It seems Trump promise to bring the production of iPhone, iPad and Mac back to U.S is about to happen. He thought that Apple’s decision producing their devices in China hurts U.S economy. Therefore, he plans 45% tariff on Chinese imports.
“I’m going to get Apple to start making their computers and their iPhones on our land, not in China,” Mr. Trump said in March, a theme he repeated throughout his campaign. “How does it help us when they make it in China?”
But, Apple and the other companies in Silicon Valley feels Trump’s plan will disturb their business. That’s why they decided to support Hillary Clinton and Sen. Bernie Sanders for $8.6 million as the contributions for the campaign. In fact, now they have to face this challenge after Donald Trump won the election.
Tim Cook responded to Trump’s victory by sending an email to Apple employees. In that email, he said: “The only way to move forward is to move forward together.” In another part of the email, Cook also said: “While there is a discussion today about uncertainties ahead, you can be confident that Apple’s North Star hasn’t changed.”
The email seems to show the disappointment of Cook toward the election result. Apple will face a big challenge if Trump truly embodies his promise regarding Apple productions. Apple must be thinking the strategy to overcome this possibility.
What Will happen If iPhone Is Produced In The U.S?
The effect to iPhone price
There are two main reasons why Apple chooses to cooperate with Foxconn and Pegatron companies in producing their products. It was told by Steve Jobs himself when Obama asked about that. The reasons are:
- Lack of skilled workers in the U.S, while China has lots of appropriately-qualified engineers supply than the U.S. does.
- The labor charge in China is much lower than in the U.S.
The cost for assembling iPhone components is around $4 – $10 in China, according to IHS. If this process is done in U.S, the iPhone price will increase for $30 to $40 due to the expensive labor charge (assuming the other cost production doesn’t change). But, if all components are made and assembled in U.S, the price will be $100 higher or even more.
The effect toward Apple
If Apple has to bring the production to the U.S, they have two options: raising the price or keep the current price by lowering the profit margin. Both options are going to hurt Apple but will have a different impact.
The first option will probably lower the number of iPhone buyers. But, if Apple is able to ensure the quality of U.S production is better than in China, it won’t significantly influence the iPhone market.
If Apple chooses to lower their profit, it can inhibit the iPhone development for a bit. It is because the profit for research and development will be reduced. Furthermore, it will also make their revenue decline significantly.
Apple has asked Foxconn and Pegatron to open their manufacture centers in U.S. Foxconn said they will consider that, while Pegatron has refused.
The effect toward China
If Apple finally stops the iPhone production in China (or the other country,, of course, it will impact China’s economy. Actually both, China and U.S.
“Both China and the U.S. suffered losses as a result …. If Trump imposes a 45 percent tariff on Chinese imports, China-U.S. trade will be paralyzed,” Global Times said.
At this time, China has been benefited by their cooperation with Apple as their biggest supplier, manufacturer, and distributor. Maybe, it’s just Trump’s rhetoric during the campaign. I hope it’s not going to happen.