Silicon Valley technology giant Apple Inc. When it comes to actually producing something as complex as its iconic iPhone in the U.S., it’s run up against some serious challenges. The firm engineers its goods in California. Other than the chip, nearly all iPhone components are produced in Asia—most notably, China. This reliance on Asian manufacturing allows Apple to produce over 200 million iPhones annually, aided by a streamlined supply chain that has evolved over decades.
No one else is able to move that fast to meet global demand, and that’s thanks to the incredibly efficient production system Apple has cultivated in China. Apple CEO Tim Cook has been remarkably open about the limits of American manufacturing. He argued that American workers aren’t trained with the skills necessary to fulfill the current production demands. He accepted as a given the huge deficit of tooling engineers in the U.S. This engineering talent is necessary to help configure machinery and equipment to make Apple’s cutting-edge designs into tangible products.
As Apple takes a serious look at bringing more of its manufacturing to the U.S., experts cautioned of the cost ahead. Labor costs in the US are not anywhere near as low as China. During those times, when the iPhone 16 was ramping up production, the hourly wage in China was $3.63 or 26 yuan. Employees won big-time signing bonuses on this wave, ranging from $500-$1,000. Shifting production to the U.S. would increase the cost of an American-made iPhone by at least 20-25%. This jump is entirely due to an increase in labor costs.
Foxconn, an important Apple manufacturing partner operates for Apple on similar campuses in China. To accommodate their workers, these facilities often operate dormitories and shuttle buses for their employees. Workers’ reports point to working conditions that are reportedly harsh. Societal issues like the pressure to work overtime have further exacerbated the personal-professional conflict, creating an even more harmful work-life dynamic. This troubling dynamic begs two questions. What we don’t know is whether we can get anywhere near these production efficiencies in the U.S. given our very different labor regulations and workforce expectations.
Apple’s growing labor costs present an opportunity. If the company takes any steps to bring production back to the U.S., it will still need to face tariffs on their imported components too. Which means Apple needs to win waivers for each individual part. If not, these tariffs may greatly raise costs and hamper efforts to set up assembly operations in the U.S.
Apple also recently made national headlines with their announced plan in Wisconsin to create 13,000 jobs. Further, they pledged to add 13,000 new jobs. This massive new facility has already only created 1,454 thrust producing jobs. This begs larger questions about the success of mega-sized manufacturing endeavors in the U.S.
Analysts estimate that Apple would require approximately $30 billion over three years to relocate just 10% of its supply chain back to the United States. Drawing on industry consensus, industry experts are particularly excited by the idea of an American-made iPhone. As they argue, it remains too unworkable and expensive to put into practice.
“The reason is because of the quantity of skill in one location, and the type of skill it is,” – Tim Cook
Despite these hurdles, many bullish industry players are steadfast in their belief that great things lay ahead. Howard Lutnick expressed that the prospect of American workers engaging in high-volume assembly is not entirely out of reach. He stated, “The army of millions and millions of human beings screwing in little screws to make iPhones, that kind of thing is going to come to America.”
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