Apple could move a significant percentage of its iPhone production to the U.S. according to rumors and President-elect Donald Trump’s claims. But it is still doubtful despite the political pressure.
Foxconn gets major support from government
The New York Times brought up fresh arguments on Thursday, noting again that some major U.S. tech giants, including Apple, are very dependent on Chinese manufacturing. Such firms cannot risk disrupting the trade status quo with China in a major way because that would mean huge losses for them.
Top Apple contract manufacturer Foxconn runs a massive iPhone plant in the Chinese city of Zhengzhou, which gets support in the form of numerous infrastructure investments, tax breaks and subsidies. The NYT outlined all of that in a lengthy expose that partially relied on confidential government records.
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About 500,000 iPhones can be produced at the factory per day, and nearly half of global iPhone production comes from this factory. It is said that Foxconn received a payment of more than $1.5 billion from Zhengzhou’s government for the purpose of building large sections of the factory, nearby employee housing, and the necessary roads and power plants.
Why is China perfect for Apple?
The NYT story complements its 2012 report, which explains why China is in a unique position to handle Apple’s iPhone production needs in several ways, and it doesn’t have much to do with labor costs, notes The Street.
It looked at several things with special emphasis on the speed at which Chinese plants are able to “scale up and down” in response to order changes, the number of industrial engineers and other technical workers working at them, and the presence of the various plants needed to assist with iPhone assembly, notes The Street.
Nikkei said in November that while Apple reportedly asked Foxconn and fellow contract manufacturer Pegatron to explore the idea of making iPhones in the U.S., the odds of any big shift in production are still low. Apple is also reportedly contemplating manufacturing some products in India, as labor costs there are often lower than those in China, reported The Wall Street Journal recently.
Even if Apple does not shift its production to the U.S., given Trump’s tough stance towards China, the country could do enough to make life tough for it.
“Given the extent of local government support for iPhone manufacturing, there’s a lot that China could do to make life less comfortable for Apple without driving iPhone manufacturing out of the country,” says The Street.