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Obviously 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 wit

by jdhn 7y ago

Obviously 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 ago
I think you could really sell it as a valuable risk management strategy, even if it does slightly raise costs.
- chrismeller 7y ago
  I 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 ago
Especially 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 ago
  This 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 ago
    It 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 ago
    Respectfully, 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 ago
      Apple 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 ago
Would 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 ago
  Growth 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 ago
    This 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 ago
  Well, 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 ago
    Good 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 ago
Note 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...

by jdhn 7y ago

morpheuskafka 7y ago

I think you could really sell it as a valuable risk management strategy, even if it does slightly raise costs.

chrismeller 7y ago
I 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 ago

Especially 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 ago
This 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 ago
  It 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 ago
  Respectfully, 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 ago
    Apple 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 ago

Would 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 ago
Growth 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 ago
  This 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 ago
Well, 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 ago
  Good 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 ago

Note 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...