On the back of every iPhone are engraved the words "Designed by Apple in California Assembled in China". But could China soon be replaced by America?
It's no secret that President-elect Donald Trump isn't happy that iPhones are manufactured in China rather than the US. During his campaign he pledged that he would "get Apple to start making their computers and their iPhones on our land, not in China," and it appears that this prompted Apple to look into the feasibility of shifting production.
According to sources speaking to the Nikkei Asian Review, Apple approached both Foxconn and Pegatron, the two companies responsible for manufacturing the iPhone, and asked the companies to look into shifting manufacturing to the US.
According to the report, while "Pegatron declined to formulate such a plan due to cost concerns," Foxconn did look into the matter and, according to the source, concluded that "making iPhones in the US means the cost will more than double."
Let's put the politics of this matter to one side and examine what we know of the way Apple manufactures the iPhone, what it costs to make an iPhone, how many people are involved in the process, and what the costs increases would possibly be.
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First off, Apple doesn't manufacture iPhones itself. This job is outsourced to Foxconn and Pegatron, and these companies, in turn, manufacture the iPhone at six assembly plants in China and one in Brazil. Over the past four quarters these factories have assembled some 212 million iPhones.
But this is only a small part of the story.
On top of assembly there's the supply chain to consider. Apple has more than 750 suppliers in over 20 countries, sourcing and manufacturing the components and minerals needed to build the iPhone. Those suppliers employ some 1.6 million people. And as of June 2016, 69 of those suppliers were US based.
And don't forget that these assembly plants and suppliers aren't just involved in building iPhones. Most will have some part to play in pretty much any piece of electronics you can think of.
This truly is manufacturing on a global scale.
Assembly is a small part of the iPhone's overall cost. While it is estimated that it costs Apple $224.80 to make a 32-gigabyte iPhone 7, the conversion costs per device -- which includes assembly and testing -- is only $5.
According to Jason Dedrick, a professor at the School of Information Studies at Syracuse University, shifting the assembly to the US would add $30 to $40 to the overall cost, partly down to increased labor costs, but also because of increased transportation and logistics overheads.
This, in turn, would add about $100 to the overall retail price.
But all this would rely on assembly plants and skilled workers being ready to start building iPhones. And that infrastructure doesn't exist.
Somebody would have to pay for it.
And even if cost or assembly plants weren't an issue, there's the issue of speed. Take this quote from a 2012 CNN Money titled "Why Apple will never bring manufacturing jobs back to the U.S.":
The real stumbling block is speed. Unlike U.S. plants, Foxconn and other Chinese manufacturing operations house employees in dormitories and can send hundreds of thousands of workers to the assembly lines at a moment's notice. On the lines, workers are subjected to what most Americans would consider unbearably long hours and tough working conditions.
The same piece goes on to highlight the skills gap:
Steve Jobs, Apple's late CEO, brought the issue up during an October 2010 meeting with President Obama. He called America's lackluster education system an obstacle for Apple, which needed 30,000 industrial engineers to support its on-site factory workers.
"You can't find that many in America to hire," Jobs told the president, according to his biographer, Walter Isaacson. "If you could educate these engineers, we could move more manufacturing plants here."
Then there's workforce flexibility. Here is a quote from a January 2012 New York Times piece:
Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone's screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company's dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
The same article goes on:
"They [Foxconn] could hire 3,000 people overnight," said Jennifer Rigoni, who was Apple's worldwide supply demand manager until 2010, but declined to discuss specifics of her work. "What U.S. plant can find 3,000 people overnight and convince them to live in dorms?"
And it goes on to touch on just how big the skills gap actually is:
Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple's executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company's analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.
In China, it took 15 days.
These are some huge problems that would need to be overcome, and not the sort of thing that anyone can fix in a few months or years. This would take decades.
Apple does do some manufacturing in the US but it's tokenistic at best. In 2013 the company announced that its new Mac Pro would be assembled at a manufacturing facility run by Flextronics in Austin, Texas.
But how many Mac Pros, which have a starting price of $3,000, is Apple selling a year, compared to iPhones?
Bottom line, it seems like it was little more than an Apple PR stunt.
It would be easy to say that it would take a miracle to bring iPhone manufacturing to the US, but that's vastly oversimplifying what it would take.
It would take money and education, and a huge shift in the way the global supply chain works. And on top of that, it would take a public that was willing to pay the $100 or so extra that it would require to make that happen.
I think it would be simpler to just ask for that miracle.
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