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Apple’s U.S. iPhones Can All Be Made Outside of China If Needed
- luciads 7y agohmm not sure if i'll buy apple products "made in India"...
- jdhn 7y agoObviously they can be made outside of China. What Wall Street would care about is whether or not the assembly cost would be raised, and how Apple would deal with that (pass the additional cost onto the customer, or take the hit and absorb a little/all of the added cost).
- morpheuskafka 7y agoI think you could really sell it as a valuable risk management strategy, even if it does slightly raise costs.
- chrismeller 7y agoI find that a hard sell to the average consumer. We’re talking people who plaster social media with every detail of their lives already... voluntarily... for free. Do you really think it ever even crosses their mind once where any of it was made, let alone what the consequences of that might mean? Not that there couldn’t be some kind of compromise where they offer a “pro” model specifically assembled outside of China... I’m thinking a “Blackberry is for serious business” kind of campaign. While there would no doubt be some serious money available from that market, that’s never been Apple’s MO, so it would be a major shift for the company and would likely skew their mojo. I mean that’s something IBM would do...
- save_ferris 7y agoEspecially given that Apple has significantly raised prices on new phones over the last few years already. I'm no economist, but there must be a limit to how much Apple can keep raising prices while still maintaining the same or similar revenue.
- Retric 7y agoThis actually reduces the impact of higher construction costs. If a 1000$ phone with a 300$ profit margin needs say 3 hours of labor to create it’s not that important if the labor is 2$/hour or 20$/hour. Further, higher construction costs would quickly push automation which is almost competitive at China’s labor rates.
- jdsully 7y agoIt does if Apple wants to keep growing their profit margin. Its the changes that matter to wall street, not the overall number.
- ninth_ant 7y agoRespectfully, I think you fundamentally misunderstand how companies approach these issues if you think the labour rated you mention don’t matter. Labour costs are certainly not the only thing that matters, but even the $56 per unit you mention is deeply significant and motivating.
- Retric 7y agoApple clearly cares about their costs. My point is labor cost is vastly less important than for example long term supply chain disruptions. Moving to another country where it costs even 10c more per phone is not going to happen. However, if they need to chose between higher costs and being unable to manufacture any phones for 8 months they would be willing to eat much higher costs.
- djsumdog 7y agoWould they really raise prices though? They have $800 billion. They're still the 3rd largest company on the planet. They charge $1000 for their flagship. They could probably easily eat that cost, still generate profit (although less profit) on the hardware and still spin that to make their shareholders happy. Their phones are already at a premium and there is a diminishing return on customers if they keep hiking prices.
- mruts 7y agoGrowth of Iphone sales has stagnated, making Wall St more than a little upset. I suspect this is why we are seeing more investment in the Mac Pro, the Ipad, and OSX after being ignored for so long. I doubt Apple would be willing to lower their profit margins in such an environment. Apple’s P/E is already well below the S&P 500 (16 vs 21) and I don’t think they want to slip into value territory any time soon.
- solarkraft 7y ago> although less profit You mentioned the problem. Maybe they could eat a few % with some spin, but I'm not sure shareholders would be okay with much more.
- djsumdog 7y agoThis is what I don't get. That's insane. You cannot have infinite growth. At some point, sales will drop. A growing number of people want to fix rather than replace and consume. How does our society change the goal posts, where increased sales and profits are no longer an end goal? They can't be forever. There isn't room for the 4th largest company to grow larger. It'll just be perpetually switching places with Microsoft, Amazon and Alphabet.
- hrktb 7y ago> Obviously they can be made outside of China From what I understand, this is not so obvious. There is a ton of parts that only Chinese manufacturer produce at scale, and I wonder if some of them can even be produced elsewhere at any reasonable price in a reasonable time frame (if it takes 10 years to rebuild a factory elsewhere, or if it's only produceable at CERN, I'd conclude it's not an option) Do we have any single example of a high scale computing product produced without any Chinese part at this point ?
