Lack of supporting infrastructure, high costs are concerns: experts
Experts believe it is unlikely that Apple Inc's manufacturing lines will be moved to the U.S., because the country lacks the infrastructure to support smartphone production and such a move could add up to $80 to the cost of producing an iPhone.
Apple's major iPhone assembler, Foxconn, which employs hundreds of thousands of workers in China, said on Wednesday that it is in talks to invest in the U.S.
"We are in preliminary discussions regarding a potential investment that would represent an expansion of our current U.S. operations," the company said in a statement sent to the Global Times on Wednesday. The plans have not been finalized.
The Taiwan-based company was responding to reports by overseas media organizations, which found Foxconn's name on a document carried by Japanese tech company SoftBank CEO Masayoshi Son to a meeting with U.S. President-elect Donald Trump on Tuesday in the U.S.
The document said, "Invest $50bn + $7bn in U.S., generate 50k + 50k new jobs in the U.S. in next 4 years."
Trump posted on social media that SoftBank will invest $50 billion in the U.S. and create 50,000 jobs. The post sparked speculation that Foxconn would invest $7 billion in the U.S., although the company declined to give details.
"Apple is the largest client of Foxconn, representing around 50 percent of the company's sales. So Foxconn probably acted on Apple's request … But Apple is just giving lip service to Trump," Wang Yanhui, secretary-general with the Mobile China Alliance, told the Global Times on Wednesday. He said that eventually the proposal will come to nothing.
Trump has publicly called on Apple several times to move production back to the U.S. to provide job opportunities.
In late November, Trump told The New York Times that he had told Apple CEO Tim Cook that he plans to "get" the tech company to make its products in the U.S. In January, Trump also said he wants to "get Apple to build their damn computer and things in this country instead of other countries."
But it is almost impossible for Trump to carry out such plans, as the U.S. infrastructure isn't able to support smartphone production and the cost would surge rapidly following any such move, market participants said.
For example, Cook said during a media interview in December 2015 that "the U.S. doesn't have sufficient technical workers to produce the iPhone products."
"Producing iPhones in bulk generally requires the presence of supply chains within the same region, yet the U.S. does not satisfy such a requirement, as the vast majority of Apple's parts are currently supplied by Asian producers," Wang said.
Terry Gou, chairman of Foxconn, was also "not enthusiastic" about the idea of moving iPhone manufacturing to the U.S., mainly due to potential cost concerns, the Nikkei Asian Review reported in November, citing unidentified sources.
A commentary published in the Global Times' business opinion section in late November said that China would benefit from Trump's effort to bring manufacturing jobs back to the U.S.
It is impossible for the U.S. restore its glory as a major manufacturer under Trump's presidency, said the commentary.
If U.S. companies move back, it will raise their costs "dramatically," which can open the door for Chinese smartphone makers such as Huawei Technologies Co and Xiaomi Inc to undercut Apple on the global battleground.
Given the high labor and shipping costs, experts estimated that the move could add $80 to an iPhone's production cost, or even double the cost.
"The cost increase will result in a price markup, but will Chinese consumers buy into it?" Liu Dingding, an independent industry analyst, told the Global Times on Wednesday, noting that Chinese users are now offered a wide range of options, especially domestic smartphone brands.
Even if Foxconn did move certain parts of production to the U.S., the job losses can be quickly offset by opportunities provided by other domestic suppliers thanks to the rise of Chinese phone makers, experts noted.
As of April, Foxconn had 690,000 jobs in China, according to a report by the Economic Policy Institute.
In 2012, the company's employment in the Chinese mainland reached a peak of 1.3 million people.
In November 2015, Foxconn built a 28 billion yuan ($4 billion) factory in Central China's Henan Province to produce display panels for the iPhone, according to media reports.
