The Wall Street Journal

Why Making Apple iPhones in America Is So Hard

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As Apple tries to escape tariffs and the trade war, it is moving production out of China—but not to the U.S. Here's how the tech giant has become so reliant on a global supply chain.
Correction: This video incorrectly states that Apple no longer assembles the 2013 Mac Pro in Austin, Texas. The 2013 version is still assembled in Austin, while Apple plans to assemble the 2019 Mac Pro in China.

Video: George Downs and Ksenia Shaikhutdinova. Illustration: George Downs

#WSJ #Apple #iPhone


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… show captions ↓
(upbeat music)
- [Narrator] Which one of these Apple gadgets
is the odd one out?
Did you get it?
The answer is this 2013 Mac Pro.
Not because it looks like a trashcan
but because it's the only one that was assembled in the USA.
The others were assembled in China.
Why is that important?
- Apple makes their product in China.
I told Tim Cook, who's a friend of mine, who I liked a lot,
"Make your product in the United States.
"Build those big beautiful plants
"that go on for miles, it seems."
- [Narrator] President Trump,
who is currently in the midst of a trade war with China,
wants these Apple products to be more like this one.
Actually, he wants them to be fully made in the USA.
But Apple, one of the companies
most exposed to the trade war,
has one of the largest, most deeply-integrated
global supply chains.
So could Apple ever move production back to the US?
- We've taxed China on $300 billion
worth of goods and products being sold into our country.
- [Narrator] Trump's threat of imposing fresh tariffs
could drive the cost of Apple's iPhone XS up by about $40.
Fortunately for Apple, that tariff has been postponed
until December 15th,
and an earlier round of tariffs
on circuit boards and computer chips
has had minimal impact on the company.
As China and the US keep fighting over trade,
Apple is already moving some of its production
to avoid tariffs and trade duties,
like to India, for example,
where many of Apple's major suppliers are relocating.
That's no mean feat.
The company moved production out of US years ago,
building a global supply network.
It lists suppliers in over 25 countries,
with some parts made in China since the early 2000s.
- [Tim] The way that I view this is
the vast majority of our products
are kind of made everywhere.
Largely I think that will carry the day
in the future as well.
- [Narrator] Others before Trump
have tried to get Apple to bring jobs back to America.
President Obama reportedly asked Steve Jobs
what it would take to make iPhones in the US,
to which Jobs said, "Those jobs aren't coming back."
- Will there be an Apple product
ever made again in the United States?
- I want there to be.
- So will there ever say on the back of an Apple product,
"Designed in California, assembled in the United States"?
- It may.
- [Narrator] The company has tried before.
Remember that Mac Pro?
- It is designed by brilliant engineers in California
and assembled here in the USA.
(audience cheers)
- [Narrator] A series of debts
at its main supplier's factory
raised questions over working conditions in Asia,
so the company invested $100 million
to assemble the Mac Pro in Austin, Texas.
- The reason the Mac Pro was made in the US,
that's because it's a pretty low-risk product.
It's not making a ton of these.
So it could move it here, test,
and see if it could do US manufacturing.
And if so, then it could explore the opportunity
for other products.
- [Narrator] But the plan in Austin had issues
when it came to locally sourcing enough components
for the production of the Mac Pro, leading to delays.
So what did the company do?
They imported some of the parts from China,
where manufacturers had capacity to keep up with demands.
- How many tool and die makers do you know in the US now?
I could call a meeting around the United States and say,
"Will every tool and die maker come to this room tonight?"
and we wouldn't fill the room.
In China, you would need several cities.
- [Narrator] Recently, production in the Austin plant
has fizzled out.
And production of the new Mac Pro--
- This is the new Mac Pro.
- [Narrator] Has been relocated back to China,
according to people familiar with the plans.
- With the new Mac Pro, it's not hard at all
to shift production back to China.
This is Apple's playbook, right?
They perfected the art of making things in China.
So transitioning the Mac Pro or any other product to China
makes a lot of sense for them.
- [Narrator] So what are Apple's choices
if they want to navigate the tariffs?
They have three options.
Given how expensive and complex moving out is,
Apple may just decide to stay in China
and at some point potentially pay tariffs,
which would likely make Apple products more expensive.
Or Apple could move manufacturing, just not to the US.
India and Vietnam are only two of the countries
that are hoping to lure Apple and its suppliers.
Finally, the company could strike an agreement with Trump.
- Tim was talking to me about tariffs.
And one of the things that he made a good case
is that Samsung is their number one competitor
and Samsung is not paying tariffs
because they're based in South Korea.
It's tough for Apple to pay tariffs if they're competing.
And I thought he made a very compelling argument,
so I'm thinking about it.
- [Narrator] In July, Cook said tariff exclusions
are key for Apple to make the new Mac Pro in America.
- [Tim] That's what's behind the exclusions.
So we're explaining that and hope for a positive outcome.
- [Narrator] We contacted Apple
following the latest round of tariffs,
but the company declined to comment further.
Apple hasn't recently moved any of its manufacturing
back to the US,
but it says it spent $60 billion
with 9,000 US suppliers and companies last year,
supporting 450,000 jobs.
They're even building a new campus in Austin, Texas,
the same city where that Mac Pro
is no longer being assembled.

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