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Apple Explores Making iPhones in the US, Finds 'the Cost Will More Than Double': Nikkei (nikkei.com)
Apple is exploring the idea of making iPhones in the United States. But the company has realized that it will cost more than double to make the shiny new gadgets at home, according to a report on Japan-based outlet Nikkei. From the report:Key Apple assembler Hon Hai Precision Industry, also known as Foxconn Technology Group, has been studying the possibility of moving iPhone production to the U.S., sources told the Nikkei Asian Review. "Apple asked both Foxconn and Pegatron, the two iPhone assemblers, in June to look into making iPhones in the U.S.," a source said. "Foxconn complied, while Pegatron declined to formulate such a plan due to cost concerns." Foxconn, based in the gritty, industrial Tucheng district in suburban Taipei, and its smaller Taiwanese rival churn out more than 200 million iPhones annually from their massive Chinese campuses. Another source said that while Foxconn had been working on the request from Apple Inc., its biggest customer that accounts for more than 50% of its sales, Chairman Terry Gou had been less enthusiastic due to an inevitable rise in production costs. "Making iPhones in the U.S. means the cost will more than double," the source said.
It's estimated that the iPhone 6+ costs about $236 US to make. They've been gouging customers for years.
BeauHD. Worst editor since kdawson.
According to this article. The $649 iPhone 7 costs around $220 to make meaning that Apple gets roughly around $400 in profit. Lets imagine that the cost does double, they will still be getting ~$200 per phone. A very healthy profit with a lot of that money staying in the US rather than China or Ireland.
Also, the cost doubling calculation (done by Foxcon!) probably assumes that they would do things exactly the same in the US as they do in China. That is, hiring thousands of people for minimal pay to to a large part of the assembly by hand. However, if moved to the US they would probably automate more of the process and employ much less people. Think of the savings on suicide netting alone.
They are charging too much for their broad offering of products
"If Apple's cash hoard was its own company, it would be the 11th largest company in the S&P 500, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indice."
They have a shit load of cash.
It little behooves the best of us to comment on the rest of us.
"According to research company IHS Markit, it costs about $225 for Apple to make an iPhone 7 with a 32GB memory, while the unsubsidized price for such a handset is $649."
So the Handset costs $225 to make, retails for $649, and Apple tends to target about 26-30% profit on each device they make. So let's say Apple is making about $195 (~200) profit per device, so Apple's overhead for marketing, retailing, R&D is about $229.
By doubling the cost to manufacture, you are at $450, adding $229 gives you $679 already, so Apple would be losing money charging $649, let alone trying to target 30% profit.
The $649 phone would wind up being around $880. No shipping costs would really be saved because I am assuming the components for the iPhone would still be sourced from China because that's where the supply chain is nowadays, maybe they factored it into the doubling.
So they would make $300+ per iphone rather than $500+ per iphone. It's still over a 100% markup, so I fail to see much of a problem.
No. The component cost would not double. Only the labor cost. The component cost for an iPhone 7 is estimated to be about $250, and the assembly labor is estimated to be about $10. The average sale price is $649, leaving a marginal profit of roughly $390 per phone. If the cost of assembly doubled, that would decline to $380.
The figures would be different if the component manufacturing was also Americanized, but since most of the components are made by Asian companies, I don't see that happening.
Disclaimer: I didn't vote for Trump, and I think the government telling companies where to make their products is idiotic, but, at least in this case, it would make little difference in the price.
No. The component cost would not double. Only the labor cost.
There is nothing in the article which makes this claim. Did you read it from another source?
The article clearly states production costs would double (with no labor / component distinction), and that those costs are currently estimated at $225 for an iPhone 7 with a 32GB memory. So this clearly means the production cost would increase from $225 to $450. The accuracy of statements coming from Foxconn is certainly up for debate, but you seem to be just making stuff up.
