When Michael Cohen and I were listening to Apple’s Q2 conference call, my ears perked up when I heard Apple CEO Tim Cook talk about how Apple had created 2 million jobs across all 50 U.S. states (see “Apple’s Q2 2017 Financial Results Show Slight Growth,” 2 May 2017). That statement turned out to be the kick-off of a much larger campaign.
Cook repeated that 2 million figure again during an interview with Jim “Mad Money” Cramer, and he went on at length about Apple’s U.S.-based stores and suppliers. Cook also announced that Apple was putting its money where its figurative mouth is: in a $1 billion fund to promote advanced manufacturing in the United States. Apple will reveal the first investment later this month.
Why is Apple doing this? President Trump campaigned on bringing manufacturing jobs back to the United States and often chose Apple as a target of his ire for offshoring much of its manufacturing to China. At the same time, Trump has spoken favorably of helping companies repatriate overseas money back to the United States, a cause Cook has championed (for background on Apple’s tax situation, see “Apple Grilled Over Tax Practices,” 24 May 2013).
Cramer immediately drew the connection:
You know, when you do that, do you ever look at the government as perhaps saying, “Okay, look, Cook is putting $1 billion of his company to it. Let’s get in,” you know, President Trump’s saying, “We’ve gotta give him a repatriation. Who knows what he’ll do with all that money over there. We’ve gotta give ‘em the tax break.” Would you work closely with the president to get some of these things done so that you can do more job creation?
Cook did not deny that this advanced manufacturing fund might be a negotiation tactic with the Trump administration, saying: “I think that repatriation — actually, I think comprehensive tax reform is the, is so important to this economy.” In fact, Cook even said that the $1 billion comes from Apple’s money in the United States, and that it will have to borrow to get it.
Cook later said:
You know, again, I think with each administration in every country in the world, there are things you disagree and things you agree, and you look to find common ground and try to influence the things you don’t. If you don’t show up, I think that’s the worst scenario because then you’re quiet and this doesn’t do your cause any good or your point of view any good.
In addition to the advanced manufacturing fund, Apple has published a new Web site with an elaborate breakdown of jobs Apple creates in the United States, including a state-by-state listing of jobs and apps based in each state.
Does this mean that Apple will start making more of its products in the United States? Doubtful. The main thing Apple manufactures in the United States is the Mac Pro, which is a high-cost, low-volume product that has plenty of other issues (see “Maca Culpa: Apple Admits Mac Pro Missteps and Promises More Transparency,” 4 April 2017).
Chinese manufacturing offers numerous advantages: cheaper wages, more skilled workers, and suppliers that are often literally down the street from the factory. But perhaps most important are China’s lax regulations, as documented in this New York Times article from 2012:
Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”
Apple could never get away with that in the United States. Regulators and labor unions wouldn’t stand for it. And even with China’s massive manufacturing capacity, Apple often struggles to keep up with demand for its products — ask anyone trying to buy a pair of AirPods.
However, there could be a strategic advantage to Apple moving at least some of its manufacturing to the United States. Due to a payment dispute, Apple supplier Qualcomm is attempting to block Apple’s import of iPhones into the United States. Needless to say, if Qualcomm were to succeed, it would be devastating to Apple’s business. But if at least some iPhones were manufactured in the United States, Qualcomm’s threat wouldn’t be nearly as dire.
Furthermore, an American-made iPhone would be produced by a labor force that is, by law, guaranteed worker rights, fair pay, and safety precautions, and the entire effort would be bound by high environmental standards. But those requirements don’t come cheap, so an American-made iPhone would likely cost more than today’s $650 starting price. An article in Marketplace places the total cost at $2000, but that’s with the unrealistic assumption that every part would be made in the United States.
Would you be willing to pay more for an iPhone that was made in America, or at least in a country with stronger labor and environmental protections? And if so, how much more would you be willing to pay? Let us know in the comments or in our informal Twitter poll, where nearly two-thirds of current respondents say they’d pay $50 or $100 more.