There's no way Donald Trump's plan to build iPhones in the US would actually work (AAPL)
Thomson Reuters
On Tuesday, Republican presidential candidate Donald Trump repeated an unlikely position that he's been staking for the past month: He wants Apple to build its iPhones in the US.
"I'm going to bring jobs back. I'm going to get Apple to start making their computers and their iPhones on our land, not in China," Trump said. "How does it help us when they make it in China?"
Made-in-USA iPhones have come up before, most notably when President Barack Obama asked then CEO Steve Jobs the same question during a private dinner in Silicon Valley in 2011. Turns out, Apple has already considered the possibility, but concluded that it's not a viable option.
Here's why:
- If Apple were to assemble iPhones in the US, it would create huge logistical challenges. An iPhone is actually an assembly of hundreds of different individual components, such as chips, batteries, camera modules, and other tiny bits. Ninety percent of these parts are manufactured outside of the US, and the vast majority of these components are made in East Asia. For example, if one supplier didn't work out, and Apple had to wait weeks for a replacement to ship to the US from China, then that could push a launch date back by weeks.
- Chinese workers are better trained in manufacturing skills than American workers. As CEO Tim Cook said during an interview on "60 Minutes," "China put an enormous focus on manufacturing ... 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."
- Chinese factories are generally more nimble than American ones. For example, most supplier employees live in dorms close to the factory, so if there's a last-minute change, work can begin immediately — even in the dead of night. An Apple executive told The New York Times that when it comes to Chinese manufacturing, the "speed and flexibility is breathtaking" and that there's "no American plant that can match that."
- In Chinese factories, overtime is standard. While workers can only legally put in 60-hour weeks without special dispensation, a large proportion go above and beyond — which has landed Apple in hot water with activist groups.
- And those workers often make far less than they would in the US. According to a study done at electronics company Pegatron, one of the two primary iPhone assembly plants, the average monthly wage, including overtime, comes out to $756.
- If Apple were to build an iPhone in the US, it could add as much as $50 to the final price, analysts told Motherboard.
- Essentially, the people, facilities, and other businesses that comprise the computer-manufacturing ecosystem are completely based in China at this point.
Of course, it's also not clear how Trump would make Apple move its production to the US. He's previously suggested a 45% tariff on Chinese imports, but if that were implemented, it would affect far more businesses than just Apple.
A better way to get Apple to bring some of its manufacturing back to the US would be to give it tax breaks. Apple has nearly $200 billion it keeps overseas, and it faces a 35% tax rate if it were to bring such work back to the US. In fact, tax is the No. 1 issue Apple lobbies for in Washington, DC, and Cook has testified before Congress asking for a "simplification" of corporate tax laws.
Apple has signaled willingness to invest in regions as part of a tax deal. For example, earlier this year, shortly after it settled a tax issue in Italy, Apple announced that it would be building "Europe's first iOS app development center" in the country.
One Apple computer is currently assembled in the US: the Mac Pro, a pricey one that starts at $2,999, and is assembled in Texas by Flextronics, which has received millions in tax breaks from Texas in exchange for creating jobs.
Ultimately, Trump's rhetoric belies a lack of understanding about how global supply chains work, and specifically, how computers get produced. But the made-in-USA iPhone might just be a talking point — Trump has said that his stances aren't necessarily policy positions he would carry out, but are starting points for negotiation.
For example, despite the fact that Trump has called for a boycott of Apple over its recent skirmish with the FBI, he's still tweeting using an iPhone.