US iPhone production's main challenge is a century of big business labor decisions

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Despite repeated political promises recently saying otherwise, because of federal wants and big business needs over the last 100 years, the U.S. lacks both the low-cost labor and specialized manufacturing workforce needed to bring iPhone production home.

Tim Cook visiting a Foxconn assembly line in China
Tim Cook visiting a Foxconn assembly line in China



On Tuesday, White House Press Secretary Karoline Leavitt answered whether Trump believes iPhone production could ultimately move to the US. Allegedly, he thinks the U.S. has the money and labor to float such a project.

That is not the case.

To be clear, this isn't just an Apple problem. This is a problem for manufacturing, especially electronics manufacturing, across the board.

However, with all the talk of how much these tariffs are going to make future iPhone models cost, let's take some time to examine how this might affect Cupertino.

Made in China



When I was a child, nearly any time I turned over a knickknack or doodad, there'd inevitably be a little golden sticker on the bottom that said "Made in China." At the time, I had no idea what that meant; I simply thought everything must be, and must have been, made in China.

A small gold sticker on a fingertip reads 'MADE IN CHINA,' with a blurred pattern of similar stickers in the background.
Made in China stickers



And, as it turned out, I was half right. When I was born, the United States imported $4.77 billion in trade goods from China. Ten years later, in 1996, that number grew to, $51.51 billion, an increase of more than tenfold.

Line graph shows U.S. imports from China rising from 1985, peaking in 2018, with fluctuations thereafter, measured in billion U.S. dollars.
Image Credit: Statista Research Department



A little over two decades later, that number had grown more than tenfold again, reaching a staggering all-time high of $538.51 billion in 2018. That's a lot of knickknacks and doodads.

All of this was encouraged by customer spending, US government initiatives, and big business need to appease investors by having eternal growth.

So, for as long as I've been alive, the U.S. has been steadily growing more dependent on China for its goods. Let's take a look at how we got to this point, and how some decisions made decades ago echo to today.

400 Million Customers



America's modern trade relationship with China was established in the 1930s. At that time, however, we weren't looking to buy products from China, but rather to sell China our products.

NPR has a fantastic piece on the history of modern U.S.-China trade relations, but I'll give you the broad strokes. Nevertheless, I suggest you check it out.

In the early 1910s, Carl Crow, a journalist, writer, and later on, businessman, moved to China to cover the country's national revolution. During his time there, he realized that something far more lucrative awaited him: a career in advertising.

Crow went on to found Carl Crow Inc. in 1920. It was an advertising agency specializing in driving sales of American-made goods, like Buicks, Colgate toothpaste, and Kodak cameras to the Chinese market.

Book cover titled '400 Million Customers' by Carl Crow, featuring colorful signs and neon lights resembling a bustling street scene.
Image Credit: Katya Knyazeva (avezink) on LiveJournal



Crow did quite well, and in 1937 wrote a book called 400 Million Customers: The Experiences -- Some Happy, Some Sad -- of an American in China and What They Taught Him. Not only was the book an award-winning bestseller, it also opened America's eyes to the idea of selling large quantities of goods to a then-mostly untapped market.

However, things quickly went askew, as they often do. In 1938, the "War of Resistance" between China and Japan made trade far more difficult.

In the following decade, the Chinese Communist Revolution took place. Then, between the Cold War and the war in Korea, the U.S. decided to slap China with a strict trade embargo in 1950.

800 million workers



It would take two more decades before the tensions between the U.S. and China eased, but things began to calm down in the 1970s. Slowly, China-made goods trickled into America. Some of the first goods were luxury-made textiles, spurred by America's recent fascination with East Asian culture.

It didn't take long before American businesses saw a new use for China: millions of workers willing to work for a fraction of what domestic labor costs. It also didn't hurt that container shipping had been doing quite well for itself by that point.

Much like the textile workers of 1800s England came to fear and hate the automation and industrialization spurred by stocking frames, American textile workers pushed back against China-made goods.