- baybal2 7y agoWell, Japanese domestic market stuff? Panasonic and Toshiba take pride in sourcing almost all, but ram and chipset from Japan for their notebooks. I once had an opportunity to take apart an RZ series, and to my amusement, even capacitors and other passives were Japanese. I never expected Japanese electronics to still be around in 2018.
- hrktb 7y agoGood point. Other notable companies are Sony, they still have CMOS sensor factories in Japan and will try to keep most of the “secret sauce” in the country, and Samsung who also has founderies in Korea if I’m not mistaken. Even them will source some of the parts from elsewhere, hut at least they still have advanced manufaturing knowledge. I guess they would be faster to move if they needed to cut ties with China.
- sbov 7y agoNote that there was an article a while ago that claimed that assembling the iPhone in the USA would cost an extra $30-40, and that was mostly due to logistics. So I would guess the extra cost would be less than that. You probably aren't talking about much difference here. https://www.technologyreview.com/s/601491/the-all-american-iphone/ https://www.technologyreview.com/s/601491/the-all-american-i...
- Operyl 7y agoNote: Unlike what some people will think at first thought, these iPhones are still not likely being made in the US. They're going to invest further into their factories in India.
- dvduval 7y agoSure, to the next "Huawei" stealing our secrets will come out of India. At some point we have acknowledge that cell phone can be made anywhere, and the people making them will surely create their own companies. It is the natural end game.
- duxup 7y agoJust for everyone in world's sake / security it would seem to be a good idea to spread manufacturing out all over the world. Hopefully we see more of that.
- throwayEngineer 7y agoIt's really expensive to build new production facilities. These trade wars benefit the lucky rather than those willing to change. Not every company can afford to create a new manufacturing environment, Apple is Priced luxury so their margins are high enough to compensate.
- duxup 7y agoCertainly not easy, but if we see Apple and others do it I expect it provides some cost savings / patterns for the next wave (if any of it happens).
- hurrdurr2 7y agoThat's what manufacturers are already doing...moving production to places like India and Vietnam. What's interesting to me is once the trade imbalance with Vietnam tips over to their favor what will the US do. Also it's not like Vietnam is some democratic wonderland in terms of their government.
- duxup 7y ago> it's not like Vietnam is some democratic wonderland in terms of their government They're not but I don't think the form of government is the key factor as much as how trade works on the ground with China. Vietnam IMO would likely be more than receptive to lots of new business, possibly making a point not "be like China" in order to assure such business.
- artificial 7y agoFascinating that business is being done for western countries in communist countries. Ideologically it's curious that there isn't more of a demand from consumers, evidently this underlines how important cost is.
- Shivetya 7y agoI think Apple should stand by their human rights mantra and move their production out of China. It should not be a question of where they are sold, the only question a company with their supposed rights advocacy is where they are produced. China has shown they do not value world opinion.
- dvduval 7y agoAbout 850 million people have lifted themselves out of poverty in China since the eighties. It's extraordinary. Just want to be clear the US is not exactly perfect when it comes to human rights. Sure, China had a lot they need to do better, but the improvements are incredible. In the US, look at Indian reservations, border detentions, hate groups, number of people in jail... We are not the human rights poster child.
- threezero 7y agoI’m not sure I’d call China running over people with tanks and imprisoning millions of Muslims in concentration camps “improvements”.
- dvduval 7y agoFrom the East India company and the opium wars and the unbalanced treaties, to the Chinese civil war and the invasion of Japan, it's not easy for an outsider to understand just how strongly China considers anything that would bring about the instability that they experienced in the past. Most Chinese people support preventing instability, as in the 80s they had the largest famine in human history. Sometimes they are heavy handed and I think they acknowledge this, and would even tell you that it's not right what they did, but I think the average Westerner does not really get the perspective of the reasoning behind it. Think about how many people we have imprisoned in our so-called drug war. As a percent of our population, it's a lot more than in China.
