If the President-elect, Donald J. Trump, is to be believed, then it looks as the United States Government could be entertaining the idea of offering a “very large” tax break in order to entice American corporations into building products and bringing manufacturing into the country.
We’re not exactly sure what those tax breaks would look like, or even if they would actually make it viable for companies like Apple to manufacture iPhones and iPads in the U.S., but if Tim Cook was to fall in line with the new POTUS, just how much would an iPhone cost to manufacture outside of Asia, and how would it affect the retail cost offered to consumers?
The idea of convincing companies to bring manufacturing into the United States from Asia has been something that Donald Trump played on on multiple occasions during his Presidential campaign.
On multiple occasions, the Republican candidate, and now President-elect set to take office on January 20, 2017, referenced Apple as once such company that he would like to see manufacture hardware in the United Sates, claiming back in January during a speech at Liberty University in Virginia that he would “get Apple to start building their damn computers and things in this country instead of in other countries.” Little did he know that Foxconn, Apple’s manufacturing partner in Asia, had already looked into the cost of building devices in the U.S.
That initial investigation by Foxconn, as well as an evaluation by Marketplace, has concluded that the cost of an iPhone “would more than double” if all components were sourced or manufactured and constructed in the United States. The estimated cost of producing an iPhone using the current setup is approximately $220.
If the above model was put in place, with all necessary parts sourced or manufactured in the U.S., with the ultimate assembling of the device handled on American soil, then it’s estimated that an iPhone could cost approximately $600 to make. Given Apple’s margins, that rise could potentially see an iPhone selling for as much as $2000.
Interestingly, an analysis published in the MIT Technology Review has taken a different approach to the pricing model by suggesting that an American made iPhone, but with components sourced globally, could see the total cost of production rise by around 5%. That would see approximately $30 or $40 added to the retail price of the device, with the consumer having to part with more cash to handle the increased cost of manufacturing.
Meanwhile IHS Markit Technology’s Chief Analyst, Dan Panzica, point at another aspect that he believes researchers have overlooked. Panzica states that the workforce estimate required to build iPhones in China numbers around the 1,50,000 mark. According to him, “If you take all the people at GE, GM and Ford, it’s still 20% less than at the four Foxconn factories. What city could support a factory of 60,000 people?” More so he also believes that the infrastructure required to manufacture electronics of this nature in these numbers was never there to begin with, so this would need to be built from scratch.
We look forward to see what these actual tax breaks by the President-elect could look like – if they come into existence at all – but given the increased cost of manufacturing in the U.S., and the fact that the infrastructure doesn’t physically exist to handle this type of production, it’s unlikely that Apple’s iPhone will be made in America any time soon.
(Via: Business Insider)
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