Yet, by the 1980s, many American businesses -- including Apple -- had already begun outsourcing work.

A corporate symbiotic relationship



Throughout the '80s and '90s, most of Apple's products were still made in America. But a fortuitous relationship between Apple and Taiwan-based Foxconn began to blossom in the late '90s, and would ultimately lead to the situation Apple finds itself in today.

Foxconn is the world's largest electronics manufacturer and has twelve factories scattered across China. While around 95% of iPhones are assembled in China, Foxconn unquestionably assembles the most iPhones -- about 70%.

It was a long road to get there, but one that would tether Apple to China for the foreseeable future.

One year after he took the reins as Apple CEO, Tim Cook made a trip to Foxconn's newly built Zhengzhou Technology Park -- which is now often referred to as "iPhone City." At that time, the facility employed roughly 120,000 people.

Workers in a Foxconn factory
Workers in a Foxconn factory



That number would grow to 200,000 in 2022. It's hard to say if Apple is the reason Foxconn is so successful, or if it's the other way around. Likely the answer is somewhere in the middle, as it's been wildly profitable for both businesses.

And Foxconn is hardly the only foreign company that Apple is inextricably bound to. The Taiwan Semiconductor Manufacturing Company, or TSMC, makes the semiconductors Apple uses in its products.

As a result, Apple accounts for the most significant portion of TSMC's annual revenue -- about 25.2%.

TSMC
TSMC



And while TSMC does have a plant in Arizona, it wasn't until September 2024 that it began producing chips. In fact, TSMC's Fab 21 was beset with issues from the very start.

Unfortunately, TSMC's second Arizona plant seems to be facing similar issues. That's why most of TSMC's chips, including those in the Apple Silicon lineup, are still manufactured in Taiwan.

Samsung Display, based in South Korea, is the primary supplier of iPhone and iPad displays. Its production plants are based in China, Vietnam, and India.

Virtually every part of Apple's supply chain is tied to countries hit hard by the Trump Administration's tariff plan.

There is no 'pulling out' of China.



Some may ask why Apple doesn't just build its factories here; after all, the company has shown that it's at least somewhat amenable to the idea of putting factories on US soil. Presumably, that would solve all of this trade war business.

Amkor's headquarters in Arizona
Amkor's headquarters in Arizona



There's a glaring problem behind that and one that likely cannot be solved easily, if at all.

For better or worse, Apple is primarily a provider of physical goods.

Sure, the tech giant has Apple Music, Apple TV+, Apple News, Apple Fitness+, the App Store -- any of the digital services that it provides. And yes, Services profits have been growing steadily in the past several years.

In 2024, Services accounted for 25% of Apple's $391 billion revenue -- not too shabby.

However, the iPhone still makes up 51% of that revenue, or $201.2 billion. And Mac, iPad, Apple Watch, HomePod, and AirPods make up 24% -- almost just as much as Services.

If Apple were suddenly unable to sell physical goods at a decent profit, it would be a devastating blow to the company. Possibly even one that it would not survive -- and that's before it attempted to build new factories in the U.S.

Dan Ives told CNN that it would take about $30 billion and three years for Apple to move its global supply chain back to American soil.

But with what money is it expected to do this -- the money from Services? That seems highly unlikely.

And even if Apple did manage to build these factories on a reasonable time scale with what money it could hurriedly scrape together, it would still need to solve its biggest problem: domestic labor.

Human beings screwing in little, little screws



In America, we, at least for the time being, have something called federal minimum wage. While you can certainly argue that it's not a living wage, it's still a wage that employees are guaranteed.

Foxconn pays the average factory worker somewhere around $3 per hour, and expects them to work for ten to twelve hours a day. That means the factory is paying each worker, on average, $30-$36 per day. There are some opportunities to earn overtime, but even still, the cost of labor is relatively cheap.

