Will the Economics Ever Permit Apple To Build iPhones In the US?

One of the economic premises driving the current US administration's tariff policy is that it will incentivize and possibly force companies to manufacture products in the US. 

Those executives and analysts trying to be polite call this a theoretical exercise. Others refer to it as pure fantasy. The issue is not simply cheap labor. A generation's worth of sophisticated supply chains have developed which depend not just on costs, but on expertise. That knowledge and capability now lies in myriad other countries, especially China for tooling and advanced manufacturing and Taiwan for chip-making. Even if Apple, under pressure, were to try to build iPhones in the US, it would take five years, cost $30 billion and result in a phone costing consumers $3,500, three times what they now pay. The likelihood of Apple attempting to do this may be seen in the news that it is shipping 600 tons of iPhones to India so that they may then be exported to the US to avoid tariffs. JL

Chance Miller reports in 9to5Mac, Joanna Stern and Nicole Nguyen report in the Wall Street Journal, Kif Leswing reports in CNBC:

Estimating that Apple would need to spend $30 billion over three years to move 10% of its supply chain to the U.S., pegs $3,500 as the U.S. iPhone’s price.  iPhones contain sophisticated parts, sourced from 40 countries and put together in China, where electronics manufacturing has been perfected over a generation. America doesn’t have the facilities, nor the skilled manpower. (Even) if a U.S. assembly operation were to start in three to five years, it would depend on parts from Asia. The incentive to build in China isn’t cheap labor. Robots can help with packaging and testing, but tasks such as routing cables, adding glue and screwing little screws, require humans. “The products require advanced tooling. In the U.S., a meeting of tooling engineers couldn't fill the room. In China, you could fill multiple football fields.”

WSJ The year is 2030. Apple Chief Executive Tim Cook takes the stage, waves his new Apple Magic Wand, shouts “Apple-cadabra!” and yanks off a black cloth.

It’s the made-in-America iPhone! Built with lots of money, people, time…and pixie dust.

In the short term, President Trump’s tariffs could mean more-expensive iPhones. The longer-term goal is to reshore high-tech manufacturing to the U.S., including Apple’s cash cow.

“The army of millions and millions of human beings, screwing in little screws to make iPhones—that kind of thing is going to come to America,” Commerce Secretary Howard Lutnick told CBS’s “Face the Nation” over the weekend. “It’s going to be automated,” he added.

Except iPhones contain a patchwork of sophisticated parts, sourced from many countries and put together primarily in China, where electronics manufacturing has been perfected over a generation. America doesn’t have facilities that resemble Chinese ones, nor does it have skilled manpower to assemble iPhones at that scale.

So we assembled a panel of manufacturing and technology experts to find out how hard it would be for Apple AAPL -4.24%decrease; red down pointing triangle to bring iPhone production to the U.S. The short answer? It’s easier to teach a bald eagle to use a screwdriver.

They unanimously agreed. Building the full stack of iPhone components and assembling it in the U.S.? Impossible. But shifting some manufacturing here? Not totally insane.

Apple declined to comment on the possibility of making an iPhone in the U.S. So come dream with us. Here’s what it would take to build an iPhone—or at least some of it—in the land of the free.

Cross-border cooperation

There are parts from over 40 different countries inside an iPhone with the most complex and specialized components coming from about half a dozen, says Gary Gereffi, an emeritus professor at Duke University who has spent decades studying global manufacturing.

Right now, many of those parts are made in—or near—China, which benefits from its proximity to Taiwan, South Korea and Japan.

The only realistic path to U.S. iPhone assembly is to reconstruct its supply chain by shifting some of its key component manufacturing to the broader North American region, says Gereffi, with some parts made in Mexico and Canada—maybe even Western Europe. If a U.S. assembly operation were to start in the next three to five years, however, it would depend on parts from Asia, too.

The Sum of an iPhone’s Parts

Processor

Taiwan

$90.85

Display

South Korea

$37.97

Battery

China

$4.10

5G cellular modem

$26.62

Memory

U.S.

$21.80

Storage

Japan

$20.59

Rear camera array

$126.95

Main enclosure

$20.79

All other components

$200.06

$549.73

Total

Source: TechInsights, iFixit

Note: The iPhone 16 Pro starts with 128 GB of storage but this pricing reflects the 256 GB upgrade. Some components have multiple suppliers from different countries of origin.

Adrienne Tong/WSJ

When Apple began building the Mac Pro desktop in the U.S., one of the first roadblocks was sourcing enough parts—including screws—close to home.

Even if funding were no object—and we’ll get to that—Gereffi estimates it would take three to five years to build out the scale and quality required for us to join hands in a big American manufacturing kumbaya.

Skilled makers

Speaking of hands, iPhone assembly in the U.S. would require a dramatically increased number of them—both human and robotic.

It wouldn’t be impossible to buy the manufacturing equipment required, but getting enough people who are able to run it might be, says Tinglong Dai, a business professor at Johns Hopkins University, who studies global supply chains. “We have a severe labor shortage,” he says, “and we’ve lost the art of manufacturing at scale.”

 

Foxconn, which assembles iPhones, has said it employs 300,000 workers in Zhengzhou, China, aka “iPhone City.” In response to tariffs, Apple plans to source more iPhones assembled in India, according to a Wall Street Journal report. India, too, has a large manufacturing workforce.

The U.S. doesn’t. Hiring is one of the biggest problems facing existing American factories.

Then there’s the skills gap. In a 2017 interview with Fortune, Cook said the incentive to build in China wasn’t cheap labor. “The products we do require really advanced tooling,” he said, nodding to the sophisticated iPhone-making equipment. “In the U.S., you could have a meeting of tooling engineers, and I’m not sure we could fill the room. In China, you could fill multiple football fields.”

