We heard reports this week that the iPhone 6 could be one of the first smartphones made by robots. iPhone manufacturer Foxconn Technology Co., Ltd (TPE:2354) (OTCMKTS:FXFCOF) revealed that it is in the process of adding robots to its assembly lines and that Apple Inc. (NASDAQ:AAPL) will be the first customer to benefit from the additions. So what does this mean for Chinese workers? It probably means that there will be fewer jobs to go around.
Steve Jobs never expected Apple jobs to come back
Forbes contributor Tim Worstall pointed to comment by former Apple CEO Steve Jobs years ago. President Obama asked him about the large number of manufacturing jobs the company had created in China. He asked when Apple would bring those jobs back to the U.S., and Jobs said they never would.
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Worstall notes that “low value added manufacturing assembly jobs” are probably never going to be one of the major features of the U.S. economy again. In fact, if this report about the iPhone 6 being made by robots as early as this year is correct, then we could be seeing manufacturing jobs in China begin to disappear as well.
Foxconn cuts iPhone 6 manufacturing costs
iFixit estimates that it costs about $7 to $8 to assemble the current iPhone generation (not including manufacturing the parts). Worstall notes that U.S. wages for assembly of products are around $14 per hour. Then about half of wages include pensions, healthcare, social security and other related costs, bumping up the hourly wage to about $20 per hour. Wages in China, on the other hand, are a mere $3.25 per hour. Including all the extras, they’re still only around $5 per hour, according to Worstall.
Given these numbers, it’s very unlikely Apple or other companies would be willing to accept lower profit margins to bring these jobs home, unless, of course, they find it worthwhile to improve the company’s reputation at the cost of margins. And if Foxconn cuts assembly costs to under $5 an hour by replacing workers with robots, it would make even less sense for Apple to move assembly jobs back home.