American factory workers who went in at federal minimum wage, which is $7.25 per hour, would receive $58 if they worked a full 8-hour day. If they were expected to work 10 to 12 hours each day, the factory would need to pay them an additional $21.76-$43.52 in overtime.

And, if these factory workers lived in one of the 34 states and territories that have state wages above federal minimum, it'd only get more expensive. Arizona, for instance, has a state-set minimum wage of $14.70, making an 8-hour day cost $117.60.

So, either the factory needs to compromise on hours or compromise on money. Of course, that assumes you'd get American workers into a factory for minimum wage.

No one in America is going to assemble iPhones for minimum wage. I'd be willing to bet you'd be hard-pressed to find someone willing to do it for $15 or $20 per hour.

Factory work is tedious, at best. It is relentless, brutally dangerous, and lonely at worst. Some of you who have been following Apple as a company for at least a decade or so probably remember the string of worker suicides that primarily took place in 2010.

And, culturally, East Asia expects quite a bit more out of their average worker. In 2021, Vietnamese workers were asked to live on-site to help prevent the spread of Covid-19. They slept in little tents on the floor of the factory.

Image Credit: Giang Son Dong/Giang Son Dong
Vietnamese factory workers slept on the floor in tents | Image Credit: Giang Son Dong/Giang Son Dong



Americans do not typically work jobs that see them doing the same task, in and out, for eight hours a day. This is not something our culture has normalized in the last several decades.

And, even when Henry Ford did it, workers didn't exactly love it either. And that's despite Ford paying wages well above what the average worker could expect elsewhere as part of his Five Dollar Day program.

At $7.25 per hour, you can easily find more gainful employment elsewhere. And even at $15, you can likely find the same employment working as a cashier in nearly any national chain grocery store.

And, odds are, you're probably not going to be asked to sleep on the floor of your local Aldi to prevent a temporary store closure.

Of course, Commerce Secretary Howard Lutnick recently and enthusiastically told CBS' Face the Nation that Americans would have "the greatest resurgence of jobs in the history of America to work on these high-tech factories, which are all coming to America."

He said that "the army of millions and millions of human beings screwing in little, little screws to make iPhones, that kind of thing is going to come to America." He then followed it up by saying, "It's going to be automated."

He then noted that the factories would need HVAC technicians, electricians, and tradespeople to help keep everything running smoothly. While that is true, it's putting the cart before the horse a bit.

Image Credit: iFixit
Image Credit: iFixit



Currently, iPhone production and assembly are not automated much, if at all. And while Apple has plans to wade into automation, with the end goal of reducing the number of workers in factories by 50%, it's not there yet.

As it turns out, those little, little screws still need that army.

Factory work is hardly low skill



In America, we have the ugly habit of assuming all manual labor is low-skill. We tell our kids to do good in school and get a degree in college so they don't become ditch diggers -- and as the daughter of a one-time ditch digger, I take pretty big offense to that.

But you know who doesn't have that outlook? Tim Cook.

In 2018, Cook sat down with Fortune's Adam Lashinky to discuss why people shouldn't look at China-based labor as low-cost, but rather highly specialized. As it turns out, China has the U.S. beat in one key area: precision tooling.



Vocational training is not seen as taking the "lower path" in China, while many other countries have de-emphasized vocational trades. Because these trades are still considered worthwhile, China has a wealth of tooling engineers.

America, on the other hand, doesn't have that many. In fact, I didn't even know what a tooling engineer was, let alone how critical they are to product manufacturing until just now.

But there is someone who knows what tooling engineers are: Tim Cook.

Tim Cook visits Luxshare factory in 2017. Source: Apple
Tim Cook visits Luxshare factory in 2017. Source: Apple



"The products we do require really advanced tooling. And the precision that you have to have in tooling and working with the materials that we do are state-of-the-art," Cook said in the interview. "And the tooling skill is very deep [in China]."

