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  • Why Isn’t the iPhone Made in the USA?

    August 6th, 2010

    This article may come across as unduly jingoistic, and for that I apologize, at least somewhat. What’s more, what Apple is doing isn’t especially different from the rest of the tech industry, but Apple also has some of the highest profit margins around, other than Microsoft of course, so maybe there’s some wiggle room.

    Now once upon a time, your Mac was built in the U.S. or perhaps in Ireland. Sure, Apple’s price structures were far less competitive than they are now. You really had to pay a whopping premium for a well-equipped Mac in those days.

    Over the years, Apple, as with most tech companies, opted to build their gear in Asia, but keep product design and support in this country. When you consider the huge savings in manufacturing costs, it made a whole lot of sense. Salaries are far lower over there, although they are increasing. So you could build gear in a state-of-the-art production facility, send it half way around the world — and sometimes use express shipping to satisfy early adopters — and still save a bundle of cash.

    Those savings went, in part, to the company’s bottom line, but it also meant that your Mac, iPad, iPhone and iPod cost a whole lot less than if they were assembled in America.

    Apple is, of course, not alone. I challenge anyone to identify a tech product, except for a few specialty designs, that are still assembled in North America (other than Mexico) or Europe. It just doesn’t happen.

    Now I am not against a third world country wanting to create a higher standard of living for its citizens. Certainly the people who work on the production lines in the factories building products for Apple and other companies have a higher standard of living than their neighbors. Indeed, Foxconn, one of the larger contract manufacturers, who assembles millions of products each year for Apple, has recently granted salary increase to their employees.

    What you see here is that, as wages improve, it will become less economical to farm out manufacturing. At what point does the cost of assembly and shipping from Asia to North America suddenly become less appealing to a company’s bean counters?

    Understand that this article is self-serving. The major industrialized nations all have high unemployment. Millions of potential customers for these products can’t even buy them because they have to struggle to cover housing, electricity, food and other survival expenses.

    Now you might see where I’m going. What sort of wages would it take to provide an adequate standard of living for someone working on the assembly lines in America? No, I’m not talking in terms of minimum wage, nor what one might get manning the counters at a fast food restaurant.

    I could, of course, also see where a factory job might serve as an entry-level position for a young person just entering the work force, maybe looking to provide a supplemental income to cover the costs of education, or perhaps just help someone establish a level of independence while still residing with one’s parents.

    Once you tally the cost of wages and benefits there is, of course, the expense involved in building a factory equipped with the appropriate state-of-the-art automated production systems.

    Indeed, would it at all be economical for contract makers to actually construct plants in the U.S.? I mean, auto makers from Asia and Europe are already doing that (and sourcing from local parts suppliers of course), finding that it’s cheaper to build a car here than to assemble and ship one across the pond. On the other hand, the cost of shipping an iPhone is minuscule compared to a two-ton motor vehicle, and the savings may vanish rapidly.

    Or maybe not.

    The real question here is, of course, whether the major tech companies are willing to weigh the costs of building their gear over there, with the attendant shipping and quality control expenses, compared to the costs involved in assembling them closer to where they are actually sold.

    I do concede that the answers to these questions are likely way above may pay grade. I do not pretend to have the answers, and I suppose that Apple and other companies are always busy looking into more efficient ways to assemble products.

    On the other hand, if the cost of domestic assembly was only slightly higher than building those products elsewhere, maybe it’s worth the investment, even if profit margins are slightly lower.

    Indeed, would a “Made in the U.S.A.” label on a new iPhone or Mac justify a slightly higher purchase price? I realize that’s a serious question that may not bring the answer you or I would want to hear. The real issue is whether Apple and other tech companies even care anymore. Perhaps they have become so accustomed to assembling their gadgets elsewhere that they won’t even seriously consider alternatives.



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