The sad reality is that politicians today can engender widespread support by issuing sweeping declarations about topics and issues they truly know nothing about. While such examples are plentiful, today we’re going to focus on statements that Donald Trump and Bernie Sanders have made about Apple in recent months.
During the course of the ongoing U.S. Presidential campaign, both Trump and Sanders have issued statements calling for Apple to begin manufacturing the iPhone in the United States. Trump in particular was rather assertive on the issue, stating that if he is elected President, he’d make sure that Apple “builds their damn computers in this country.”
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While such proclamations sound great, they fundamentally ignore any number of economic realities. Even if we ignore the fact that most major hardware companies outsource manufacturing to China, calling for Apple to relocate its factories to the United States shows a shocking lack of awareness and understanding regarding the economic realities that govern mass production of consumer electronics.
We’ll get to that in a second, but beforehand, Konstantin Kakaes of MIT Technology Review conducted a little thought experiment and imagined what would really change if Apple followed the advice of Trump and Sanders.
In one scenario which imagines Apple outsourcing components from abroad and assembling the iPhone in the United States, Kakaes writes that the retail price of the iPhone might increase by about 5% but that such a move would have a negligible impact on the U.S. economy.
What benefits would this bring to the U.S.? Apple says its suppliers employ more than 1.6 million workers. But final assembly of the phones accounts for a small fraction of that. So even if Apple could convince Foxconn or another supplier to assemble iPhones in the U.S. without cutting into its profits too badly, that alone probably wouldn’t be as transformative as Trump and Sanders imply.
In another scenario, Kakaes details what would happen if Apple not only manufactured the iPhone in the United States, but sourced all of its components domestically.
According to Professor Jason Dedrick of Syracuse University, such a plan would, at the very minimum, add upwards of $40 to production costs.
Initially, at least, “U.S. factories would be uncompetitive for most of these goods and run at low volumes, raising the differential with Asia even higher,” Dedrick points out. But it’s safe to project, he says, that in this scenario a phone would be at most $100 more expensive, assuming that the raw materials that go into the components were bought on global markets.
You can check out full versions of Kakaes’ hypotheticals via the source link below, but there are a few other important points worth mentioning.
For starters, U.S-based factories aren’t built to accommodate the level of specialized production needed to manufacture the iPhone at scale. It’s important to remember that Foxconn and other China-based manufacturers have factories that are designed from the ground-up to handle all facets of an extremely granular manufacturing process. What’s more, such factories employ hundreds, if not thousands of employees who possess specialized and unique skills that simply can’t be found in equal measure in the United States.
Illustrating why moving manufacturing to the U.S. simply isn’t a rational idea, recall this New York Times blurb from a few years back:
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”
Indeed, Tim Cook even broached the topic during a 60 Minutes interview late last year.
China put an enormous focus on manufacturing,” Cook explained. “The U.S., over time, began to stop having as many vocational kind of skills. I mean, you can take every tool and die maker in the United States and probably put them in a room that we’re currently sitting in. In China, you would have to have multiple football fields.”
All that said, politicians can talk about moving manufacturing to the U.S. all the want, but the economic realities of iPhone production signal, rather strongly, that such promises are empty at best.