"In the U.S. you could have a meeting of tooling engineers and I'm not sure we could fill the room. In China you could fill multiple football fields."

Tooling engineers are highly specialized workers who fall somewhere between craftsmen and traditional mechanical and electrical engineers. It's very much an engineering job, but it's also a job that requires an eye for design and a keen sense of problem-solving.

It's also a very long educational process for just the training, much less the experience that Apple will need. This is literally a skill that will require a generation to fill in the quantity that Apple will need.

China has been honing this skill for decades to meet the demands of its trade partners. They aren't innate skills, aren't easily transferrable to robots, or are quickly taught to people who have no experience in manufacturing at the scale Apple needs.

And, China literally does not let them leave the country.

So, while it is possible that Apple could open factories in the United States, it's not as easy as telling Apple that it needs to do it soon. And it's certainly not made easier by jacking up the cost of materials now.

Even if it had the money to do so, and even if it got the workforce to agree to it, American factories would still manufacture products slower and at a lower quality, at least until Americans get an eye for this kind of manufacturing.

Even so, that doesn't change the fact that a domestically produced iPhone would likely be prohibitively expensive. I'm a bit skeptical that we'd see prices jump to $100,000 per iPhone, but $3000 is in the realm of possibility given 145% tariffs on China now, and the reality of US labor and the costs to build that capacity out going forward probably 10 years.

Apple will likely continue to increase manufacturing in the U.S. in the future, that's almost for certain. It is not a short-term thing, and if it happens at all, it will take probably six years at a minimum for low-yield high-defect production.

But, to answer the question: is Apple going to make the iPhone in America?

As Needham analyst Laura Martin aptly put it, "I don't think that is a thing."



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Comments

  • Reply 1 of 11
    iadlibiadlib Posts: 122member
    Dan Ives told CNN that it would take about $30 billion and three years for Apple to move its global supply chain back to American soil.
    But with what money is it expected to do this — the money from Services? That seems highly unlikely.


    UMM Apple has 162 billion in cash and cash equivalent assets. Had they not spent so much money on stock buy backs they’d have more. They can financially make this move happen. Whether it’s lucrative. That’s a different story. 

    williamlondondewmejib
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  • Reply 2 of 11
    iadlib said:


    UMM Apple has 162 billion in cash and cash equivalent assets. Had they not spent so much money on stock buy backs they’d have more. They can financially make this move happen. Whether it’s lucrative. That’s a different story. 

    UMM...  Shares are money - buying back shares keeps that money in the company (which is valued by its share capital) and they can be re-issued again if required - there is no loss.

    What really destroys wealth is a carrot top that finds ways of reducing the profits of global American companies.

    jroyAulanijib
     3Likes 0Dislikes 0Informatives
  • Reply 3 of 11
    Wow. I spent a lot of time in International logistics and about 12 years in supply chain management for companies that were moving production from Asia to North America (mostly Mexico, but some US), and you did a very good job covering the labor portion of it.

    There's more to it: any consumer electronics contain tons of tiny parts (resistors and capacitors, wiring, etc.) that cost virtually nothing, as in a hundredth of a penny or so. Costs don't get added up the supply chain, they get multiplied, so having the price of these parts move significantly from virtually nothing can have a very significant impact. Producing them domestically or even in Mexico adds a lot of cost.

    US customs is a complete joke. Parts can fly right through or be arbitrarily held for months. I think people can figure out the details, but this adds a lot of cost.

    US regulation swings between inattentive / useless, and capricious / arbitrary. We all know about companies abusing this, but you don't hear as much about regulators deciding suddenly one day they're going to interpret a rule differently and make an example out of somebody: usually a smaller business that can't fight back. And a company somebody spent years or decades building is just gone because a bureaucrat had a whim.

