With two Presidential candidates saying that Apple should be making more of its products in the USA, the Massachusetts Institute of Technology has done the sums to see just how practical it would be for Apple to manufacture iPhones in its home market.
The question, of course, isn’t a simple one: you first need to define your terms. Does it just mean assembling iPhones here rather than in China, or does it mean sourcing components from the U.S. too? The MIT analysis considered both scenarios, starting with assembly-only …
Assembly, says the MIT Technology Review piece, is not a major part component of the cost of an iPhone. Apple doesn’t disclose the numbers, of course, but industry estimates place it in the $4-10 range.
Syracuse University professor Jason Dedrick has already estimated the additional cost of carrying out the assembly work in the USA, and says that it would add $30-40 to the cost of an iPhone – but not for the reason you might think.
That’s partly because labor costs are higher in the U.S., but mostly it’s because additional transportation and logistics expenses would arise from shipping parts, and not just the finished product, to the U.S. This means that assuming all other costs stayed the same, the final price of an iPhone 6s Plus might rise by about 5 percent.
With assembly already partly automated, and getting more so, it’s not likely that it would bring that many jobs to the USA – especially as any production line created from scratch would take full advantage of the opportunities to maximize the use of robots rather than people.
The piece then goes on to examine scenario 2: making the components in the U.S. also.
Across iPhone, iPad and Mac, Apple has a total of 766 suppliers, of which 69 are in the USA. Almost half of them are in China, with many of the the rest in Japan and Taiwan. When it comes to chips, there is good news and bad. The good news is that such a shift would be practical.
As Alex King, director of the Critical Materials Institute headquartered at the Department of Energy’s Ames Laboratory, points out, semiconductor fabs become obsolete a few years after they are built. This means, he says, that “with every new generation of semiconductors there is an opportunity to place a semiconductor fab anywhere in the world, including the U.S.”
But Duane Boning, an electrical engineer at MIT specializing in semiconductor manufacturing, says that this wouldn’t necessarily generate many jobs.
Labor costs are a tiny fraction of cost compared to the equipment and facilities that go into a multibillion-dollar fab.
There’s in any case a limit to the components that can be manufactured in the USA.
According to King at the Ames Lab, an iPhone has about 75 elements in it—two-thirds of the periodic table. Even just the outside of an iPhone relies heavily on materials that aren’t commercially available in the U.S. Aluminum comes from bauxite, and there are no bauxite mines in the U.S. […]
The elements known as rare earths (which aren’t that rare but are tough to mine) would need to come primarily from China, which produces 85 percent of the world’s supply.
So the bottom-line appears to be that assembly could be done in the U.S. if consumers were willing to pay an additional $30-40, rising to around an additional $100 if as many components as practical were manufactured here – but the impact on the job market isn’t likely to be significant.
Photo: Ym Yik/EPA