Sorry Donald Trump, Apple's iPhones should still be made in China
Few people took Donald Trump seriously when he said in March that he’d “get Apple to start making their computers and their iPhones on our land, not in China”.
But his election appears to have caused a change of heart. Apple has reportedly asked the two Asian companies that assemble the bulk of its iPhones to assess whether they can bring the work to the US. One of them, Foxconn, has agreed to look into the matter.
The US lacks the workforce and supply chains necessary for Apple to move its iPhone operation back home. Photo: AP
Trump’s supporters have embraced this news as a sign of his power to persuade wayward corporations to make America great again.
But as Apple and its manufacturing partners know, and as President Trump will soon find out, it’ll never happen. The US lacks the workforce and supply chains necessary for Apple to move its iPhone operation back home. And more to the point, Americans shouldn’t want it to.
Foxconn chairman Terry Gou. Apple has reportedly asked the two Asian companies that assemble the bulk of its iPhones to assess whether they can bring the work to the US. One of them, Foxconn, has agreed to look into the matter. Photo: Bloomberg
Although Apple’s original supply chain included a suburban American garage, Asia quickly became central to the company’s growth. In 1981, it opened a facility in Singapore to make logic boards and other components.
It was a no-brainer, according to a manager who ran the facility: “We find that no country can provide the combination of infrastructure, technical ability, supporting industries, governmental efficiency, support and incentives that Singapore offers.”
In the decades that followed, China emulated Singapore’s approach on a massive scale, developing industrial clusters with world-class infrastructure and offering land and subsidies to companies willing to relocate.
By 2004, Apple had shut down its last US manufacturing operation and China had become the industrial hub of its global empire. Low labour costs and minimal regulation were certainly part of China’s appeal. But the most important factor was its huge and nimble workforce.
This could never happen in the US
The main iPhone facility in Zhengzhou now employs 110,000 workers and other factories employ hundreds of thousands more. China’s 270 million migrant labourers – most of them ambitious and opportunistic – have proven indispensable to a business that prizes flexibility.
Last summer, Apple contractors reportedly hired 100,000 workers to ramp up production of the iPhone 6s in advance of its fall release.
Nothing comparable could ever happen in the US, no matter what the president wants. A mass mobilisation on that scale, and at that speed, isn’t likely to have been tried since World War II. And there’s little reason to think it would be successful or desirable today, even if Apple was willing to try.
Finding enough skilled labour wouldn’t be much easier. Apple CEO Tim Cook told 60 Minutes last year that, thanks to better vocational education, China now has a more skillful workforce than the US.
Apple’s executives estimate that they’d need 8700 industrial engineers to oversee 200,000 assembly line workers, yet only 7000 students completed university-level industrial-engineering programs in the US in 2014. Shenzhen, by contrast, is home to 240,000 Foxconn employees – and millions of additional engineers and labourers.
Such a heavy concentration of manufacturing and skills in one place gives China its other big advantage. Most of the hundreds of parts that go into an iPhone are made a short distance from where the devices are assembled. This speeds up production, reduces the need for warehousing and trims logistics costs.
Those factories can also ramp up production as quickly as Apple needs, thanks to a ready supply of labour. It’s an industrial ecosystem that took decades to evolve, and it’s not going to relocate to the US.
Moreover, Americans shouldn’t want it to. That ecosystem has made Apple one of the world’s most profitable companies, supporting 2 million domestic jobs. It’s what allows Americans to buy some incredible gadgets at a (relatively) affordable price. And it’s helping give rise to a vast and tech-savvy Asian middle class – which will produce plenty of customers for American goods and services.
All that would disappear if Apple were somehow forced to ship production back to American shores, probably doubling its costs in the process.
If Trump wants to revive manufacturing in the US, it will require more than hectoring Apple. It will mean supporting vocational education on a huge scale, offering Chinese-style industrial subsidies and waiting around for decades for all of it to have an effect – all in pursuit of tedious, low-paid jobs that are increasingly obsolete as industrial robots improve.
In reality, an American iPhone is likely just one more empty campaign promise. And that’s for the best.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.