    I could go on and on, but it's a tough problem. Thinking they could move the supply chain back to the US in three years is hilarious. 15 years would be reasonable.
    edited April 10
    thtneoncatnubuspsliceAulanijib
     6Likes 0Dislikes 0Informatives
  • Reply 4 of 11
    ecarlseen said:
    Wow. I spent a lot of time in International logistics and about 12 years in supply chain management for companies that were moving production from Asia to North America (mostly Mexico, but some US), and you did a very good job covering the labor portion of it.

    There's more to it: any consumer electronics contain tons of tiny parts (resistors and capacitors, wiring, etc.) that cost virtually nothing, as in a hundredth of a penny or so. Costs don't get added up the supply chain, they get multiplied, so having the price of these parts move significantly from virtually nothing can have a very significant impact. Producing them domestically or even in Mexico adds a lot of cost.

    US customs is a complete joke. Parts can fly right through or be arbitrarily held for months. I think people can figure out the details, but this adds a lot of cost.

    US regulation swings between inattentive / useless, and capricious / arbitrary. We all know about companies abusing this, but you don't hear as much about regulators deciding suddenly one day they're going to interpret a rule differently and make an example out of somebody: usually a smaller business that can't fight back. And a company somebody spent years or decades building is just gone because a bureaucrat had a whim.

    I could go on and on, but it's a tough problem. Thinking they could move the supply chain back to the US in three years is hilarious. 15 years would be reasonable.

    The article is spot on.

    As an electronics designer I have been in manufacturing since the 1980s - but only small companies where at least you do get to see the entire operation.

    Working with the Taiwanese and Chinese is a revelation to that of people in our own country (UK)

    The exceptionally poor work ethic here (and maybe the USA) is why manufacturing will never come back without a major change in education and expectation. 

    It will take more than a generation to achieve.


    thtneoncatecarlseendewmeAulanijibglnf
     7Likes 0Dislikes 0Informatives
  • Reply 5 of 11
    thttht Posts: 5,899member
    Dan Ives told CNN that it would take about $30 billion and three years for Apple to move its global supply chain back to American soil.
    As a comparison, TSMC spent $65b to build a 4nm factory in about 4 years. TSMC’s 4nm node was mature when they made the investment. This was just the silicon. They need to spend more money to actually package the chips in the USA. 

    It would probably take $3000b to $30000b, that’s 3 to 30 trillion dollars, to move the iPhone manufacturing and supply chain to the USA. I think I may be underestimating it. 

    These pop-culture stock analysts have no idea about how things are done. Dan Ives might be the worst. They are very good at their jobs, which is to protect their company and clients from financial harm. Assume everything they say is a lie in service of themselves or their clients, which are banks with a lot of money on the line or the companies they are covering. 

    Knowing how companies work, how they make money? These pop-culture TV analysts don’t even care enough to want to know. Dan Ives was one of those analysts that said Tesla was going to deliver 420k vehicles in late March while if you actually were tracking the company, it was going to be on order $350k, and people knew that in early February. 

    Their job isn’t tracking and predicting how a company performs or how to do things. It’s really to protect their financial interests and that of their clients. 
    ecarlseendewme
     2Likes 0Dislikes 0Informatives
  • Reply 6 of 11
    GeeAyegeeaye Posts: 42unconfirmed, member
    UMM...  Shares are money - buying back shares keeps that money in the company (which is valued by its share capital) and they can be re-issued again if required - there is no loss.

    What really destroys wealth is a carrot top that finds ways of reducing the profits of global American companies.


    Carrot tops are green
     0Likes 0Dislikes 0Informatives
  • Reply 7 of 11

    The article is spot on.

    As an electronics designer I have been in manufacturing since the 1980s - but only small companies where at least you do get to see the entire operation.

    Working with the Taiwanese and Chinese is a revelation to that of people in our own country (UK)

    The exceptionally poor work ethic here (and maybe the USA) is why manufacturing will never come back without a major change in education and expectation. 

    It will take more than a generation to achieve.


