Apple: made in China, untaxed profits kept offshore

It's been a banner week for Apple. With Apple's announcement of Q1 2012 results, the company is now apparently worth more than Greece.

In the same week, the President of the United States invoked the late Steve Jobs and Apple in his Congressionally-mandated State of the Union address.

Just a few hours later, in the GOP response to the President's speech, Governor Mitch Daniels also played the Steve Jobs card, saying "The late Steve Jobs -- what a fitting name he had -- created more of them than all those stimulus dollars the President borrowed and blew."

Partisanship aside, certainly Apple has created a lot of jobs over the years. But today, most of the jobs created by Apple are not American jobs, they're sweatshop-style jobs for miserable, overworked workers in China.

According to the New York Times, Apple employs 43,000 people in the United States. That's not an inconsiderable number of people. However, Apple no longer builds its own devices. There was a time when Apple computers were actually manufactured in the United States. Today, Apple products are built in China. Foxconn City has 230,000 people working to make iPhones and iPads -- and Presidential candidate Rick Santorum claims more than 500,000 people build Apple products in China.

In other words, Apple provides jobs to more than 10 times more employees outside the United States than in the United States.

But Apple is a U.S. company. We know it is because both the President and the loyal opposition just pointed to it (or to the Dearly Departed, in any case) as a model for American business.

Let's look at that model, shall we? According to the Apple earnings call, the company had a whopping $97.6 billion (yes, billion) dollars in cash at the end of December. Unfortunately, about two-thirds of that money, "about $64 billion," was "offshore" at the end of December, according to Apple CFO Peter Oppenheimer.

That's a lot of money for an American company to keep outside of America.

In fact, MG Siegler of TechCrunch raises a rather disturbing allegation. He says, "$64 billion of that is offshore, Apple CFO Peter Oppenheimer stated during the call -- meaning, it would cost money (taxes) to bring it back into the U.S."

Despite TechCrunch's reputation for inflammatory posts, Siegler's allegation is troubling. I'm not an international finance expert, but the idea -- the mere idea -- that a company like Apple would store its big wad of loot offshore to avoid paying its fair share to America makes me ill.

I floated this troubling thought to ZDNet's editors before running this story and to ask for some of their advice about how to approach telling you about it. Ed Bott reminded me that there was a great deal of discussion of the same issue when Microsoft was purchasing Skype. Microsoft has $42 billion overseas.

Ed told me, "Both companies (and others their size) are huge multinationals that do lots of sales overseas. Although they may be American companies, there are incentives for them to do business this way."

James Kendrick pointed out another logistical challenge that makes it hard to bring cash home, "Don't forget that multinational companies have a big cost in currency exchange when they move big funds around. This alone is cause for leaving funds where they live for as long as possible, too."

ZDNet Editor-in-Chief Larry Dignan advised, "Note that it's not necessarily avoiding taxes as much as the money is made in international markets. There's no incentive or common sense reason to repatriate it." He also said Cisco and many others also have gobs of cash offshore.

Larry suggested the importance of keeping this story in context, saying "This isn't an Apple issue. It's a govt-corporate issue. Apple is just the company du jour being pointed out."

That's true, not only of the massive cash hoard stashed offshore, but the giant job suck as well. The New York Times story (a must-read, by the way) discusses that it's not just the cost of labor, it's the infrastructure, supply chain, attitude, and responsiveness that encouraged Apple to move its manufacturing to China.

As someone who has researched America's job situation in extreme depth, and as the author of How To Save Jobs, I am well aware of the complexity of the manufacturing process and how important supply chain, cost, and responsiveness can be.

I am also painfully aware of how many jobs America needs to create simply to keep up with our birthrate, not to mention all the jobs lost over the last decade.

While there isn't room in this article for policy suggestions, go read my book (free PDF download) for 476 pages of them. My point today, though, isn't policy suggestions.

My point today is that both the President and the GOP pointed to Apple, pointed to Steve Jobs, and effectively held the company up as the shining example of American innovation. It is an innovative company. Sadly, the jobs it creates as a result of that innovation don't seem to wind up back here in America and neither does the money it rakes in.

I'd recommend to our politicians two courses of action: (1) don't use companies that outsource nine-tenths of their workers as examples of American innovation. It's just poor taste. And (2) consider looking -- for real -- at what we need to do to get those jobs (and that cash) back here to the U.S., so it'll be put to good work for the American people.

After all, by my estimate, the citizens of the United States gave Apple at least a few million dollars worth of free publicity from the State of the Union events, alone.

Update: I'm seeing where the comments are going already, and I want to nip some misconceptions in the bud. I'm not demanding that Apple be taxed extra or forced to bring jobs or money back home. I'm demanding that our politicians create the situation where companies like Apple want to bring that money and those jobs back home. Second, I'm demanding that our politicians stop glorifying companies that are not operating according to America's active needs and goals. This week, the President and the GOP did just that, and it wasn't right.

See also:

• Gallery: How Apple should spend its $90 billion in cash
• Is Apple's suicide factory outsourcing to even cheaper Chinese peasants?
• Apple may be poisoning Chinese workers and doesn't seem to care. Should we?

What do you think? Should Apple and all the other massive American corporations be forced to bring to bring their cash home and pay taxes on it, like the rest of us do?