Apple Inc., the tech giant renowned for its innovative products, designs its devices in California but relies heavily on international manufacturing. More than 80% of the US tech giant’s products are manufactured there. This practice has come under fire as the rhetoric around domestic manufacturing and competitive labor costs have turned up.
The company’s manufacturing strategy includes partnerships with key suppliers such as Foxconn, which remains Apple’s top supplier, and TSMC, its primary chip manufacturer. TSMC has recently achieved success with advanced chip production at its new factory in Arizona, marking a shift towards American manufacturing. This creation could spell trouble for Apple’s ability to source all the components that go into their products. The majority of the iPhone’s components still essentially originate from China and other foreign countries.
Foxconn, the company that assembles the iPhone, provides a powerful illustration of the difficulty Apple would experience if it tried to move the bulk of production to America. CEO Tim Cook has said American workers are not trained in the skills needed to do high-volume electronics manufacturing. These comments underscore a major barrier for any effort to boost domestic production.
Though Apple’s products are designed in California, their components are international in scope. A TSMC facility under construction on Taiwan, home to the processors used in every iPhone. South Korean companies like LG and Samsung are the ones providing the displays. Consequently, almost all of the parts needed to put an iPhone together are still produced in China.
The cost of relocating production to the U.S. are significant. California’s statewide minimum wage is currently $16.50/hr. Consequently, the labor cost to assemble and test an iPhone might increase from $40 in China to about $200 in the U.S. This increase in labor costs would clearly adjust to retail prices. With the iPhone 16 Pro starting at $1,199. Labor costs might increase the final price by 25%. By comparison, the high-end iPhone 16 Pro Max could face a murderous 91% price hike. This increase may be due to increasing tariffs and increasing labor costs.
Jeff Fieldhack, an industry analyst, was doubtful that manufacturers would find it possible to move production back to America on short notice.
“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,” – Jeff Fieldhack.
The U.S labor market shows clear divergence with respect to China. Although companies such as Foxconn can hire millions for assembly line work, creating that same workforce in America is a pipeline impossible to match on the ground. Howard Lutnick, the CEO of Cantor Fitzgerald and major player in finance, illustrated this discord when lamenting the shortage of labor to produce electronics.
“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,” – Howard Lutnick.
As Apple works through these challenges of potential civil liability and reputational harm, it’s simultaneously looking to diversify its supply chain by moving more manufacturing stateside. TSMC’s Arizona facility, while only a first step, is a significant move toward establishing a new, better supply chain. In the meantime, Apple’s desire to be the foundry’s most faithful customer remains undeterred.