower middle class who have been left out of the economy for the past two decades due to globalist elites might still be worth supporting. (note: all wealth gain has gone to the top 1% in the US since the 1970s) Because our current system (and that proposed by the dems) is that it is better to not have a job than have a job that you don't want (one reason the dems voicing support the US economy losing 2 million people in the workforce due to the affordable care act), it could be an improvement to actually raise costs and reduce taxes. Consider: walmart pays their workers next to nothing because of the tacit agreement with the elite that their workers will be subsidized an additional $18 or so from our taxes in the form of earned income tax credits (for example). tl;dr: We could raise costs and lower taxes and improve the quality of life for Americans. Is it worth propping up the anti-human right Chinese govt. with our innovative technologies and growing their economy while our 99% suffer?

I can see that you're more interested in polemics than facts, but regarding the "losing 2 million" jobs:

from the Christian Science Monitor:
"But the report doesn’t predict that businesses are going to dump workers because of Obamacare. It frames the issue in terms of worker choice. By giving workers more options for accessing health insurance, with possible subsidies, the ACA gives workers more freedom to work fewer hours – which could cause a reduction in labor force participation, the CBO report says.

jdgarvin50

Okay, so if overseas labor costs are estimated at $5 and moving to the U.S. would quadruple that, then we're only talking about $20 in labor costs here. I've read elsewhere the real issue is build response time and availability of engineers in the U.S. I think the example was that a project that could be done in 30 days in Taiwan would take 9 months here. Mr_Grey's link above is to a more contemporary take on that, post Trump's "build their damn computers and things here" statement.

launfall

It wouldn't just be Apple. ALL manufacturing would have to be brought home. You can't single out one company. It would essentially be the end of the USA as all nations would become economic protectionists, buying only those goods they manufacture. Which is why we have a congress that is very business-oriented, and why we will never have to worry about Trump being elected. And a little tip to Tralala...the last thing in the world the Republican party wants is full employment. Unemployment in 8% range is most desirable as it keeps wages down. Your anti-Democrat stance is evidence of your ignorance about world economies.

mjtomlin

robin huber said:

On the one hand it seems silly to even dignify Trumps ridiculous ravings with a serious consideration such as this. But I agree with Tralala that it would be better if we did get serious about technical education in this country and re- start manufacturing. 

That should be Tim Cook's response... "Hey, Trump! We'll start thinking about moving manufacturing back to the US, when this fucking government starts thinking (and doing something) about the failing public education system in this country!"

bobringer

Federal minimum wage "trumps" Wyoming's minimum wage. It's not $5.15 in Wyoming. It's $7.25.

rcomeau

How many Apple employees are employed in the US? How much money from foreign sales help pay for that?

The days of manufacturing anything in one country (or even tracking that sort of thing) are over. Your customers are worldwide. Your supply chain is worldwide. Your manufacturing is worldwide. This is the world today.

Have a look at countries with protectionist rules like the ones Trump is suggesting: Brazil, Argentina, etc... How are they doing? Do they have a healthy middle class? No, they have worse rich/poor distribution than we do.

suddenly newton

"Damn computers" indeed.

rotateleftbyte

knowitall said:

Apple will be kicked out of China and lose its most important (future) market. Apple will not be able to sell to other future markets like Brazil and possibly India. In short it will be the end of Apple.

As well as HP, Dell, Microsoft etc.

Tariffs work two ways.  If the US imposes this then I am 99% sure that countries will retaliate with similar rates. DT should know this but like any Politician, he forgets what is the 'Inconvenient Truth'.
The EU is a bigger market than the USA. Suddenly no US products can be sold in the EU without a 35% Import tariff. What then eh?
What then for all those jobs in the US then?
When South America imposes tariffs
When Asia does the same?
As a non American, my view that this man is a danger to the world. He won't save the USA.

slurpy

thewhitefalcon said:

frankie said:

Or we could actually make multibillion dollar corps actually pay taxes, living wages, keep jobs in America, and make BUYING that allows all these illegal.

So...communism then. Or fascism. At any rate, the government would control everything. 


We conservatives are doing our best to stop this maniac, but we're probably going to have to destroy the GOP to do it, so...buckle up. 

Well, "your best" is pretty pathetic then, since he's in the lead by leaps and bounds. Face it, he's the face of your party, and the dream candidate of "conservatives" and most republicans in the US- he's who they want. What does that say about the GOP and their voters? Own it. He's the natural product of the nastiness the party and its candidates have been espousing for years, and they created his base.  And I've seen enough of your posts to know that you participate and condone this nastiness, on multiple levels. 

bweston

I'm not speaking as a Trump supporter… he's not my guy… but I can't stand media mischaracterizations, and this is just one of a litany of such…

There was no "mandate", nor did he say anything about "forcing" Apple to do anything. Specific words spoken, in the context of Making America Great Again, were "I think we're going to get things coming. We're going to get Apple to start building their damn computers and things in this country instead of in other countries."

This reads as if to say "we are going to make Apple WANT to start building their damn computers in this country again"… again, you make America great, manufacturing comes back here. It is irresponsible to use the word "mandate" or to assume that he was talking about doing anything by force.