The U.S. v. iPhone: A Pricey Proposition for Apple
U.S. iPhone Pricing Revealed
By C. Lohner
The ongoing spat between US President Donald Trump and Apple CEO Tim Cook is heating up as Trump aims to make iPhones "Made in USA." However, this move could leave many customers in a lurch, financially speaking. Transitioning production to American soil is riddled with issues beyond the price tag.
In the latest skirmish, Trump criticizes Cook for considering manufacturing iPhones in India instead of the US. If the production shift to states like West Virginia or New Jersey were to occur, the cost of an iPhone would skyrocket.
Economy: The Apple-Sized Gap Between Reality and Dreams
According to the "Wall Street Journal," Apple may be considering a price bump for their new model this fall. This price hike will not be linked to Trump’s tariffs but will be justified by new features and designs. Economists warn, though, that this could potentially cost the company a chunk of their market share. If Apple succumbs to Trump’s pressure, sales are predicted to tumble.
Currently, Apple offers iPhones between $600 and $1200. Calculations by Wedbush analyst Dan Ives indicate that a fully domestic iPhone would cost around $3500. Apple’s intricate supply chain has been meticulously constructed over decades, and shifting merely 10% of this intricate network from Asia to the US would set Apple back a hefty $30 billion, Ives estimates, and take approximately three years.
Up to $3500 for an iPhone
German tech portal Golem.de estimates that a fully US-produced iPhone, maintaining Apple's current margin of 46%, would retail at around $3500. If Apple only considers the absolute value of the current $560 for the iPhone 16 Pro Max, an American-made iPhone would cost between approximately $2560 and $2960—still a steep rise in price. Even then, it would still be cheaper for the company to foot the import tariffs themselves.
Beyond the price, producing in the US poses logistical challenges. Although Apple has already diversified its supply chain to Vietnam, India, and the US, most components are still manufactured in China. Building a factory in the US would take four to five years, not to mention the necessary infrastructure and workforce, which are not readily available, according to Ives. The total time from groundbreaking to iPhone production in the US would be seven to eight years, Ives estimates.
India: The Living, Breathing iPhone Hub
Instead of settling on US production, Apple is focusing on India as a critical new production hub. Cook recently stated that most iPhones sold in the US this quarter will originate from India. Apple began seeking alternative production sites outside of China due to geopolitical tensions and the threat of a trade war and Chinese invasion of Taiwan years ago. Apple aims to manufacture a quarter of all iPhones in India by the end of the year, according to the "Wall Street Journal."
Apple has enhanced its production capacity with contract manufacturers in India and Vietnam, allowing the entire model range to be assembled in India. However, most iPhones are still manufactured in China.
Made in America, Labored Over at Home?
Labor costs would be significantly higher in the US, although it would account for only a small portion of production costs. But where would the workforce come from? A culture of industry with millions of factory workers no longer exists in the US; the country has long since morphed into a service-oriented society.
The Great Migration for iPhone Professionals
Moreover, the US government is increasingly expelling low-wage migrants, who might constitute a viable candidate for production work. In the Chinese “iPhone city” of Zhengzhou, operated by the supplier Foxconn, more than 200,000 people already work at the largest iPhone factory. Overall, millions of people in China are employed in the Apple supply chain.
From Market Chief to Five in China: Apple's Fall from Grace
In 2020, Apple sold over 230 million iPhones, a majority of which are highly popular in the USA and the UK. On its home turf, Apple sells more than 60 million iPhones annually. Even if enough applicants were found and trained for industrial production, it would still be challenging to replicate the workforce that currently populates China's Apple manufacturing facilities.
The idea of production in the USA is, according to analyst Ives, a "fictional story."
Source: ntv.de
- iPhone
- Apple
- Donald Trump
- Electronics industry
- India
- USA
- China
Insights:
- If production costs in the USA were to equal those in current production sites like China or India, a fully domestic iPhone would retail at anywhere between $2,560 and $2,960, representing an increase of up to $1,560.
- Shifting just 10% of Apple's supply chain from Asia to the USA would cost $30 billion and approximately three years.
- Building a factory in the US would take between four and five years, with additional time required for necessary infrastructure and workforce development.
- If Apple succumbs to Trump's pressure, sales could plummet, as premium-priced iPhones may face consumer resistance.
- Due to geopolitical tensions and the threat of a Chinese invasion of Taiwan, Apple has already begun to diversify its supply chain, aiming to have a quarter of all iPhones produced in India by the end of 2021.
- Building a workforce in the USA capable of effectively manufacturing complex electronics like iPhones would be unrealistic due to a lack of existing infrastructure, workforce, and the logistical challenges associated with retraining workers for industrial production.
- The economically challenging transition of iPhone production from Asia to the US, as suggested by President Donald Trump, could potentially lead to an unrealistic retail price for a fully domestic iPhone of up to $3500, according to estimates by analyst Dan Ives.
- Shifting merely 10% of Apple's elaborate supply chain from Asia to the US would cost the company an estimated $30 billion and require approximately three years, making it a financially burdensome proposition.
- Rather than producing iPhones in the US, Apple is focusing on India as a critical production hub, aiming to manufacture a quarter of their iPhones in India by the end of 2021, due to logistical challenges and the already developed supply chain in China.