    The work ethic in the US isn't great, but you can find good people if you look hard enough (it's tough). A bigger problem - and part of the root of the work ethic problem - is that management culture in the US has completely rotted out. It's not that MBAs are inherently bad people, but they're trained to believe they can manage processes they don't understand by staring at spreadsheets and TPS reports. The good employees start out good then become frustrated and eventually apathetic. It's gotten to the point where companies are run this way from the top down and that will probably take a generation or two to fix.

    The result is a country full of huge companies that mostly suck at everything they do. Even if manufacturing was brought back here right now, the US would suck at it. Imagine Boeing building iPhones. Yuck.

    Again, this is fixable but it's going to be a process and even the President can't wish or order or tariff it done.


    edited April 10
    glnf
     1Like 0Dislikes 0Informatives
  • Reply 8 of 11
    dewmedewme Posts: 5,987member
    tht said:
    As a comparison, TSMC spent $65b to build a 4nm factory in about 4 years. TSMC’s 4nm node was mature when they made the investment. This was just the silicon. They need to spend more money to actually package the chips in the USA. 

    It would probably take $3000b to $30000b, that’s 3 to 30 trillion dollars, to move the iPhone manufacturing and supply chain to the USA. I think I may be underestimating it. 

    These pop-culture stock analysts have no idea about how things are done. Dan Ives might be the worst. They are very good at their jobs, which is to protect their company and clients from financial harm. Assume everything they say is a lie in service of themselves or their clients, which are banks with a lot of money on the line or the companies they are covering. 

    Knowing how companies work, how they make money? These pop-culture TV analysts don’t even care enough to want to know. Dan Ives was one of those analysts that said Tesla was going to deliver 420k vehicles in late March while if you actually were tracking the company, it was going to be on order $350k, and people knew that in early February. 

    Their job isn’t tracking and predicting how a company performs or how to do things. It’s really to protect their financial interests and that of their clients. 
    I agree with you and Amber. There is no way Apple can bring all of its manufacturing back to the US and bring all of the suppliers feeding that manufacturing back to the US for $30 billion USD. The current tariffs are insane enough, but once the tariffs hit the parts imports the damage to American’s wealth will be horrendous. 
    Aulanijib
     2Likes 0Dislikes 0Informatives
  • Reply 9 of 11
    bsimpsenbsimpsen Posts: 408member
    "Dan Ives told CNN that it would take about $30 billion and three years for Apple to move its global supply chain back to American soil."

    You have 
    misquoted Ives. He said it would take $30billion and three years for Apple to move 10% of iPhone production to the US.

    “Apple has already announced a $500 billion investment in the U.S. along with Trump in February,” Ives noted. “The reality is it would take 3 years and $30 billion dollars in our estimation to move even 10% of its supply chain from Asia to the U.S. with major disruption in the process."

    Quoted from: https://finance.yahoo.com/news/apple-faces-complete-disaster-analyst-145000336.html
    thtjib
     2Likes 0Dislikes 0Informatives
  • Reply 10 of 11
    thttht Posts: 5,899member
    bsimpsen said:
    "Dan Ives told CNN that it would take about $30 billion and three years for Apple to move its global supply chain back to American soil."

    You have misquoted Ives. He said it would take $30billion and three years for Apple to move 10% of iPhone production to the US.

    “Apple has already announced a $500 billion investment in the U.S. along with Trump in February,” Ives noted. “The reality is it would take 3 years and $30 billion dollars in our estimation to move even 10% of its supply chain from Asia to the U.S. with major disruption in the process."

    Quoted from: https://finance.yahoo.com/news/apple-faces-complete-disaster-analyst-145000336.html
    Good correction!

    He’s now only off by an 1 to 2 orders of magnitude instead of 2 to 3. And there are a lot of assumptions in developing an iPhone capable supply chain. A lot of assumptions. 
    dewme
     1Like 0Dislikes 0Informatives
  • Reply 11 of 11
    dewmedewme Posts: 5,987member
    Thanks for showing Tim smiling. 
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