Donald Trump, the next president of the United States who said that he wants Apple to move their manufacturing processes into the country, would be happy to know that the company is at the very least considering it.
The company's products have always been tagged as "designed by Apple in Cupertino," but the devices are generally manufactured and assembled by suppliers based in China. Will we see "made in the USA" labels on Apple products in the near future?
iPhone Production in the United States
According to an exclusive report by Nikkei Asian Review, Hon Hai Precision Industry, also known as Foxconn Technology Group and one of Apple's biggest suppliers, is currently studying a plan to move iPhone production into the United States. Foxconn, based in Taipei's Tucheng district, makes over 200 million iPhones per year in their Chinese factories.
A source revealed that back in June, Apple requested for Foxconn, along with another iPhone assembler Pegatron, to analyze the possibility of making iPhones in facilities located in the United States. Pegatron refused to start working on a plan because it was concerned with the cost of making such a move, but Foxconn complied.
The Effect Of Making iPhones In The United States
Apple has sourced iPhone components from all over the world, but the assembly is done in China were costs for several aspects such as labor are lower. The reduced costs has allowed Apple to bring in sizable profit margins that has fueled the company's growth.
While Foxconn has complied with Apple's request to study bringing iPhone production into the United States, Chairman Terry Gou has not been supportive of such a plan due to the expected rise in the costs of production.
According to a source, making future iPhone models in the United States will more than double the cost of production, which would heavily impact the profit margin of Apple and its suppliers. It was earlier reported that it costs $225 to manufacture the 32 GB model of the iPhone 7, which is being sold at $649. If the cost of production would double, the profit margin for each iPhone would be halved from over $400 to around $200, excluding additional costs such as those associated with marketing.
The source added that it is believed within Apple's supply chain in Taiwan that Trump, at the very least, might push for Apple to make certain components of the iPhone in its home country.
Will Apple Go Ahead With iPhone Production In The USA?
With Trump securing an unexpected victory in the presidential election, will Apple now be taking an even more serious look into making iPhones in the United States?
Trump previously said in his campaign that he would place a 35 percent tariff on products coming into the United States that are manufactured in other countries such as the iPhone. The tariff is seen as a means to bring back manufacturing into the country, but with the massive costs that such a move would entail, companies such as Apple might instead continue manufacturing iPhone in China.
Apple would then likely pass on the additional cost of the tariff onto consumers, which would make the price tag of the $649 iPhone 7 jump to $876.