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A ‘Made in America’ iPhone Would Cost $2,000, Studies Show

Would you be willing to pay $2000 for a phone that costs only half that much today?

How much would an all-American iPhone cost?

About $2,000 according to two reports, one recent and one from 2014.

From Jefferson Graham writing in USA Today a few days ago:

Would you willingly spend $2,000 to buy an iPhone that today costs a grand? That’s how much veteran analyst Tim Bajarin tells me it would cost Apple to retail if it made iPhones in the United States.

Why shouldn’t Apple makes iPhones here? Well, here’s the problem. It’s not just money. Yes, there’s way lower labor costs involved. Skilled workers in China make about $100 a week, way less than we offer. There’s also the availability of parts in Asia and the lack of suitable manufacturing facilities here.

Think about the parts dilemma for a second. Remember that Apple makes more than 200 million iPhones yearly and has to come up with OLED screens, camera sensors, solid state storage drives and the like to put into every one of them.

These are all made-in-Asia products.  “We lost manufacturing to Asia, Southeast Asia, India and Mexico two to three decades ago, and it’s never coming back,” Bajarin told me recently. Apple’s not alone. Cameras have been made in Asia for decades, Samsung creates its Galaxy phones in South Korea, Vietnam and India, Amazon gets Echo speakers made in China and Google gets the Pixel phone made in South Korea.

And from National Public Radio’s Marketplace‘s Stacey Vanek Smith’s 2014 report when the iPhone 5 cost between $650-$850 retail:

Labor’s not the most significant financial advantage to manufacturing the iPhone in China, where Apple has been able to create enormous iPhone-assembling villages. “They have these special regions, like Shenzhen, which is an industrial region,” explains Rene Ritchie, editor-in-chief of iMore, a publication about Apple products. “Anything you need is just a couple of buildings away, and the ability to keep everything so close together has incredible logistic advantages for Apple.”

Ritchie says it would be almost impossible to re-create that in the U.S., which would mean longer assembly times, less efficient assembly and lots of micro-shipments. “It’s an incredibly complicated process to build one of these devices and you’d have to move that entire culture of production to the U.S. in order for it to work,” says Ritchie.

“For almost every component that goes into the device, there may be as many as two or three sources,” says Andrew Rassweilier, Senior Director of Materials and Cost Benchmarking at IHS technology. “Then if you were to dig down another layer into some of the components, such as the display, the touch screen, the batteries. Those are also assemblies that are comprised of multiple components coming from, potentially, multiple counties.”

Rassweiler says making all of the iPhone’s parts in the U.S. would push the price of the iPhone’s components from $190 to around $600. “If the materials alone are costing $600,” says Rassweilier, “it stands to reason, that same iPhone could cost, perhaps, $2,000 at retail.”

That’s right. $2,000 for an iPhone. And it wouldn’t even earn political goodwill from most of its customers.

The U.S. only brings in 6 percent of profits from iPhone sales. “Two out of three Apple customers aren’t in the USA anymore,” says the Yankee Group’s Carl Howe. “That’s quite a change from many years ago when most of Apple’s customers were in the US.”

In addition to not understanding the basic economic principles of international trade, the Mercantilist-in-Chief also apparently doesn’t understand very well the business principles and dynamics of international production activities that are driven by complex, intricate, cross-border, global supply and value chains that have taken decades to develop. And it’s those global supply chains that are at work with the ultimate goal of producing products most efficiently to provide maximum value for global consumers. The Apple iPhone is a perfect example of a globally produced product for global consumers, with two-thirds of those consumers living outside the USA.

Apple, Inc. has a responsibility to its shareholders and consumers to produce and sell its products at the lowest price in a hyper-competitive global marketplace. Large multi-national corporations like Apple, although many are headquartered in the USA, operate in global marketplaces for inputs, parts, production, and sales and have to operate with a global mindset to be competitive and remain in business. To force those global companies like Apple to operate within Trump’s nationalistic and mercantilist view of the global economy is a sure formula for impoverishing America and its multi-national corporations, not a formula for any kind of American greatness.

This article is reprinted with permission from the American Enterprise Institute.

  • Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.