With the announcement of the iPhone 7 this past Wednesday, the internet is sure to stop in its tracks and bloggers will pour over every conceivable detail until it is released. The argument will also inevitably be made that Apple should stop producing its phones in China and start doing so domestically. The only problem with that, however, is that people who are making that claim have more than likely not read in to or researched the facts on the matter. The writing may be on the wall for a gradual shift away from Chinese production, but even a full tilt shift to US manufacturing would not nearly be the saving grace most people think.
Let’s get one thing out of the way. Apple has no responsibility to produce products in the US. Zero. Zip. Zilch. Their responsibility is to produce a product at a sufficient price point to the consumer which will maximize sales and maximize profits. The only way to change their practices is if the economic landscape starts changing, and it might be. China is no longer the home to cheap labor and relaxed worker laws that it once was. According to Oxford Economics, Chinese labor is now only 4% cheaper than the U.S. when you factor in productivity. Still, Apple probably won’t move much of their production out of China, since 44% of their supply chain resides there, however, they probably won’t be adding facilities there anytime soon either.
So why not just bring manufacturing back to the U.S. like Donald Trump and Bernie Sanders suggest? A commitment to return production stateside would be no more than a PR move. American based factories would not be filled with eager employees excited to re-enter the workforce. They would be filled with robots, which now only cost about $40,000 to purchase. Not only are the upfront costs for manufacturing robotics falling, but they cost as little as a dollar an hour to operate and can run around the clock (at least until they figure out how to unionize). The upfront costs to build new facilities and reconfigure supply chains are the only things preventing this from happening today.
None the less, the candidates, talking heads, and internet experts will all claim that Apple should bring back production to the U.S. once the iPhone 7 is released. Let’s say we lived in a perfect world (we don’t) and take a look at what would happen if Apple brought production back to America, sourced their materials domestically (they can’t), and staffed it all with living, breathing humans (they won’t). According to a study done at MIT, U.S. assembly would add around $40 to the final cost and producing the components would add about another $60. The current price of the iPhone 6 Plus would go from about $749 to $849. It’s very doubtful that Americans would find enough value in domestically produced iPhones to openly accept the increase in price.
Those out there calling for this shift, out of pure idealism, will more than likely not be so excited to shell out the extra cash come September once Apple updates their phones and adds an “s” as a suffix. Many Americans would also more than likely think twice about giving up an extra hundred dollar bill every year for a handful of new features. Phone sales go down. The number of people with phones goes down. Profits go down. Investments in to technology decreases. Consumers get saddled with inferior products.
The simple fact is, Apple producing phones and other products as cheaply as possible benefits you, the consumer, just as much as it does the company.
Apple employs 47,000 people in the U.S. and has indirectly created jobs for another 300,000, according to University of California, Berkeley economist Enrico Moretti. Yet, people act as if Apple is some evil corporation taking advantage of foreign workers.
The numbers and the reality of the situation tell a different story. Still, the facts never got in the way of an uplifting campaign speech or a good news story.