iPhone manufacturing might be moved to USA
The United States is in a major transitional period, and Apple may soon be making some moves as well. Japanese new outlet Nikkei Asian Review is reporting that Apple may ask key manufacturing partners to move iPhone production to the United States. Citing an unnamed source, the report stated that Apple has “asked both Foxconn and Pegatron, the two iPhone assemblers, in June to look into making iPhones in the U.S. Foxconn complied, while Pegatron declined to formulate such a plan due to cost concerns.”
Apple is Foxconn’s largest customer, accounting for more than 50% of its sales revenue.
Terry Gou, chairman of the Chinese manufacturing giant, has expressed concern about the cost of U.S. production. It currently costs about $225 USD to make the base model iPhone 7 (32 GB), which Apple then sells for $649, pocketing the $424 profit margin. Due to labor laws, minimum wage requirements, supply costs, and other factors, manufacturing costs in the U.S. would be much larger. These expenses would eat far into Apple’s profits and could spur the Cupertino giant to reduce production or increase the retail price of future devices.
U.S. President-elect Donald Trump has been pushing American companies to move manufacturing back home. In a speech he made in January, he called out Apple specifically, saying that the U.S. “was going to get Apple to build their… computers and things in this country instead of in other countries.” Trump has also threatened a 45% tariff on Chinese imports, although there is no confirmation that his administration will pursue the trade penalty. Apple has bowed to political pressures on their business practices before and may do so again. Foxconn has stated that if Apple wants to move manufacturing to America, they would follow their customer's wishes.
There is further concern that American citizens may be unqualified or unwilling to take manufacturing jobs. Apple CEO Tim Cook said in a December 2015 interview that the U.S. didn’t have enough skilled workers for the scale of production the iPhone demanded. Many Americans may also be averse to taking a repetitive assembly line job.
Motorola, prior to being purchased by Lenovo, started manufacturing the Moto X in the United States in 2013. The manufacturing campus was shut down less than 2 years later, however, and production was moved to China and Brazil, due mainly to cost. Apple, Foxconn, and other Apple product manufacturers would face similar steep costs if they move production to America.
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