Apple suppliers Foxconn and Pegatron may be looking into relocating their manufacturing operations for the iPhone from China to the U.S. The news comes on the heels of concerns that when Donald Trumps gets into the White House, he may start pushing Apple to start producing at least a certain number of components for the iPhone in the U.S.
Foxconn said to be looking into moving Apple production
Citing unnamed sources, the Nikkei Asian Review reports that Apple asked Foxconn and Pegatron to start studying the possibility of moving iPhone production to the U.S. The website claims that the iPhone maker requested that Foxconn look into this in June—months before Trump actually won the election. It’s an interesting report in light of the fact that Hillary Clinton was widely expected to be the next president, and she would have been less likely to make the types of demands Trump is expected to make regarding manufacturing.
Foxconn and Pegatron are Apple’s two main assemblers for its iPhone. According to the Nikkei Asian Review, Foxconn complied with the company’s request for a feasibility study into moving production. However, Pegatron reportedly refused to do so because of concerns about the costs associated with it.
Foxconn said to criticize the plan
Terry Gou, CEO of Foxconn, was said to be critical of moving the manufacturing operations for the iPhone. According to Nikkei, Gou believes that the cost of manufacturing iPhones in the U.S. will more than double. IHS Markit currently pegs the production cost for the 32GB iPhone 7 at around $225. Apple is widely known for its gross margins, a metric it has long prioritizes, and it sells the 32GB iPhone 7 for $649 on an unsubsidized basis.
Apple is Foxconn’s biggest customer, as it makes up over half of its revenues. Together, Foxconn and Pegatron produce more than 200 million iPhones every year in their facilities in China.
Will the iPhone one day be Made in the USA?
While Apple has neither confirmed nor denied that it asked its iPhone suppliers to produce feasibility reports on manufacturing in the U.S., it would make sense because Trump said while on the campaign trail that he would slap a 35% tax on goods manufactured overseas, which of course would include the iPhone. His goal in doing that is to incentivize companies to bring jobs back to the U.S. because many U.S. companies have moved their manufacturing operations to China and other Asian nations to save money.
While it could be seen as a negative for Apple to have a hefty tariff placed on the iPhone, some analysts have said that Apple could be a great beneficiary of some of Trump’s other policies, such as his desire for corporate tax reform and the possibility of a tax holiday for companies to repatriate some overseas cash.