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The Economist pegs the iPhone component cost at $178 and that Foxconn's margin at $7/iPhone: http://www.economist.com/node/21525685 http://www.economist.com/nod

The Economist pegs the iPhone component cost at $178 and that Foxconn's margin at $7/iPhone: http://www.economist.com/node/21525685 http://www.economist.com/node/21525685 Most of the iPhone components don't come from China, they come from Korea, Taiwan, and actually even Italy and Texas: http://news.cnet.com/8301-13506_3-57344151-17/iphone-ipad-processor-made-by-samsung-in-texas-report-says/ http://news.cnet.com/8301-13506_3-57344151-17/iphone-ipad-pr... From another article: The total component cost of an iPhone in 2009 was $172.46. Workers in China assemble the iPhone, but because their wages are low the assembly cost per phone (labeled manufacturing costs in the table below) is quite small, only $6.50 a phone. The total production cost per phone is $178.96: http://thesocietypages.org/socimages/2011/12/29/the-innovation-trap-how-the-iphone-isnt-saving-america/ http://thesocietypages.org/socimages/2011/12/29/the-innovati... >"If iPhones were assembled in the US the total assembly cost would rise to US$68 and total manufacturing cost would be pushed to approximately US$240. Selling iPhones assembled by US workers at US$500 per unit would still leave a 50% profit margin for Apple": http://business.time.com/2011/01/11/is-the-iphone-bad-for-the-american-economy/#ixzz1k8KI625q http://business.time.com/2011/01/11/is-the-iphone-bad-for-th... However, I think it's fair to conclude: Slicing the iPhone in this way, we can see that the real value of the iPhone isn’t in the manufacturing process at all, but lies in its design and the development of its components. And by owning the technology and design, the U.S. also gains in global trade, even though the iPhone isn’t manufactured in America: http://business.time.com/2011/01/11/is-the-iphone-bad-for-the-american-economy/#ixzz1k8LwWTMQ http://business.time.com/2011/01/11/is-the-iphone-bad-for-th...

tobylane 15y ago
I don't like their assumption of 50% profit margin (including nothing but hardware). They have the manufacturing cost and the retail cost, why not use the american manufacturing cost to think up a real retail price?
- molmalo 15y ago
  Why ? Because, as the article states: Companies have closed major facilities in the United States to reopen in China. By way of explanation, executives say they are competing with Apple for shareholders. If they cannot rival Apple’s growth and profit margins, they won’t survive. They don't care about workers, they care about shareholders. If Apple says to its shareholder "We'll earn 30% less next quarter, but we'll create 30000 new jobs in the US!" how do you think the market would react ? They'd sell like crazy! The share price would plummet. No one wants to loose money.
- uncoder0 15y ago
  I agree, they should have used a total price of $875. (34% Increase) $240/$178 * $649 $649 = iPhone 4S 16GB Unlocked | $178 = CoM in China | $240 = Aproximate CoM in USA
- JumpCrisscross 15y ago
  What's the moral advantage of using American over Chinese workers? By a similar token, why not just raise the wages of those Chinese workers by 100%. They'd be madly richer, very happy, and still far cheaper than American workers. Then again, the existing wage level is such that it commands some 8 000 applications a month (at Foxconn). Part of the gist of the article was that US regulations make building out flexible manufacturing capacity rapidly incredibly difficult. Quicker to do it in China. Ironic considered the PRC's legendary red tape (no pun).
  - enjo 15y ago
    Apple owes its existence to American education, infrastructure, and a host of other services provided by American taxpayers. Why shouldn't they support the same families that supported them all these years?
    - tsotha 15y ago
      >Apple owes its existence to American education, infrastructure, and a host of other services provided by American taxpayers. Why shouldn't they support the same families that supported them all these years? You mean, why shouldn't Apple pay even more to support families it's already been supporting all these years? Do you honestly think Apple, as a corporation, has been a net-negative to the taxman?
    - yummyfajitas 15y ago
      Apple is no longer utilizing those services. It is instead using Chinese education and infrastructure. Why should Apple continue paying for services it no longer needs?
      - easp 15y ago
        Absolute and total nonsense. Do you really think Apple and other multinationals could operate as profitably, or at all, without many of "those services." Enforcement of Apple's intellectual property? Protection of their brand and trademarks? The contracts they rely on? The banks they rely on? Safe passage of ships and aircraft carrying raw materials and finished goods? The security and safety of their executives and engineers?
speleding 15y ago
$6.50 of manual labor in China translates into $68 worth of labor in US only if you forget about automation. At American wage levels a whole set of production steps could be more profitably done by robots.
- dredmorbius 15y ago
  An interesting factoid I saw online was the economic value of a quantity of oil. One of the cost visualizations was what the lost oil could produce in economic output in China, and the US. The US value far exceeded China's. China benefits from low-wage and low-rights labor. Capital productivity is still higher in the US. Not something to take as a given for all times, though.
- trimbo 15y ago
  As long as there is manual labor that can be found for that low cost, no one will invest the capital to automate.
  - molmalo 15y ago
    And don't forget that the government of a country with 1340 M people, has an enormous incentive to keep the status quo. If automation destroys hundreds of thousands of jobs, it's a recipe for chaos. The ones ruling China, surely want to keep people working with low wages, so they can be replaced easily if they start causing trouble. Having hundreds of thousands, or millions of unemployed people is by far much more dangerous for them, than loosing a few bucks per phone by not automating the process.
  - deleted 15y ago
    [deleted]
  - forensic 15y ago
    They will if we tax human suffering. Internalize the externalities. It's not complicated.
    - deleted 15y ago
      [deleted]