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
Apple tried to manufacture the iPhone in the US initially. The reason they didn't wasn't wages - in highly automated mass production, wages are a tiny percentage of cost of goods. The "deal breaker" was that the US didn't have enough industrial engineers to manage the production lines. Apple would have had to hire 100% of the new graduates from all US universities for 3 years to have enough engineering management to run the lines. The secondary issue is supply lines. All of the suppliers manufacture in or near Foxconn in China, so they can iterate on designs in hours, rather than weeks (shipping). So, to be in market years earlier, and with maximum agility, Apple had to be in China. Manufacturing on a large scale in the US was killed long before the iPhone launched.
Enable 3D printed prosthetics!
Most companies (Apple and Microsoft being notable exceptions) have narrow or unstable margins (and even Microsoft has a cycle of loss years and profit years). The average profit margin in U.S. in total is 10%; 90% of income goes to wages.
All wages are paid from revenues; revenues are paid from sales; and sales are paid from income. Making a product requires labor from many people, fractioned together. If you have 100 people at $10/hr making 1,000 widgets per hour, that widget costs $1, and can have a price no lower than $1. Each of those people, in that 1 hour, makes enough money to buy 10 such widgets.
In one sense, those people are trading widgets for other widgets (or food). In another sense, they're trading labor for labor (time). When you make $20/hr, you're essentially trading 1 hour of your time for 2 hours of theirs.
That means money is kind of a closed system. There's a limited amount of income in any time frame, which determines what can be bought and what jobs can exist at that technology level. When you add in trade, you're moving income between isolated trading partners, which works the same way. Central banks can issue more money, allowing banks to give loans, allowing consumers to spend more, which adds money to the system; however, this counters technical progress (which causes deflation) and enables inflation (which makes your loan payments shrink in purchasing power over time). In the end, you're still dealing with trading hours for hours; mucking about with money just creates (and modifies) a representation of that time.
It gets more complex than that.
We can modify time.
Over a 100-year span of time, you can safely increase the level of technology such that productivity goes up by 10 times. If, overnight, you double productivity, then you have a need for half as many workers, and get instant 50% unemployment (this is the fear with automation); that collapses your economy. If you do this slowly over years, you create some unemployed, and then create a need for more jobs as prices fail to keep with inflation: your costs drop because the same wages are paying for less time, so the wage cost lowers, and market pressures still set you at the same general profit margin.
So you get enough technical progress to make 10 times the stuff in the same labor. The same proportion of dollars doesn't reflect the same buying power; or, to put it simply, 1 hour of labor buys 10 times as much stuff. That means even a 10% profit margin is 10 times bigger, because it's 10% of money representing the labor costs of making a thing, and that's kind of huge.
So the answer to your question is complex. The short answer is the profit margins stay the same, in the long-run; and the prices go up to adjust for rising costs (or down to adjust for falling costs--though "down" can be slower if the market isn't experiencing a flurry of change and competition). Those margins would actually have less purchasing power if industries have higher costs.
In the long-run, technical progress as I described drives the entire progression of economies. In the short-term, wage inequality and other opportunistic behaviors create fluctuations. It looks something like this. Trade tends to lower prices; Malthusian growth tends to adjust out any jobs you gain or lose through trade deals etc., so both the job creation argument and the job loss argument (we'll lose jobs if we pay American workers over a certain wage to replace Chinese manufacture--it's $18/hr for men's cotton pants, for example) are meaningless.
Rising costs mean more poverty and poorer people--not poorer rich people, but poorer consumers who have to barter their time against the time of other working-class workers. It is mathematically-impossible to disconnect wealth from the total wage cost of making products.
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No Apple does not pay their taxes. Apple is hold revenue off their books in order to not pay taxes. Apple also has elaborate shell business that hide their revenues. http://prospect.org/article/pr...
No Apple does not pay their taxes.
They pay what they are legally required to pay. How much extra money have you voluntarily donated to the IRS? Nothing? Then why should Apple?
Apple is hold revenue off their books in order to not pay taxes.
No, they hold it overseas, which is not "off the books". If you think it is absurd for the US government to incentivize companies to invest outside America, then you should complain about it to congress, not to Apple.