Inspired by the Steve Jobs thread. Seems like the thing would die on the vine if it cost a couple of thou. But use cheap labor and everyone who wants one has one.
WAG : I think it would drive up the price less than $30. Why so little? Because the main costs are the components. I assume those are still sourced from Asia, and you’re just talking about assembly, right? It is estimated to cost $11 to assemble and test the phone in Asia. The test equipment and the facility is going to cost about the same in the U.S., maybe slightly more, the main difference is the labor cost of the people doing it. In China, they now make about $10 an hour, I would guess it would cost $30 an hour here.
Also, in the U.S., the higher labor rate means more incentive to purchase better automated assembly and test equipment.
Frankly, an iphone is a bad example. Obviously, Apple can trivially absorb $20, even $100 in extra manufacturing cost. However, if you’re talking about much lower margin products, like those $50 android smartphones from Chinese manufacturers, the extra cost to make it in the USA would make it totally unprofitable.
This article (from 2013) claims that the marginal labour costs would be something like $4 per phone ($600M total), but the tax liability would add another $3.6B. As Habeed indicates, the components dominate the total cost.
Well, shit. So the real reason so many Americans have lost their jobs and China is in ascendance while America languishes…is because the American tax laws make it most economically feasible to do it this way. Wow. I can’t say I’m surprised, there are numerous things wrong about America that are causing catastrophic losses in efficiency, like a leaking engine. (to name a few : the education system is a parasite that works by denial of education as much as it does by helping people, the legal system is almost purely parasitic, and the medical system is a parasite that consumes vast amounts of wealth for little benefit to patients and medical treatments that are decades old cost more real money now than they did when invented)
It’s a couple of years old, but this article talks about why the iPhone isn’t made in the US.
It mentions, for instance, that Steve Jobs decided a month before the iPhone was first to be sold that a plastic screen was unacceptable and that the screen had to be made of glass. Foxconn was able to provide hundreds of industrial engineers to figure out how to mount the glass screen and train the production staff, which numbered 8,000 at the start of production. And, by the way, production started in the middle of the night.
The article says, “‘The entire supply chain is in China now,’ said another former high-ranking Apple executive. ‘You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.’”
In short, the additional cost isn’t the reason that the iPhone isn’t made in the US.
This is actually something I know something about.
The entire supply chain for the iPhone is in China/Asia. That means each and every single component that goes into manufacturing the iPhone is NOT sourced in the US. Each component as well as the final assembly would have to be based on a US wage, environmental and regulatory environment with smaller economies of scale. Good luck with that being a $12 differential.
And then you get to seasonal employees. When Apple ramps a new iPhone, it requires hundreds of thousands of migrant laborers. Even in China, that creates a spike in wages and labor shortages.
- The actual labor. China gets $8 - 12 per iPhone for the final assembly. To change this from Chinese manual labor to US manual labor would WAG require 5-10x. Wages and benefits are higher in the US, more overtime requirements, etc.
- Apple would have to get hundreds of suppliers to move their manufacturing to the US. Majority of component manufacturers are based on Chinese labor (with some components from Japan and/or Korea), and would require the same 5-10x in labor costs on top of moving manufacturing to the US.
- Manufacturing (factory costs) are higher in the US than China. There are more enforced environmental, safety and other regulations
- Economies of scale. Obviously the iPhone is huge, but if you are a supplier that can supply the iPhone, AND all the major Android players (Xiaomi, Huawei, Samsung, etc) then you have even great economies of scale than if you were in the US only manufacturing for Apple.
It is not efficient to manufacture the components in Asia, ship to the US, and then assemble in the US. You need the right mix of parts and JIT.
Even if you could manufacture everything in the US (and it would take years to bring everything over), my wag is a 5x-10x increase in the overall price of the iPhone.