Thursday, September 13, 2018
Trump says Apple should just build plants in America.
I tried to figure out what that would entail. The issue is not so much cost of putting an iPhone together, or even the cost per part on paper.
The issue is skill, scale, expertise, and infrastructure -- all of which require money, time and long-term investment. Unlike other manufacturing jobs that have migrated from the United States, Apple wouldn't be bringing them "back" so much as starting from scratch.
The cost would come in attempting to build a system that's never been in the US, but has been built over decades abroad. And even if Apple could somehow manage to bring the whole process to the United States, at a huge cost, there might not even be much of an advantage in terms of global trade.
China makes only about $8 per phone, so placing Apple and its supply chain in the midst of the US-China trade dispute just isn't that smart.
It's tempting to assume that the reason Apple assembles its phones in China is cost. After all, the minimum wage is a fraction of what it is in the United States. But that doesn't explain why, then, Apple doesn't go somewhere even cheaper. Why aren't iPhones built in, say, Nicaragua, where labor is even less expensive? The answer is skill.
Apple CEO Tim Cook said last year that he needs a "rare" combination of craftsman-like skill, sophisticated robotics, and computer science. That combination is a system that's been built over time in countries like China that have made the investment.
"There's a confusion about China," Cook said. "The popular conception is that companies come to China because of low labor cost. I'm not sure what part of China they go to, but the truth is China stopped being the low labor-cost country many years ago.
And that is not the reason to come to China from a supply point of view. The reason is because of the skill, and the quantity of skill in one location and the type of skill it is."
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