Mon, Jan 30, 2017 - Page 6 News List

Moving manufacturing to US not so simple for Apple

APPEASING TRUMP:Analysts said that making Apple devices in the US would require more robots and fewer workers, undermining the political aim of creating US jobs


The Twitter accounts of US President Donald Trump, @POTUS and @realDoanldTrump, are displayed on Apple devices arranged for a photograph in Washington on Friday.

Photo: Bloomberg

As US President Donald Trump pushes hard for goods to be “made in America,” how realistic is it to expect Apple Inc to stop manufacturing its iconic devices in China?

The freshly installed president vowed while campaigning that he would force Apple to bring production to US soil.

Yet, as other big companies have sought to appease the new administration with promises of jobs or investments in the US, Apple has stayed low-profile.

Major Apple contractor Hon Hai Precision Industry Co (鴻海精密) this month confirmed that it is considering a US$7 billion investment to make flat panels in the US in a joint project with Japan’s Softbank Group Corp. The Taiwanese firm has given no details, and Apple declined to comment.

Global Equities Research analyst Trip Chowdhry said that moving manufacturing to the US, where many customers are, was more of a common-sense move than a political one.

“You need to manufacture local products in local markets,” Chowdhry said.

Making things locally gives better control of distribution networks and lets manufacturers customize goods for local markets, he added.

Whether politically motivated or not, Apple is not in the same position as automakers which relocated US factories overseas to cut costs, according to IHS manufacturing processes chief analyst Dan Panzica. Apple never moved jobs offshore, it created them there.

“The Apple jobs were never here,” Panzica said. “The entire supply chain grew in China.”

Apple benefits in Asia from a network that goes beyond subcontractors assembling smartphones, tablets or laptops. The California-based firm relies on a dense ecosystem of companies that make components and spare parts for its devices as well.

China also offers sources of important raw materials, along with cheap, flexible and abundant labor to keep iPhone assembly lines cranking along.

It would be “very hard to replicate” that situation with US workers without using “more robotics and less workforce,” undermining the political aim of creating jobs there, according to Endpoint Technologies Associates Inc analyst Roger Kay.

Exacerbating the challenge, “it makes no sense to make phones here if you have to ship all the components from China,” said technology analyst Jack Gold of J. Gold Associates LLC.

The MIT Technology Review in June last year considered several scenarios, from simply bringing assembly to the US to simultaneously shifting the manufacture of parts here.

The Review estimated the extra manufacturing cost of an iPhone 6S Plus at US$30 to US$100 as a result of those moves.

It is difficult to imagine that Apple would risk its status as the world’s most profitable company to absorb such a hike in manufacturing costs.

“Apple will never lower its margins on its flagship product, the iPhone,” Ovum Ltd consumer technologies analyst Ronan de Renesse said.

Apple is under pressure from investors to keep its high margins, and already faces slowing growth of iPhone sales.

So, would US consumers put their money where the political talk is and pay more for iPhones stamped “Made in the USA”?

Not all analysts were convinced.

It was seen as more likely that Apple would make a symbolic move to appease Washington, such as investing more in making Mac Pro computers here, or in a facility for higher-priced, limited-edition devices such as an “anniversary edition iPhone” to mark the handset’s 10th birthday this year.

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