- wp381640 7y agoThere is nothing unique about China's own human rights abuses that rationalises it. Every dictatorship ever has had similar rationalisations.
- jokoon 7y agoDoes that include rare earths? This article says China hold 97% of rare earth's production: https://en.wikipedia.org/wiki/Rare_earths_trade_dispute https://en.wikipedia.org/wiki/Rare_earths_trade_dispute Anyway, that's an important argument made to make durable phones, and with lightweight software so that you can do more with less. I wish there was some durability review on products so that consumers can understand what companies do to make products have a limited lifespan.--
- peaktechisnow 7y agoThat stat is wildly out of date -- its closer to 80%. https://www.usgs.gov/centers/nmic/rare-earths-statistics-and-information https://www.usgs.gov/centers/nmic/rare-earths-statistics-and... There are operational mines in the U.S. and Australia (among others) and processing facilities in Estonia, Malaysia, and 3 processing facilities under construction in the US. DoD has begun creating large stockpiles, adding >400 metric tonnes per year.
- HeXetic 7y agoMy understanding of the rare earths issue is that the reason China controls that much of the production is because all the extraction & production elsewhere shut down due to an inability to compete with China's prices. You basically have to open pit enormous areas to get any quantity of them. If the global rare earth prices rise enough, or if China continues to try to manipulate its exports to ensure that products using rare earths are manufactured within its borders, then mines eleswhere will open.
- dgemm 7y agoMothballed facilities like the mountain pass mine are already reopening.
- Whatarethese 7y agoI really wish shareholder would sacrifice a little profit to allow these to be made in the states. So many US jobs.
- friedman23 7y agothat is just not how it works
- Mediterraneo10 7y agoManufacturing in China uses large numbers of human beings because labor is cheap there. Manufacturing in the USA strives to use minimal human involvement through automation because of the high cost of labor there. Companies moving production of goods back to the United States will not necessarily add a significant amount of jobs.
- swagasaurus-rex 7y agoNo but the jobs created will be American, feed american families, and those job skills can be transferred to create other American businesses. I'm so glad I did not choose mechanical engineering as a college major, and instead opted for Computer Sciences. I wasn't around during the 70s and 80s but it appears the jobs in the engineering field has dried up. Programming appears to be the only field that has resisted globalization, and even then there is still massive offshoring.
- hello_1234 7y agoNo, the jobs in engineering field has not dried up. I wish people did some research before spewing up lies. "But every engineering occupation has added jobs, the most coming among mechanical engineers." - https://www.forbes.com/sites/emsi/2014/09/12/the-most-in-demand-and-oldest-engineering-jobs/#7c3ed5431e37 https://www.forbes.com/sites/emsi/2014/09/12/the-most-in-dem...
- DiogenesKynikos 7y agoYou left something out of your calculation: When industrial production comes back to the US, the price of consumer goods will rise. Consumers will not be able to afford as much at those higher prices, so some American businesses will lose customers. People will be laid off in other sectors of the economy because of the reduced demand. Overall, your plan would just shift jobs from other sectors of the economy into manufacturing. The average American would be able to afford less, not more. In other words, Americans would likely be poorer as a result of this policy. There isn't some magic rule that restricting imports leads to greater prosperity. There are costs to restricting imports, and in general, those costs outweigh the benefits (especially for developed countries).
- chrismeller 7y agoSo this is “made”, not made... assembled somewhere that is not China (so India), but there’s no mention of where all the components they’re assembling are being produced at. The most recent estimate [1] I could quickly find valued the iPhone X at $600 in components alone (excluding assembly), so any trade war would seem to still be incredibly perilous for Apple, especially on their lower-end products. I haven’t been following any of this, so perhaps they covered it in another story, but for Bloomberg I really expected a bit more of an in-depth analysis. 1: http://fortune.com/2017/09/18/apple-iphone-x-margins/ http://fortune.com/2017/09/18/apple-iphone-x-margins/
- H8crilA 7y agoComponents are not made in China, at least mostly. Chips are from tsmc for example. Mainland China is responsible for the final assembly.
