Why the iPhone Can't Be Made in the US

Bloomberg Originals

29 Jun 201702:41

Summary

TLDRThe iconic iPhone, designed in California, is assembled in China due to favorable government policies and a robust supply chain cluster in Shenzhen. Despite lower labor costs, assembly contributes minimally to hardware costs. Attempts to replicate this model in Brazil failed, highlighting the difficulty of establishing such an ecosystem elsewhere. The seasonal nature of iPhone production raises questions about the feasibility and desirability of an American assembly line.

Takeaways

📱 iPhones are designed by Apple in California but assembled in China.
💰 Apple designs, develops chips, and writes software in California to maintain high profit margins.
👷‍♂️ Assembly in China is not solely for cheaper labor, as it accounts for only 2% of an iPhone’s hardware cost.
🌆 Most iPhones are made in Shenzhen and Zhengzhou due to favorable policies and a strong supply chain.
🏭 Foxconn, the largest employer in Shenzhen, hires nearly a million workers during peak iPhone production seasons.
📦 The supply chain in Shenzhen means most components are sourced within a 50-mile radius, creating a cluster effect.
🇧🇷 Apple’s attempt to replicate the Shenzhen model in Brazil failed due to the lack of a similar supply chain and ecosystem.
🚚 In Brazil, most of the manufacturing still occurred in China, with parts shipped to Brazil for final assembly.
🤖 The Brazil project didn't meet expectations in job creation or attracting Apple’s suppliers.
🇺🇸 If iPhones were made in the U.S., it would likely follow the Brazil model, with limited job creation and seasonal work.

Q & A

What phrase is printed on the back of every iPhone?
-Designed by Apple in California. Assembled in China.
Why does Apple design its products in California?
-Apple designs the exterior, writes the software, researches new technologies, and develops its own chips in California.
How much more does Apple sell its devices for compared to their cost?
-Apple sells its devices for 65 percent more than their cost.
What is the percentage of an iPhone's hardware cost attributed to assembly?
-Assembly is only 2% of an iPhone's hardware cost.
Which two Chinese cities are most iPhones made in?
-Most iPhones are made in Shenzhen and Zhengzhou.
What role has the government played in making Shenzhen an electronics manufacturing hub?
-Favorable government policies have helped Shenzhen become the electronics factory to the world.
Who is the biggest employer in Shenzhen and what is their connection to Apple?
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