Throwing a Spanner in the Works: iPhone's Skyrocketing Cost if Made in America
Cost of an U.S. iPhone Revealed
By Chrissy D., Updated by Moe K.
Get ready for some sticker shock - US President Donald Trump's push for iPhones to be domestically produced could make the smartphones a luxury item for many consumers. Shifting production to American soil isn't just a pipedream; it's a far-fetched, expensive, and largely unrealistic endeavour for a plethora of reasons.
Donald Trump's beef with Apple CEO Tim Cook took center stage in the ongoing tussle over iPhone production. "I had a bit of a tiff with Tim Cook," Trump said. The President is miffed that Apple isn't planning to produce a significant chunk of its iPhones in India but in the USA. An iPhone fabricated in West Virginia or New Jersey would set customers back several times the current price tag.
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Dollars and Sense
With Apple considering a price hike for the upcoming model release[1], the expected increase may not be entirely due to Trump's tariffs but rather new features and aesthetics. However, analysts caution that raising prices could lead to a loss of market share. Sales would undoubtedly plummet if Apple caves to Trump's demands.
Apple offers its models between $600 and $1,200. Calculating production expenses and maintaining a profit margin of around 46%, Dan Ives of investment firm Wedbush estimates that a completely US-produced iPhone would set consumers back between $2,560 and $2,960. Even with a narrower profit margin, the iPhone would still end up costing between $3,000 to $3,500. It's a much more affordable option for Apple to pay the import tariffs themselves.
Logistical Impassee
Moving production to America is far from a simple task, given the intricate web of suppliers that Apple has cultivated over the past few decades. Shifting just 10% of this supply chain from Asia to the USA would cost Ives $30 billion and take three years.
India and Vietnam: The New Kids on the Block
Instead of planting roots in the US, Apple has set its sights on India as a crucial new production location. In the recent past, Apple had already been eyeing alternative production sites outside of China due to multiple geopolitical tensions, including the looming trade war and potential Chinese invasion of Taiwan. As early as two years ago, the goal was for a quarter of all iPhones to be manufactured in India[1].
Today, Apple has expanded its production capabilities with contract manufacturers in India and Vietnam. However, most iPhones are still being churned out in China.
A Tale of Two Economies
Labor costs in the US are significantly higher, but they constitute a tiny fraction of the total production costs. Even if labor costs were to double, the impact on the final price would be negligible. But where would the labor force in the US even come from?
The Elusive Factory Workforce
The US no longer has a culture of industry with millions of factory workers. In the Chinese "iPhone city" of Zhengzhou, over 200,000 people worked in Foxconn's largest iPhone factory in recent years[2]. Millions of people are employed in the Apple supply chain across China. It's an unlikely scenario that these numbers can be replicated in the US. Additionally, people who could potentially fill factory roles - low-wage migrants - are being targeted for mass deportation by the US government.
Automation as an Alternative?
The US government is banking on automation as a solution. However, supply chain experts and industry insiders say this may not be feasible[2]. The constant evolution of iPhone components poses a significant challenge for robotics.
A Cock-and-Bull Story?
Analyst Ives sums up the idea of US production succinctly: "It's a fictional story."
Sources:
- Wall Street Journal
- CNN
- Bloomberg
- Golem.de
- iPhone
- Apple
- Donald Trump
- Electronics industry
- India
- USA
- China
- The proposed employment policy by Donald Trump to have iPhones made in America could result in a significant increase in the device's price, making it a luxury item for many consumers.
- According to Dan Ives of investment firm Wedbush, a completely US-produced iPhone could cost consumers between $2,560 and $2,960, even with a narrower profit margin.
- Moving the intricate web of suppliers that Apple has cultivated over the past few decades to the US would cost $30 billion and take three years, making the logistics a significant hurdle.
- Given the high labor costs, the US no longer having a culture of industry, and the US government's targeting of low-wage migrants for mass deportation, it's highly unlikely that the numbers employed in the Chinese iPhone factories can be replicated in the US.
