Apple exploring the possibility of moving iPhone manufacturing to United States

Posted:
in iPhone edited November 2016
Primary iPhone assemblers Foxconn and Pegatron are said to have been evaluating the ability of the company to shift production of Apple's mobile devices to the U.S., with the verdict mixed on if the move would be cost-effective.




"Apple asked both Foxconn and Pegatron, the two iPhone assemblers, in June to look into making iPhones in the U.S.," a source told the Nikkei Asian Review. "Foxconn complied, while Pegatron declined to formulate such a plan due to cost concerns."

Reportedly, Foxconn Chief Executive Terry Gou was critical of the plan, saying that labor and other associated costs would more than double, should the plan come to fruition.

Pegatron was also reportedly tasked with developing a U.S. manufacture report, but declared the shift impossible due to costs.
A 35% cost increase, regardless if induced by labor and material shipping costs, or a tariff would likely passed on to consumers, making a $649 base-model iPhone retail for around $876.
The study was probably spawned because of potential political pressure and taxation for Apple promised by President Elect Donald Trump during campaigning for the office. Trump's campaign promise of a 35 percent tariff levied against products like the iPhone manufactured overseas, is presumed by the President Elect to give companies a significant economic incentive to bring manufacturing jobs back to the U.S.

"Although TSMC is very clear that it would be much more expensive to make chips outside of Taiwan, it's inevitable for the world's largest contract chipmaker to take 'Made in the U.S.' into consideration," said Sanford C. Bernstein analyst Mark Li. "The alternative is that it would lose Apple orders without moving to America."

Apple's stance on the matter

"To make iPhones, there will need to be a cluster of suppliers in the same place, which the U.S. does not have at the moment," Apple CEO Tim Cook said in an Dec. 2015 interview about a possible shift. "Even if Trump imposes a 45% tariff, it is still possible that manufacturers will decide to continue production overseas as long as the costs together with the tariffs are lower than the amount they need to spend on building and running production lines in the U.S."

A 35 percent cost increase, regardless if induced by labor and material shipping costs, or a tariff would likely passed on to consumers, making a $649 base-model iPhone retail for around $876.
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Comments

  • Reply 1 of 76
    tmaytmay Posts: 3,245member
    sog35 said:
    Why is Apple even doing this?

    Just gives more fuel to the fire that making iPhones in the USA is a good idea.
    Uh, so that Apple isn't caught flat-footed when President (Elect) Trump and the Republican Congress legislate new tariffs, if they actually do that. Apple needs to know what the costs are.

    Even then, I would note that these would only be shipped and sold within the U.S. and possible Canadian markets, and competitors would have the same tariff hurdle. The tradeoff is higher prices against increased U.S. jobs, but those jobs aren't going to the rust belt without subsidies, so yet again, cost increases. Most of the jobs will end up in Southern population centers, Texas primarily, and those jobs will go to first and second generation Hispanic Americans, who will be more accepting of a lower wage base.

    calisockrolidDeelronschlackrandominternetpersonwelshdogbaconstangadonissmuchiaviclauyyc
  • Reply 2 of 76
    jbdragonjbdragon Posts: 1,903member
    sog35 said:
    Why is Apple even doing this?

    Just gives more fuel to the fire that making iPhones in the USA is a good idea.
    More then $200 more on the base price iPhone is just crazy. To get a Plus version with 256 gig's will be like $1500. Who's going to pay these kind of prices? I'm not going to pay $880 for a lowest end iPhone. I'd have to go to the crap Android Platform.
    dasanman69duervo
  • Reply 3 of 76
    ben20ben20 Posts: 119member
    I do love to say today: I told you so before ! Apple can very quickly move parts of the iPhone manufacturing back to the United States, and provide jobs locally. Looking forward to hold an iPhone Made in America in my hands. And I happily will pay a few bucks more for it, just for the better quality and the support of America. Smart move by Apple ! It is a great idea to start to make products locally again - from violation of IP to shorter shipments times it's a win/win. 
    georgie01h2p
  • Reply 4 of 76
    SoliSoli Posts: 8,403member
    This would likely only be for final assembly, not for manufacturing.
    schlackbloggerblogviclauyyclolliverjony0
  • Reply 5 of 76
    If Apple could make their products in the US, that would be great ... again.
    georgie01tallest skil
  • Reply 6 of 76
    Serious question: Why would it cost more to make iPhones with robots in the USA than it would in China?
    calischlacktallest skil
  • Reply 7 of 76
    calicali Posts: 3,495member
     Here's an idea: 

     Apple has manufacturing plants in every country they sell in. This would reduce shipping times and costs in the long run correct? 

    Or am I wrong ?
  • Reply 8 of 76
    calicali Posts: 3,495member
    grangerfx said:
    Serious question: Why would it cost more to make iPhones with robots in the USA than it would in China?
    I was thinking the same. I don't believe it will cost more. Might actually cost less because of shipping
    schlack
  • Reply 9 of 76
    nasseraenasserae Posts: 3,152member
    Soli said:
    This would likely only be for final assembly, not for manufacturing.
    They will probably be assembled by machines with minimum human staff. Most components will come from overseas.
    sockrolidlightknight
  • Reply 10 of 76
    tmaytmay Posts: 3,245member
    cali said:
     Here's an idea: 

     Apple has manufacturing plants in every country they sell in. This would reduce shipping times and costs in the long run correct? 