Robots can help with packaging and testing, but tasks such as routing cables, adding glue and yes, screwing in little screws, still require humans, Dai says. All of this is going to take moolah. Lots and lots of it. President Trump has pointed out Apple’s willingness to spend $500 billion on U.S. manufacturing. But the company’s commitment is largely for a factory in Houston intended to make AI servers, not iPhones.

Apple would have to spend more to build out the manufacturing ecosystem for an All-American iPhone. And even if it did, would the company be able to maintain iPhone quality while selling them at today’s prices?

“No,” says, well, everyone.

A $1,000 iPhone made completely in the U.S. would be a low-quality product, at least at first, Dai says. “The U.S. has the capacity to manufacture smartphone parts in some areas, but it is not the best across these areas.” America would need to catch up on decades of expertise that Japan has with cameras, and South Korea has with displays, for instance.

There’s momentum for American semiconductor manufacturing. TSMC, the world’s largest chip maker and Apple’s partner, promised to build several plants in Arizona. But for now the company’s most advanced chips, including Apple’s, can only be made in Taiwan.

Apple partner Foxconn planned to build a 3,000-acre TV-screen plant in Wisconsin, shown here under construction in 2020, but substantially scaled back its investment partly because of high manufacturing costs. Photo: Mark Hertzberg/Zuma Press

In 2017, during Trump’s first administration, Foxconn announced plans to build TV displays in Wisconsin at a 13,000-worker facility. It has drastically reduced its commitment—creating only about 1,000 jobs. Manufacturing costs turned out to be “four to five times more expensive” than in China, says Jeff Fieldhack, a research director at Counterpoint Research.

 

Before Trump’s tariffs, Fieldhack estimates, Apple could make a U.S. operation in five years, assuming money was no object.

But here’s the kicker: With new fees and tariffs threatening to jack up not just the iPhone components but the cost of factory building materials—lumber, steel and everything in between—“It’s way down the road now,” he says.

Don’t worry, Tim Cook’s working on that Apple Magic Wand.

 

CNBC As it’s largely a theoretical exercise, there’s a broad range of guesses as to how much an all-American iPhone might cost.

Bank of America Securities analyst Wamsi Mohan said in a Thursday note that the iPhone 16 Pro, which is currently priced at $1,199, could increase 25% based on labor costs alone. That would make it a roughly $1,500 device.

Wedbush’s Dan Ives pegged $3,500 as the U.S. iPhone’s price shortly after last week’s tariff announcement, estimating that Apple would need to spend $30 billion over three years to move 10% of its supply chain to the U.S.

At the moment, Apple makes over 80% of its products in China. Those products now receive a 145% tax when they’re imported into the U.S. after Trump’s tariffs went into effect this week.

Experts say that a “Made in the USA” iPhone would face serious challenges, ranging from finding and paying a U.S. workforce to tariff costs that Apple would incur importing parts to the U.S. for final assembly.

There’s broad agreement among analysts and industry watchers that it’s not likely to happen. Wall Street has doubted for years that Apple would do an American iPhone. “I don’t think that’s a thing,” Needham’s Laura Martin quipped on CNBC this week.

“It’s just not a reality that on the time frame of imposing tariffs that this is going to shift manufacturing here. It’s pie-in-the-sky,” said Jeff Fieldhack, research director at Counterpoint Research.

 

9To5 Trump’s massive tariffs on China will have and its supply chain. Ah ead of that, White House Press Secretary Karoline Leavitt said that Trump firmly believes that Apple can move iPhone manufacturing to the United States.

In response to a question from Maggie Haberman of The New York Times about the types of jobs Trump hopes to create in the U.S. with these tariffs, Leavitt said:

“The president wants to increase manufacturing jobs here in the United States of America, but he’s also looking at advanced technologies. He’s also looking at AI and emerging fields that are growing around the world that the United States needs to be a leader in as well. There’s an array of diverse jobs. More traditional manufacturing jobs, and also jobs in advanced technologies. The president is looking at all of those. He wants them to come back home.”

Haberman followed up with a question about iPhone manufacturing specifically, asking whether Trump thinks this is “the kind of technology” that could move to the United States. Leavitt responded:

“[Trump] believes we have the labor, we have the workforce, we have the resources to do it. As you know, Apple has invested $500 billion here in the United States. So, if Apple didn’t think the United States could do it, they probably wouldn’t have put up that big chunk of change.”

Leavitt is referencing Apple’s announcement from February, when it said it would “spend more than $500 billion in the U.S. over the next four years.” Apple’s commitment, however, made zero reference to iPhone assembly in the United States. The press release focused on R&D in the U.S., chip production in Arizona, AI server manufacturing in Houston, Apple TV+ production, and an academy in Michigan.

Also worth reading today is this story from 404 Media, which outlines exactly why an iPhone made in the U.S. is “pure fantasy.”

 

Tim Cook has addressed this topic multiple times in the past. Here’s a quote from Cook during a 60 Minutes interview in 2015:

“China put an enormous focus on manufacturing. The U.S., over time, began to stop having as many vocational kind of skills. I mean, you can take every tool and die maker in the United States and probably put them in a room that we’re currently sitting in. In China, you would have to have multiple football fields”

And from a Fortune event in 2017:

“The truth is China stopped being the low labor costs country many years ago and that is not the reason to come to China from a supply point of view. The reason is because of the skill and the quantity of skill in one location, and the type of skill. It is like the products we do require really advanced tooling and the precision that you have to have in tooling and working with the materials that we do are state-of-the-art, and the tooling skill is very deep here.”

As reported yesterday, Apple has been stockpiling iPhone inventory in the United States ahead of Trump’s tariffs. This will help the company stave off the impact of the tariffs and avoid price increases for now. We’re still waiting on a public response from Apple on its plans.