For Apple, there is no other opportunity in the world like the China opportunity they’ve enjoyed since 2008 or so.
In the next year, a larger and larger portion of iPhones will be labeled “Designed in California, manufactured in India.” You may have noticed this already.
The first phrase is debatable. The second is misleading gimmick. iPhones are made in China. Apple has invested in a process whereby a larger portion of iPhones receive final assembly, testing, and packaging in India. That helps the company avoid tariffs placed on China (unless the U.S. tightens them).
Kevin Hassett, director of the National Economic Council, talks about the need for onshoring.
What would onshoring mean? If, as Commerce Secretary Howard Lutnick says, it means “the army of millions and millions of human beings screwing in little screws to make iPhones,” then iPhones are going to become $25,000 a piece.
Simply put: Free trade with China means that the American market for cellphones depends on the Maoist hukou system, which prevents hundreds of millions of rural Chinese from moving to a prosperous city without government permission. These indentured workers make up the bulk of China’s industrial workforce even at Apple contractors like Foxconn. As of 2018, Foxconn workers on the Apple lines earn $32 a week, plus room and board on the Foxconn campus, for 60 hours of work. (Free trade enthusiasts might say these Chinese workers are just outcompeting Americans for investment in a fair, free global market.) Needless to say, such jobs are not coming to America.
In any case, Apple designed its manufacturing process like puzzle pieces. How could the company’s innovative, non-plasticky-junk products be manufactured at a scale of 200 million phones a year? It required dramatically upgrading China’s manufacturing know-how, pioneering new techniques, including commoditizing CNC machining, and relying on China’s legally encumbered workforce.
Even if America could solve the challenges of finding the copper and other materials used in manufacture of iPhones, it would require another one or two great leaps forward in innovation and automation to make iPhones competitively in America. Screwing in tiny screws is not economical here, unless machines are doing it. Pressure is the mother of innovation. But a company can die before it escapes the political demands governments place on them.
The fact is, Apple probably does need an escape plan from China. Most Western companies that do business in China end up getting pressured to do joint ventures, and then once China has captured all the technical and intellectual property it needs, those companies are kicked out, replaced by firms wholly in the control of the CCP.
But there is no other opportunity in the world for Apple like the China opportunity they’ve enjoyed since 2008 or so. No other country has a similarly large, legally encumbered population to exploit, and no other state has the hunger of China to achieve manufacturing dominance, and therefore the will and means to build the infrastructure to attract Apple’s level of investment in China.