tobylane 15y ago

I don't like their assumption of 50% profit margin (including nothing but hardware). They have the manufacturing cost and the retail cost, why not use the american manufacturing cost to think up a real retail price?

molmalo 15y ago
Why ? Because, as the article states: Companies have closed major facilities in the United States to reopen in China. By way of explanation, executives say they are competing with Apple for shareholders. If they cannot rival Apple’s growth and profit margins, they won’t survive. They don't care about workers, they care about shareholders. If Apple says to its shareholder "We'll earn 30% less next quarter, but we'll create 30000 new jobs in the US!" how do you think the market would react ? They'd sell like crazy! The share price would plummet. No one wants to loose money.
uncoder0 15y ago
I agree, they should have used a total price of $875. (34% Increase) $240/$178 * $649 $649 = iPhone 4S 16GB Unlocked | $178 = CoM in China | $240 = Aproximate CoM in USA
JumpCrisscross 15y ago
What's the moral advantage of using American over Chinese workers? By a similar token, why not just raise the wages of those Chinese workers by 100%. They'd be madly richer, very happy, and still far cheaper than American workers. Then again, the existing wage level is such that it commands some 8 000 applications a month (at Foxconn). Part of the gist of the article was that US regulations make building out flexible manufacturing capacity rapidly incredibly difficult. Quicker to do it in China. Ironic considered the PRC's legendary red tape (no pun).
- enjo 15y ago
  Apple owes its existence to American education, infrastructure, and a host of other services provided by American taxpayers. Why shouldn't they support the same families that supported them all these years?
  - tsotha 15y ago
    >Apple owes its existence to American education, infrastructure, and a host of other services provided by American taxpayers. Why shouldn't they support the same families that supported them all these years? You mean, why shouldn't Apple pay even more to support families it's already been supporting all these years? Do you honestly think Apple, as a corporation, has been a net-negative to the taxman?
  - yummyfajitas 15y ago
    Apple is no longer utilizing those services. It is instead using Chinese education and infrastructure. Why should Apple continue paying for services it no longer needs?
    - easp 15y ago
      Absolute and total nonsense. Do you really think Apple and other multinationals could operate as profitably, or at all, without many of "those services." Enforcement of Apple's intellectual property? Protection of their brand and trademarks? The contracts they rely on? The banks they rely on? Safe passage of ships and aircraft carrying raw materials and finished goods? The security and safety of their executives and engineers?

speleding 15y ago

$6.50 of manual labor in China translates into $68 worth of labor in US only if you forget about automation. At American wage levels a whole set of production steps could be more profitably done by robots.

dredmorbius 15y ago
An interesting factoid I saw online was the economic value of a quantity of oil. One of the cost visualizations was what the lost oil could produce in economic output in China, and the US. The US value far exceeded China's. China benefits from low-wage and low-rights labor. Capital productivity is still higher in the US. Not something to take as a given for all times, though.
trimbo 15y ago
As long as there is manual labor that can be found for that low cost, no one will invest the capital to automate.
- molmalo 15y ago
  And don't forget that the government of a country with 1340 M people, has an enormous incentive to keep the status quo. If automation destroys hundreds of thousands of jobs, it's a recipe for chaos. The ones ruling China, surely want to keep people working with low wages, so they can be replaced easily if they start causing trouble. Having hundreds of thousands, or millions of unemployed people is by far much more dangerous for them, than loosing a few bucks per phone by not automating the process.
- deleted 15y ago
  [deleted]
- forensic 15y ago
  They will if we tax human suffering. Internalize the externalities. It's not complicated.
  - deleted 15y ago
    [deleted]