LOS ANGELES — President Donald Trump would love to see Apple make iPhones in the USA and has been threatening tariffs to convince companies like Apple to move production here.
But for a variety of reasons, mostly dealing with the skills of overseas labor at manufacturing digital devices and the lower costs, the idea of bringing the iPhone here is a “pipe dream,” says Tim Bajarin, a longtime industry analyst from Creative Strategies. “It’s not going to happen.”
Building an iPhone XS Max, the current top of the line $1,100 iPhone, would cost consumers more than $2,000 if it was made here. A 25% tariff, as threatened by Trump, would add $250 or so to the price of the device, which consumers would either have to pay, or Apple would eat.
Apple’s main competitor, Samsung, is based in South Korea and builds the premium Galaxy phones and others in Korea, India, Vietnam, Brazil, Indonesia and China.
Google has Pixel phones made in China. Amazon’s Echo speakers are made there, as are most consumer tech products.
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Apple this week asked the government to not put tariffs on parts it needed from China to build the new high-end $6,000 Mac Pro computer, but Friday, Trump said no way.
“Make them in the USA, no Tariffs!”
Apple had announced plans to build a factory in Austin, Texas, to make high-end Mac computers here, but recently shifted gears to get them made in China. In January, the New York Times outlined the various issues Apple had in getting devices made in Texas, most notably problems getting a specific screw that was only available in large quantities in China.
“The costs of doing it here makes it impossible,” says Bajarin. The main components of an iPhone – screen, power chip, RAM, solid-state drive and camera sensor – are all made in China.
“The tariff outcome is unlikely to bring wholesale suppliers to the U.S.,” says Sridhar Tayur, a professor at the Carnegie Mellon University’s Tepper School of Business. That said, he notes there’s been a trend for companies to move out of China and look elsewhere due to higher labor costs, human rights abuses and environmental issues.
Bajarin says Vietnam has been the beneficiary, with many companies getting tax breaks to set up shop in the Asia country. Action camera maker GoPro shifted its U.S. production to Mexico in June, while still creating cameras for other countries in China.
China’s Foxconn Technology Group, which builds iPhones for Apple in Shenzhen, announced with great fanfare two summers ago that it would work with Trump and build a plant in Wisconsin to make TV display panels. The company said it would spend $10 billion on a new plant, and create as many as 13,000 jobs. The state offered the company a controversial $3 billion in state incentives to make the move.
But as the Milwaukee Journal Sentinel, a member of the USA TODAY network reports, the factory has yet to be built, and it “will be significantly smaller and less costly than the type of plant specified in Foxconn’s contract with the state.”
Tayur says the experience of Foxconn in Wisconsin shows the perils of Chinese sub-contractors moving their operations to the United States. “If Foxconn cannot make it happen, I don’t see how others can,” he says.
Readers: What would you do with a $250 tariff on an iPhone? Switch to Android or pay the price? We’d love to hear from you on Twitter, where I’m @jeffersongraham