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Trump, Manufacturing & iPhones

During Donald Trump’s campaign for the presidency he constantly emphasized bringing jobs, specifically manufacturing jobs, back to the United States. Many of his supporters loved the nationalist rhetoric spurred by the  “Make America Great Again” spirit around which many rallied behind him. However, one must ask…is bringing manufacturing jobs back to the United States really in the best interests of the American people?

A company that President Trump has focused on is Apple. Everyone knows that Apple makes the iPhone, but not many know what the manufacturing process entails to bring this product to one’s fingertips. iPhone production is a truly global ordeal.

A closer look at the component manufacturers of some of iPhone parts:

  • Accelerometer: Bosch Sensortech. Based in Germany, with locations in the U.S., China, South Korea, Japan, and Taiwan
  • Audio chips: Cirrus Logic. Based in the U.S., with locations in the U.K., China, South Korea, Taiwan, Japan, and Singapore
  • Battery: Samsung. Based in South Korea, with locations in 80 countries
  • Camera: Qualcomm. Based in the U.S., with locations in Australia, Brazil, China, India, Indonesia, Japan, South Korea, and more than a dozen locations through Europe and Latin America
  • Compass: AKM Semiconductor. Based in Japan, with locations in the U.S., France, England, China, South Korea, and Taiwan
  • Glass screen: Corning. Based in the U.S., with locations in Australia, Belgium, Brazil, China, Denmark, France, Germany, Hong Kong, India, Israel, Italy, Japan, South Korea, Malaysia, Mexico, Philippines, Poland, Russia, Singapore, South Africa, Spain, Taiwan, The Netherlands, Turkey, the U.K., and the United Arab Emirates
  • Gyroscope: STMicroelectronics. Based in Switzerland, with locations 35 countries
  • Flash memory: Toshiba. Based in Japan, with locations in over 50 countries  
  • LCD screen: Sharp. Based in Japan, with locations in 13 countries
  • A-series Processor: TSMC. Based in Taiwan, with locations in China, Singapore, and the U.S.
  • Touch ID: Xintec. Based in Taiwan.

Source: Lifewire, Where Is the iPhone Made?

Next step, assembly. iPhones are assembled by two companies both of which are based in Taiwan – Foxconn and Pegatron. Even though both corporate headquarters are located in Taiwan, iPhone manufacturing is largely located at their Chinese plants. Of the two, Foxconn handles the clear majority of iPhone manufacturing. Trump has championed a potential deal to bring Foxconn to Wisconsin for American job creation. We believe this is not an appropriate course of action for both domestic and foreign economies.

Source: CompareCamp.com, How & Where iPhone is Made

To put it simply, uprooting the firmly established industrial metropolises that Foxconn and Pegatron established would be a nightmare and only damage the iPhone market. The costs and space needed to recreate the size of these massive clusters of factories would be astronomical. Perhaps the largest advantage of these southeast Asian centers is the availability of labor. Staffing alone would be a major obstacle for the US market as the Chinese can staff the 200,00 workers needed in 15 days while the US would take 18 times as long (Alex Hillsberg compareonline.com).

These companies also train their extensive management networks that would not be able to make the trip across the Pacific, so an entire management class would need to be fabricated from nothing. In a system that succeeds and fails on timing and efficiency, the Foxconn and Pegatron plants in China are built and run as close to perfectly as possible. Training management would take too long and be another major expense for these companies. Moving to the US would not help Apple or any of the manufacturing corporations in any way. Not to mention, consumers domestic and abroad lose due to increased retail prices.

Works Cited

Costello, Sam. "Where Is the IPhone Made?

Hillsberg, Alex. "How & Where IPhone Is Made: Comparison Of Apple's Manufacturing Process."

16 thoughts on “Trump, Manufacturing & iPhones

  1. the prof

    OK, folks, time to jump in for the discussion. I will withhold comments for the time being. OK, one comment: see the following article, which is also under the "news" heading on the right side of the blog. The NYTimes (and many other publications) have covered how well Foxconn does outside of their main base in Shenzhen (most of Foxconn's employees are outside their home country of Taiwan, as is true of most truly global firms).

  2. mcconnellm20

    One of the main reasons why so many things including electronics and clothes are made outside of the US is due to the fact that labor is cheaper in countries such as Taiwan China. Also, it is better availability of labor compared to the United States. If manufacturing for items such as the iPhone were to be moved into the United States, there would be many issues. The price of the iPhone would increase because it would be more expensive to create the parts and assemble it. While I understand the point Trump is trying to make by bringing more manufacturing to the United States, there will be serious consequences for some companies such as Apple where so much of the production happens abroad.

