“I am going to get Apple to start making their computers and iPhones on our land; not I China.” Donald Trump, March, 2016.
I like Donald Trump but like most of us, was stunned that he trumped over the more presidential candidate Hilary Clinton during the just ended African-styled American elections. I am convinced that women are not better brother’s (shall we say sister’s?) keepers; women’s solidarity was enough to get the job done!
I first encountered Trump’s no holds barred talk in his book, Why We Want You to Be Rich, which he coauthored with my favourite business motivational scribe, Robert Kiyosaki. Since then (2005), I have longed to read anything there is about this Germany, descendant American.
Donald wants to take back the jobs that Apple exported to China by bringing back iPhone’s manufacturing back home. Being what he is, Donald punctuated his promise with a threat, “I am going to impose a 40 percent tariff on Chinese imports to the country.”
I have been following the writings of tech journalist Ryan Whitman of Extreme Tech and economics critic, Tim Worstall who writes for Forbes and it’s about time I got it off my chest.
I am afraid Donald Trump won’t succeed in bringing back iPhones manufacturing to the USA just yet. And why so much fuss about the iPhone?
The iPhone is not a top selling smartphone in terms of volumes. Its attraction is its invincible profit margins; which is the best in the world. Take the iPhone 7 for example; Apple spends $400 to manufacture it. Add $249 on top, and the answer is what Apple asks for it.
If Apple moved iPhones assembly process back to home to an inflated-wage based economy, the saving would be a skimpy 5%. At that point Donald is making a lot of sense. Unfortunately that is only part of the economic equation.
The Foxconn facility in Zhengzhou, China churns out 500,000 iPhones per day. Foxconn has climbed this Sapitwa mountaintop of efficiency with the assistance of the Chinese local subsidies amounting to $1.5 billion.
While the company built the massive facilities and employ dorms, the Chinese government built the road network and upped the ante with state of the art airport to ease exportation logistics. All I am trying to say is that Apple is a spoilt child in China.
Half of 800 suppliers for the iPhone components are in China and the vast majority of the remainder are in nearby Asian countries. Moving the manufacturing from Zhengzhou would eat way into Apple’s impressive margins.
After all, the labour savings is not an issue anymore; Foxconn is slowly replacing human beings with robots. The iPhone was created in the economic image of China and Asia. And doesn’t Donald’s real estate empire extend outside the borders of USA? Why the hypocrisy, big brother?
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