Could Donald Trump really get Apple to ‘build a big plant’ in the US?


Powered by Guardian.co.ukThis article titled “Could Donald Trump really get Apple to ‘build a big plant’ in the US?” was written by Julia Carrie Wong in San Francisco, for theguardian.com on Wednesday 23rd November 2016 20.18 UTC

Donald Trump told Apple CEO Tim Cook that he is going to “get” the company to start manufacturing its products in the United States, the president-elect told the New York Times on Tuesday.

Trump revealed that he had received a post-election phone call from Cook during which he said, “Tim, you know one of the things that will be a real achievement for me is when I get Apple to build a big plant in the United States, or many big plants in the United States.”

According to Trump’s account, Cook responded, “I understand that,” and Trump went on to promise incentives through tax breaks and reduced regulations.

“I think we’ll create the incentives for you, and I think you’re going to do it,” Trump said he said.

Apple did not immediately respond to a request for confirmation of Trump’s characterization of the call, nor did it respond to a request for comment on the content of Trump’s remarks.

Though Apple markets its high-end products as being “designed by Apple in California”, the electronics are assembled at factories in China from components produced primarily in China, Japan and Taiwan, according to the MIT Technology Review. The company says that its suppliers employ more than 1.6 million people.

Forcing American companies to bring jobs back to the US was one of the key themes of Trump’s presidential campaign, despite his own business’s decision to manufacture apparel in China or Bangladesh.

“We’re going to get Apple to build their damn computers and things in this country instead of in other countries,” the then-candidate told supporters in Virginia on 18 January.

Trump later called for a boycott of the company’s products unless it acceded to the FBI’s demand that it unlock one of the San Bernardino shooters’ iPhones, a request Apple had strenuously resisted.

Apple markets its products as ‘designed in California’ but assembles them in Chinese factories from components produced in China, Japan and Taiwan.
Apple markets its products as ‘designed in California’ but assembles them in Chinese factories from components produced in China, Japan and Taiwan. Photograph: Dominic Lipinski/PA

But most experts agree that building iPhones from scratch in the US is impractical and economically unfeasible, largely because the company relies on a complex and very large supply chain and manufacturing infrastructure already established around Shenzhen, China.

“Geography matters,” said Seungjin Whang, a Stanford Business School professor who studies supply chain management. “In Shenzhen, if you need a part (how scarce it might be), you can find at least 10 suppliers within a day.”

“Right now the supply chain to make consumer electronics in volume does not exist in the US,” said Tim Wilson, a partner in venture capital firm Artiman. “You might tax [importing] so it costs more, but to reposition and get people to rebuild that supply chain in the US is not something that I would predict in the next few years.”

If Apple were to invest in establishing a new supply base in the US, Whang predicts that the delay would give its competitors – largely Korean and Chinese companies – time “to catch up and eat its lunch”.

Jason Dedrick, a professor at Syracuse University’s School of Information Studies, analyzed Apple’s supply chain for the MIT Technology Review and found that assembling iPhones in the US would add between $30 to $40 to the product’s cost, largely due to labor costs and the additional cost of shipping components to the US.

Dedrick’s estimate did not include the capital cost outlay of building factories, which could be substantial.

“It’s quite feasible for Apple to do limited volume assembly of some products in the US,” Dedrick said, proposing iMacs as a possibility. “I don’t think it’s possible to move production of hundreds of millions of iPhones to the US, at least not at a competitive cost.”

One possibility, Greg Linden of the Institute for Business Innovation at UC Berkeley said, would be for Apple to have “the parts kitted in China and shipped to the existing factory of one its assemblers here and voilà – you’ve got a US-assembled iPhone with one extra process step plus some extra shipping and labor.”

That strategy could cost as little as $10 to $20 per iPhone, he said, but is limited to the capacity of those already existing factories.

As to whether Apple will attempt something like that, Linden said, “I guess it depends on how badly Tim Cook wants a win.”

guardian.co.uk © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.