  3. laniere20

    It had never occurred to me how globalized the process of making iPhones is. While the idea of moving production to the states seems appealing due to the number of jobs it would create, the article makes a good point that the money and resources required to make this move would outweigh the benefits of the jobs that would be created in the united states. By outsourcing their labor, Apple is trying to reduce the costs of production. This concept makes sense, but why doesn't Apple have all of their abroad factories centralized in one location? I feel as though the globalization of the production process would waste a lot of time and resources.

  4. denatalec20

    When considering whether the production of widely used goods such as the Apple iPhone should be moved to the United States, it is important to discern whether this movement would truly be beneficial to Americans. Although the creation of jobs would certainly improve the economy, such a huge transition in the production map/cycle would drastically alter the quality and price of the good. Due to increased labor costs and a less experienced work force, iPhones would cost significantly more, and would be of lower quality. Therefore, would the benefits of a factory's worth of jobs outweigh the widespread costs?

    1. the prof

      Let's ignore that there's nowhere in the US where you could go out and hire 100,000 people for an iPhone factory, much less have a way to get them to work. If you tried, it would surely drive up local wages. But would such a factory be able to use older workers? people without strong English? or would it not compete with fast food restaurants for employees? SUM: this is very much a hypothetical!

      So ... assuming Apple does open plants in the US, who benefits? Would this drive up the wages of workers?

      Who is hurt? Who pays higher prices? Do only the well-off have smart phones? Would it hurt Apple profits – is that a noticeable slice of the stock market? And would it make fast food and nursing homes and many other businesses that need lots of people more expensive?

  5. Kaitlyn Fitzsimmons

    Americans have loyalty to Apple products and despite being manufactured elsewhere, the strong ties to Silicon Valley, Apple’s headquarters and home of design, make the products uniquely American. As one of Apple’s largest markets, Americans most-likely wouldn’t benefit from personally assembling one of their most-popular commodities. There would certainly be some exasperation over another iPhone price hike. If the U.S. doesn’t have the competitive advantage in iPhone assembling, it would be better off sticking to specializing in the accelerometers and A-series processors.
    My first observation was how uprooting this manufacturing process would be unsustainable, demanding much of Apple’s resources and time. A less hypothetical aspect of Apple product manufacturing that has concerned me in the past wasn't where it’s products were made, but how. It’s popular knowledge that during 2010 production line suicides in Apple factories skyrocketed. My view of Apple production includes anxiety-causing and humiliating bosses, long hours, and minimal benefits. Before Trump tries to bring this industry to the United States, this environment and unhealthy work culture should be remedied. I'm guessing that higher wages that are expected and mandated in the U.S. could solve some of the financial issues afflicting Apple workers, but Apple would have to completely re-arrange their business model to accommodate this change in their source of labor, inevitably taking from other areas in the company. Some argue that profits could be downsized easily.

    1. the prof

      Just a quick note on the suicide thing: I took the total population working in the factory and multiplied it by a representative suicide rate. The result was the level reported by the media as a "rash of suicides." It was just poor journalism. Yes, suicides "clump" – but we see the same thing with any random variable, cancer clusters will be observed.

  6. murrayc20

    During the Golden Age, lets say, domestic and foreign economies were able to flourish due to high industrial productivity,new technology, and unregulated markets. I see Trump's point that bringing companies, like Apple, industrial headquarters to the US could kick start a new economy. While although this makes sense in theory, a couple of aspects make it hard to imagine. First, if Iphones were produced domestically, due to our labor laws and other restrictions the price of the IPhone would dramatically increase. The product is already extremely expensive; the newest edition is said to cost over $1000. Although the product is highly wanted, the demand for it could sharply decrease because it is simply un affordable. If multiple industries took the same steps, demand for many products could decrease. So although people would be getting more jobs and the US would be more industrially independent, would the economy really benefit enough to make America truly great again? Secondly, the price tag associated with finding new land, employing people to work the factories, employing people to move the company across the world, etc would be huge. Where would this money come from? Could this really happen in one presidents term? In theory it would be great, but in reality it seems pretty unattainable.

    1. the prof

      None of the argument depends on labor laws or regulation, only that the US has higher incomes = higher wages, and without a very large pool of unemployed, eager-to-assemble phones population in one location, an attempt to hire a lot of workers would inevitably cause wages to rise. That would feed over into higher wages and higher costs for fast food, for nursing homes and for many other areas of the economy. Good for the US? – maybe, but maybe not. I'm not going to try to trace all those moving pieces!

      Now would this lead to a large increase in the cost of an iPhone? Assembly costs in China were under $5 per phone. Even if Apple had to pay 10x what it does in China, that would mean a cost of $50 or a $45 increase in the price of a product whose base price is $999. Would raising the price to $1,044 make a big dent in sales? Apple would likely accept a somewhat smaller profit, that's the normal impact of a cost increase, so while it would make some dent, it's hard to see it as large.

      The essence of vertical trade, however, is that this would only shift that one production step to the US. The various specialized chips and displays and parts of the camera that are made outside the US wouldn't move. Instead it would only be tedious, low-wage jobs.