- chrismeller 7y agoAccording to the link another commentor replied to my comment with, which includes the actual per-component cost breakdown, the most expensive part is the Samsung display. Where is that manufactured? Well, in 2017 Samsung was planning the world’s largest plant in... you guessed it... China. Even if some details or price estimates are wrong, the fact that they are dependent upon a third party for the most expensive component with no obvious alternative is a problem.
- seanmcdirmid 7y agoEven if Samsung plans to put a plant in China, they still have production capacity in Korea. In fact, most of the components that’s come out of China are fungible like that. Apple tends to have multiple display providers, even for the same phone model (Sharp, LG, Samsung). They are on top of that problem, mostly.
- solarkraft 7y agoSomewhat OT: How do you guarantee for quality/consistency when you have multiple suppliers for a part as sensitive as this?
- cronix 7y agoBut can they make any products at all without Chinese Rare Earth materials? Production is at the end... I believe that is the Ace in the sleeve. Just jack the price of rare earth minerals 1000%, or temporarily halt production. It won't matter what country they are manufactured in if you can't get all of the parts you need, or get them economically...
- jpollock 7y agoThis is about avoiding US import duties, not avoiding Chinese export bans.
- EliRivers 7y agoHere's the register talking about the last time China decided to flex their rare earth monopoly; https://www.theregister.co.uk/2015/09/02/western_worlds_only_rare_earth_mine_closes/ https://www.theregister.co.uk/2015/09/02/western_worlds_only... Here's the same commentator more recently; https://www.theverge.com/2019/5/23/18637071/rare-earth-china-production-america-demand-trade-war-tariffs https://www.theverge.com/2019/5/23/18637071/rare-earth-china... Basically, yes, you can make them without Chinese rare earths, and it won't break the bank. You can just dig them up and process them elsewhere.
- chibg10 7y agoRare earth metals are not as rare as their name suggests, and there are plenty of mines outside of China capable of meeting demand for them. There hasn't been sufficient motivation to tap those mines yet, but that if there's money to be made (i.e. Beijing limits supply) then those mines will be up in a hurry. The threat isn't empty but it's not really a trump card either. This is all based off what I've read on the topic from mainstream news sources. I'm not an expert in this area.
- _iyig 7y agoYes. The U.S. can reopen the Mountain Pass mine, as was previously discussed on HN: https://en.wikipedia.org/wiki/Mountain_Pass_rare_earth_mine https://en.wikipedia.org/wiki/Mountain_Pass_rare_earth_mine https://news.ycombinator.com/item?id=20055069 https://news.ycombinator.com/item?id=20055069 (Submission looks flagged now for some reason?)
- _emacsomancer_ 7y agoPerhaps assembled outside of China using Chinese components.
- amelius 7y agoHow about components for Desktop PCs? Or will a trade war with China force everybody to buy Apple products?
- dirtyid 7y agoSince the article suggest the pivot will be to India, keep in mind that India is speculated to be the next US trade war. In the last two weeks India has been removed from the preferential trade agreement and threatened with sanctions via Countering America’s Adversaries Through Sanctions Act for possible Russian S400 acquisition.
- jepler 7y agovs https://www.nytimes.com/2019/01/28/technology/iphones-apple-china-made.html https://www.nytimes.com/2019/01/28/technology/iphones-apple-... "A Tiny Screw Shows Why iPhones Won’t Be ‘Assembled in U.S.A.’"
- pwinnski 7y agoYes, the claim is "outside of China," not "in the USA."
- baybal2 7y agoThey can manufacture electronics pretty much anywhere, but they will still have to haul all parts from China.
- mensetmanusman 7y agoThere would be massive global environmental benefits moving the supply chain to western countries. These devices should be more expensive, the hidden cost is in killing the next generation because humanity isn’t handling industrial waste properly (because we outsourced the problem to China.)