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The Impossible Dream of a Made-in-America iPhone

1af 88  iPhone - all American


Some, like Presidential candidate Donald Trump, think that if Apple was given the right tax beaks to bring back their money that's offshore and get Foxconn to open a plant in the US, that it could bring back needed jobs to America. Although Apple's CEO said it wasn't just about cheap labor, it was about tool and die shops and infrastructure, that's something that could be fixed to accommodate Apple and other US companies if there's a plan to resurrect America's one-time leadership in this area. The question is, will Americans and Canadians pay $100 more per iPhone? I think they would if it meant putting America back on track and bring jobs to those without university degrees. Yesterday, the MIT Technology Review presented their case on the matter.


The MIT report states that "Today Apple contractors assemble iPhones in seven factories—six in China and one in Brazil. If the phones were assembled in the U.S. but Apple still sourced components globally, how much would that change the price of the device?


According to IHS, a market analyst, the components of an iPhone 6s Plus, which sells for $749, cost about $230. An iPhone SE, Apple's newest model, sells for $399, and IHS estimates it contains $156 worth of components.


Assembling those components into an iPhone costs about $4 in IHS's estimate and about $10 in the estimation of Jason Dedrick, a professor at the School of Information Studies at Syracuse University. Dedrick thinks that doing such work in the U.S. would add $30 to $40 to the cost. That's partly because labor costs are higher in the U.S., but mostly it's because additional transportation and logistics expenses would arise from shipping parts, and not just the finished product, to the U.S. This means that assuming all other costs stayed the same, the final price of an iPhone 6s Plus might rise by about 5 percent.


What benefits would this bring to the U.S.? Apple says its suppliers employ more than 1.6 million workers. But final assembly of the phones accounts for a small fraction of that. So even if Apple could convince Foxconn or another supplier to assemble iPhones in the U.S. without cutting into its profits too badly, that alone probably wouldn't be as transformative as some surmise." For the full story and more scenarios, see the full MIT Technology Review report here.


In 1992 the independent Presidential leader Ross Perot clashed with Bill Clinton and Al Gore over free trade. Perot's famous punch line was that free trade would bring a "giant sucking sound" of American plants leaving America. Twenty-Four years later and we see that Perot's prophesy/forecast was spot on despite being laughed at by the Democrats at that time.


If you trusted the Democrats as a working man back then, then you know that you got royally screwed over with a smile. So the Democrats pretending to be the champion for jobs in the US going forward is just another empty promise, ironically by another Clinton.


Donald Trump, like him or not, has laid out the case, as did presidential candidate Sanders, that special interests and big business wanted to kill U.S. Unions and gain "slave labor" by hanging the American labor force out to dry. It's been a disaster for manufacturing and the level of unemployment is spiraling out of control with plant after plant still closing and running to Mexico and beyond for cheap labor. The Democrat's solution is to have an open border and flood the U.S. market with cheap foreign labor for U.S. companies. What a disaster for American workers having to cope with that reality. 


In the end, would Apple fans pay $100 more for an iPhone made in the U.S.? Yes, in a heartbeat if Apple's CEO framed the argument in a positive light. But Tim Cook will never do that. His claim to fame at Apple, that led Jobs to appoint him CEO, was based on his savviness in getting Apple to tap into the labor camps in China to work in their favor and that's likely to never change.


To tap into India, the next great iPhone market, Apple will work with Foxconn to open a plant there over the next few years. Wherever there's close to slave labor available, Apple will open a plant, gladly. So a U.S. iPhone plant, no matter how you play the numbers like the MIT Review did in their report, isn't in Apple's interest unless they get their U.S. tax rate down to zero – and good luck with that.


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