  7. Julia Moody

    It will be difficult for Foxconn expand into other markets and create an equally successful business as it has in China because of differences in labor practices and because of the sheer size of its business. According to the New York Times article, the people who work at Foxconn's factories in China work 60-hour weeks and get paid around $2.50 per hour. Obviously, these conditions would be unacceptable in the United States, so if Foxconn continues with its plans to build factories in Wisconsin, it would have to completely rework its business model and treat the labor much differently. In addition to changing labor conditions, the size goal of Foxconn's new project in Wisconsin (a 20 million square foot manufacturing center) will be very difficult to carry out. It will take years to construct, cost a large amount, and require the training of hundreds of new employees. Because of these obstacles, I think Foxconn will have a hard time expanding past its giant manufacturing centers in China.

    https://www.nytimes.com/2017/09/20/business/foxconn-trump-wisconsin.html

  8. Ellie Bradach

    It is certain that IPhone prices would be much higher if production moved to the US, but is it worth it? The cheap labor in Asian countries proposes if it is even ethically right to do business with the current strategy. I think it is important for both the US to have available jobs and for countries to use each other to be most efficient and economical, but does that even matter when people are losing human rights over a phone? If production moved to the US, the standards set by the government would protect the labor of American people.

  9. mizeo20

    My first thought after reading this post is the fact that while this rhetoric will win elections, it is not a sustainable practice. Much of this information just reiterates that while bringing manufacturing jobs sounds great in the process, and in some ways is beneficial to the middle class and low skilled workers, the U.S. economy has developed beyond the manufacturing industry. It is now a service economy. Locations such as China and Taiwan are more equipped to manufacture these parts than the United States. Furthermore, as mentioned, the cost of the unit would be inflated for the consumer. This is similar to his campaign in the rust belt and bringing back car manufacturing jobs from Mexico...
    My first thought after reading this post is the fact that while this rhetoric will win elections, it is not a sustainable practice. Much of this information just reiterates that while bringing manufacturing jobs sounds great in the process, and in some ways is beneficial to the middle class and low skilled workers, the U.S. economy has developed beyond the manufacturing industry. It is now a service economy. Locations such as China and Taiwan are more equipped to manufacture these parts than the United States. Furthermore, as mentioned, the cost of the unit would be inflated for the consumer. This is similar to his campaign in the rust belt and bringing back car manufacturing jobs from Mexico...

    I do see the other side of the argument, however. From a macro perspective, bringing thousands of these jobs back to the United States for individuals in the middle class could send a large economic ripple through the US and boost the economy. Thousands of people who are unemployed and are then given jobs, who then turn around and go spend their salaries adds to the US GDP, but at what cost...

  10. smithg20

    In today’s political climate, we frequently hear politicians promise to bring more jobs to the United States from other countries, frequently citing companies who manufacture popular American products in overseas economies. While these promises might sound great for the American people, it is interesting to take a deeper look into what the consequences of these actions would be. It is important to remember that the United States economy does not act isolated from other nations, but rather is deeply entangled with other countries’ economies. As we have discussed in class, specialization plays a critical role in a nation’s economic trade systems. Because these other manufacturing countries, such as China, are able to efficiently specialize in the manufacturing of certain goods it does not make logical sense to relocate companies into the United States.

  11. bashamc20

    This blog post touches on a major political issue of the present, which will assuredly continue to be on the forefront of American political debate: how do we construct a trade policy that follows the principles of economics (which espouse free trade) but simultaneously do not put the United States at a strategic disadvantage.
    It is incredibly difficult to combine nationalistic "America first" policies of President Trump and populist politicians with the notions of free trade. While prioritizing American manufacturing and production sounds like a grand policy, in reality, its far more complex. Those policies, like raising import tariffs and penalizing companies that outsource their manufacturing and/or offshore, would not necessarily be economically wise. Import tariffs and trade hurdles would inevitably raise the prices of goods, as the tariff burden would in part fall on the American consumer.
    While many could argue that there exist some benefits of protectionist policies, by in large, economics tells us that the bad probably outweigh these benefits. In reality, "America first" trade positions could end up putting America behind, while other countries enjoy free trade upon the principles of comparative advantage.

  12. mitchelld20

    I agree with your point that manufacturing something like the iphone entirely in the US would be virtually impossible. Donald Trump figured a nice campaign slogan would be "Buy American", "Hire American", but he never considered the macroeconomics behind these products, especially when dealing with massive manufacturing companies such as Pegatron and Foxconn. As you stated, it would require a whole lot of people and factories in order to mimic what Pegatron and Foxconn already do for Apple, which would ultimately result in a lot of effort for little to no payoff. Donald Trump focusing on creating more American manufactured goods could be a good thing, but focusing on these incredibly successful corporations such as Apple is a horrible idea, especially when considering the outsourcing that already occurs.

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