Why Apple Assembles in China

Wednesday, 20 January 2016

Arik Hesseldahl, writing for Recode on Donald Trump’s “we’re gonna get Apple to start building their damn computers and things in this country, instead of in other countries” campaign promise:

Any honest presidential candidate regardless of party should say clearly and indeed proudly that America doesn’t want these jobs to come back. Final assembly jobs are low-skilled, low-paying occupations; no American would wish to support a family on what the jobs would pay. Workers at China’s Foxconn, which manufacturers the iPhone, make about $402 per month after three months of on-the-job probation. Even at the lowest minimum wage in the U.S. — $5.15 an hour in Wyoming — American workers can’t beat that.

It’s not that simple. These jobs are certainly menial, but they’re not low-skill. As Tim Cook said on 60 Minutes:

Charlie Rose: So if it’s not wages, what is it?

Tim Cook: It’s skill. […]

Charlie Rose: They have more skills than American workers? They have more skills than —

Tim Cook: Now — now, hold on.

Charlie Rose: — German workers?

Tim Cook: Yeah, let me — let me — let me clear, China put an enormous focus on manufacturing. In what we would call, you and I would call vocational kind of skills. The U.S., over time, began to stop having as many vocational kind of skills. I mean, you can take every tool and die maker in the United States and probably put them in a room that we’re currently sitting in. In China, you would have to have multiple football fields.

Charlie Rose: Because they’ve taught those skills in their schools?

Tim Cook: It’s because it was a focus of them — it’s a focus of their educational system. And so that is the reality.

Wages are a huge factor, but for the sake of argument, let’s say Apple was willing to dip into its massive cash reserves and pay assembly line workers in the U.S. a good wage. Where would these U.S.-made iPhone be assembled? A year ago Apple sold 75 million iPhones in the fourth quarter of calendar 2014. There is no facility in the U.S. that can do that. There might not be anywhere in the world other than China that can operate at that sort of scale. That’s almost one million iPhones per day. 10 iPhones per second. Think about that.

You can say, well, Apple could dig even deeper into its coffers and build such facilities. And train tens of thousands of employees. But why would they? Part of the marvel of Apple’s operations is that they can assemble and sell an unfathomable number of devices but they’re not on the hook for the assembly plants and facilities. When iPhones go the way of the iPod in 10 or 15 or 20 years, Apple doesn’t have any factories to close or convert for other uses. Foxconn does.

The U.S. can’t compete with China on wages. It can’t compete on the size of the labor force. China has had a decades-long push in its education system to train these workers; the U.S. has not. And the U.S. doesn’t have the facilities or the proximity to the Asian component manufacturers.

The only way Apple could ever switch to U.S. assembly and manufacturing would be if they automated the entire process — to build machines that build the machines. That, in fact, is what NeXT did while they were in the hardware business. But NeXT only ever sold about 50,000 computers total. Apple needed to assemble 35,000 iPhones per hour last year.

So long as assembling these devices remains labor intensive, it has to happen in China. And if someday it becomes automated — if the machines are built by machines — by definition it’s not going to create manufacturing jobs.¹