    Or am I wrong ?
    Yes, you are wrong, and you can thank FedEx and UPS for low shipping costs in volume. It also helps that you can load 250,000 iPhones easily into the cargo bay of an aircraft and fly it in less than 24 hours to the U.S.
    edited November 2016 Deelronpatchythepiratewelshdogbaconstangchiaviclauyycdesignrlolliverduervo
  • Reply 11 of 76
    sockrolidsockrolid Posts: 2,788member
    Apple: "We want you to look into US-based iPhone manufacturing."

    Foxconn: "OK.  But it will involve robots.  Lots.  Of.  Robots."
    viclauyyclolliverargonaut
  • Reply 12 of 76
    SoliSoli Posts: 8,403member
    cali said:
     Here's an idea: 

     Apple has manufacturing plants in every country they sell in. This would reduce shipping times and costs in the long run correct? 

    Or am I wrong ?
    It would reduce shipping times and shipping costs once the final product is ready for shipping. It does not reduce other costs, and would cause many other costs to skyrocket.

    Now, let's say Apple does your "manufacturing plants in every country they sell in" plan. How would Antigua and Barbuda, with a population of only 85,600 (est. 2009) be able to effectively set up shop so that they could sell the very few units they sell in that country? And that's just one example. There are innumerable small countries, countries that don't have the manpower, resources, expertise, cost savings, or sales numbers to make this viable. The only way it works is in a global economy, not one where you separate each and every country.
    edited November 2016 patchythepiratechiaduervo
  • Reply 13 of 76
    Apple can effectively bring manufacturing into the US.  The problem is with scale.  Assuming they do not use robots we don't have enough people willing to work to get enough labor to man a large factory like they would need.  I would think they could start small and work into somethings versus completely bypassing the US for manufacturing.
  • Reply 14 of 76
    cali said:
    grangerfx said:
    Serious question: Why would it cost more to make iPhones with robots in the USA than it would in China?
    I was thinking the same. I don't believe it will cost more. Might actually cost less because of shipping
    Each robot would cost on average $35k and more on maintenance adding more complexity to the manufacturing process, things break. Offcause all those are non issues to the world's most richest company the real problem is that iPhone internals aren't designed to clic together like logo bricks, it's just too hard at the moment for a robot to reliably replicate the dexterity of the human hand
    viclauyyclolliver
  • Reply 15 of 76
    ipilyaipilya Posts: 185member
    I'd have to go to the crap Android Platform.
    Except that the Android prices would be impacted the same as the iPhones.
    Deelronchiaviclauyyclolliver
  • Reply 16 of 76

    "Although TSMC is very clear that it would be much more expensive to make chips outside of Taiwan, it's inevitable for the world's largest contract chipmaker to take 'Made in the U.S.' into consideration," said Sanford C. Bernstein analyst Mark Li. "The alternative is that it would lose Apple orders without moving to America."
    I don't understand this! 

    I've been in my share of clean rooms and making chips is not a labor intensive process.

  • Reply 17 of 76
    cali said:
    grangerfx said:
    Serious question: Why would it cost more to make iPhones with robots in the USA than it would in China?
    I was thinking the same. I don't believe it will cost more. Might actually cost less because of shipping
    Because robots are expensive, hence holyone's post above.
    lolliver
  • Reply 18 of 76
    the more excuses we hear about how hard/expensive it is the more reason we should be working hard to make it happen. not having self sufficiency in critical high tech devices in our own country is a HUGE risk if god forbid we ever have a world war again.  people need to understand assembly cost is a very small portion of the cost of our devices.  the majority of the cost is component cost, R&D, and marketing costs.

    we always have the options of bringing in large numbers of immigrants that are dieing to come to the US and have special development zones that have lower minimum wages for a transition time. it's a win win for everyone.   along with special economic zones where have massively reduced tax rates for factories brought back home.

    we also can consider imposing taxes on goods from other countries that have ridiculously low minimum wages. that will force other countries to stop exploiting their people for politician and elite profits at the same time helping to make our country more competitive. 
    edited November 2016 georgie01
  • Reply 19 of 76
    cali said:
     Here's an idea: 

     Apple has manufacturing plants in every country they sell in. This would reduce shipping times and costs in the long run correct? 

    Or am I wrong ?
    You mean manufacturing or assembly? The shipping times and cost are small compared to requiring dozens of parts suppliers to split their manufacturing across dozens of countries and retooling for every new product/part. Foxconn only really does the assembly and makes a few basic parts like the case. Besides, what is the point? If the goal is employment in USA, that won't be achieved anyway as Foxconn will either employ robots or immigrants and treat them terribly, like they do in their plants in Europe. Seems to me, the US should chase these corporations to pay the tax they owe and invest that into public services and infrastructure rather than forcing them to deglobalise 
    tmaylolliverduervo
  • Reply 20 of 76
    wigginwiggin Posts: 2,264member
    cali said:
     Here's an idea: 

     Apple has manufacturing plants in every country they sell in. This would reduce shipping times and costs in the long run correct? 

    Or am I wrong ?
    That would be a parts supply chain nightmare! One country will have a surplus of part X while another is running low. Tracking and warehousing the parts at each location would be expensive. Every location would have to have a full set of skilled labor (and/or robots) and one assembly line might sit idle because they have surplus finished product in their country's sales channel while another assembly line in another country would be struggling to keep up with their demand. And every time Apple updates the design, manufacturing engineers would need to travel to each and every assembly line to implement, test and verify the new process to ensure it is meeting Apple's strict quality standards.
    edited November 2016 mike1chiaiosenthusiast
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