Chinese manufacturers not likely to follow Apple iPhone manufacturing migration to US
Despite some research by Foxconn with a slightly positive angle towards moving some efforts to the U.S., other Apple supply chain vendors are likely to not move, citing labor and operating costs.
According to Chinese-language qq, suppliers like Lens Technologies, an iPhone glass vendor, will not set up shop in the U.S., even if Foxconn does. Lens cites high-wage workers and reluctance amongst the U.S. workforce to accept variable schedules depending on surges and dips in product demands.
Positives to U.S. factories cited by Lens are lower power and land costs.
Another, unnamed, Apple parts vendor quoted by the report says that a complete supply chain won't exist in the U.S., making the entire fabrication process more nimble in China. An order involving molding metal components takes about 10 days in Shenzhen, but will likely take a month or more in the U.S. without a complete process in-country.
In June, Apple reportedly asked iPhone assemblers Foxconn and Pegatron to evaluate the possibility of moving manufacturing efforts to the U.S. Foxconn Chief Executive Terry Gou was said to be critical of the plan, saying that labor and other associated costs would more than double, should the plan come to fruition.
Pegatron denied to develop a plan, citing obvious cost concerns.
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.
"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 percent 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. Studies vary on the exact impact, but range between a 10 and 20 percent in Apple's cost to manufacture the phone, between increased labor costs, and the need to ship some components and materials to the U.S. plant.
According to Chinese-language qq, suppliers like Lens Technologies, an iPhone glass vendor, will not set up shop in the U.S., even if Foxconn does. Lens cites high-wage workers and reluctance amongst the U.S. workforce to accept variable schedules depending on surges and dips in product demands.
Positives to U.S. factories cited by Lens are lower power and land costs.
Another, unnamed, Apple parts vendor quoted by the report says that a complete supply chain won't exist in the U.S., making the entire fabrication process more nimble in China. An order involving molding metal components takes about 10 days in Shenzhen, but will likely take a month or more in the U.S. without a complete process in-country.
In June, Apple reportedly asked iPhone assemblers Foxconn and Pegatron to evaluate the possibility of moving manufacturing efforts to the U.S. Foxconn Chief Executive Terry Gou was said to be critical of the plan, saying that labor and other associated costs would more than double, should the plan come to fruition.
Pegatron denied to develop a plan, citing obvious cost concerns.
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.
"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 percent 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. Studies vary on the exact impact, but range between a 10 and 20 percent in Apple's cost to manufacture the phone, between increased labor costs, and the need to ship some components and materials to the U.S. plant.
Comments
Concerned citizens absolutely should debate these types of issues. In fact, I think the future of democracy in the US -- and the world more generally -- depends now, more than ever, on concerned citizens paying attention to what is happening and talking about it.
I recognize that AI is a privately owned company and that the editors are well within their rights to suppress such debate. But I hope they won't. Instead, I'd prefer that they just enforce rules about personal attacks, trolling, and off-topic posting. Given the nature of this story, I think the debate is on-topic. If AI really doesn't want anything other than technology discussions, then they should avoid posting stories that stray from the world of technology.
What would those incentives be? Well... how about
1. a massive tax cut that would allow them to repatriate foreign taxes
2. a massive increase in tariffs on the imports of competing products
3. zero enforcement of anti-trust laws against Apple
4. long term federal government contracts for Macs, iPhones, and iPads
Those things could enable Apple to become the US monopolist (or near-monopolist) in smartphones and tablets, and would give them the opportunity to significantly expand Mac marketshare in the US.
Such a deal would be terrible for consumers. It would create some jobs, and that would be great publicity for Trump. The loss to consumers would be far greater than the gains to workers, but that wouldn't be obvious, certainly not right away.
Yes, there would be a trade war, and that would probably lock Apple out of China. But from Apple's point of view, that tradeoff might be acceptable -- even desirable. China is a risky place to do business for an American company, even in the best of times. Giving up China in exchange for a near-monopoly in the US might be a good deal.
Note -- I'm not happy about the scenario I'm describing here. Not at all. I'm just trying to figure out what might happen.
this to is disturbing!
Manufacturing some parts in the US might be more likely, such as iPhone cover glass.
But nearly the entire electronics and miniature-hardware production ecosystem, which includes the engineering and knowledge over the last 50 years, more than two generations, is in Asia. Entire industries established over entire regions and several countries do not transplant well.
Boeing can't make 757s in Kazakstan. Apple can't make AirPods in the US. With great difficulty, some small percentage of assembly could happen here. But what Apple can only do in the US is the intellectual innovation, the engineering, of developing the products, including the software.
Let them concentrate on that as they expand and refocus in their new headquarters.
That combined with rumors from last year where it was alleged that Apple tried to drive down component prices to maintain the same profit margin. Leads me to believe that Apple would go this route first.
Now, I wouldn't be surprised if Apple somehow got trump to turn the tarrifs around and instead of imposing them on American companies not manufacturing in USA. Raises tarrifs on foreign competition forcing those companies to make THERE provide in USA in order to better compete. Forcing them to invest money into America to keep costs the same. Like India for example. If you want to sell products in our country they need to be made in our country.