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Could Donald Trump really get Apple to ‘build a big plant’ in the US?

Convincing Apple to make its products in the US will be a real achievement says Trump, but skepticism remains about whether it could ever happen

Donald Trump told Apple CEO Tim Cook that he is going to get the company to start manufacturing its products in the United States, the president-elect told the New York Times on Tuesday.

Trump revealed that he had received a post-election phone call from Cook during which he said, Tim, you know one of the things that will be a real achievement for me is when I get Apple to build a big plant in the United States, or many big plants in the United States.

According to Trumps account, Cook responded, I understand that, and Trump went on to promise incentives through tax breaks and reduced regulations.

I think well create the incentives for you, and I think youre going to do it, Trump said he said.

Apple did not immediately respond to a request for confirmation of Trumps characterization of the call, nor did it respond to a request for comment on the content of Trumps remarks.

Though Apple markets its high-end products as being designed by Apple in California, the electronics are assembled at factories in China from components produced primarily in China, Japan and Taiwan, according to the MIT Technology Review. The company says that its suppliers employ more than 1.6 million people.

Forcing American companies to bring jobs back to the US was one of the key themes of Trumps presidential campaign, despite his own businesss decision to manufacture apparel in China or Bangladesh.

Were going to get Apple to build their damn computers and things in this country instead of in other countries, the then-candidate told supporters in Virginia on 18 January.

Trump later called for a boycott of the companys products unless it acceded to the FBIs demand that it unlock one of the San Bernardino shooters iPhones, a request Apple had strenuously resisted.

Apple
Apple markets its products as designed in California but assembles them in Chinese factories from components produced in China, Japan and Taiwan. Photograph: Dominic Lipinski/PA

But most experts agree that building iPhones from scratch in the US is impractical and economically unfeasible, largely because the company relies on a complex and very large supply chain and manufacturing infrastructure already established around Shenzhen, China.

Geography matters, said Seungjin Whang, a Stanford Business School professor who studies supply chain management. In Shenzhen, if you need a part (how scarce it might be), you can find at least 10 suppliers within a day.

Right now the supply chain to make consumer electronics in volume does not exist in the US, said Tim Wilson, a partner in venture capital firm Artiman. You might tax [importing] so it costs more, but to reposition and get people to rebuild that supply chain in the US is not something that I would predict in the next few years.

If Apple were to invest in establishing a new supply base in the US, Whang predicts that the delay would give its competitors largely Korean and Chinese companies time to catch up and eat its lunch.

Jason Dedrick, a professor at Syracuse Universitys School of Information Studies, analyzed Apples supply chain for the MIT Technology Review and found that assembling iPhones in the US would add between $30 to $40 to the products cost, largely due to labor costs and the additional cost of shipping components to the US.

Dedricks estimate did not include the capital cost outlay of building factories, which could be substantial.

Its quite feasible for Apple to do limited volume assembly of some products in the US, Dedrick said, proposing iMacs as a possibility. I dont think its possible to move production of hundreds of millions of iPhones to the US, at least not at a competitive cost.

One possibility, Greg Linden of the Institute for Business Innovation at UC Berkeley said, would be for Apple to have the parts kitted in China and shipped to the existing factory of one its assemblers here and voil youve got a US-assembled iPhone with one extra process step plus some extra shipping and labor.

That strategy could cost as little as $10 to $20 per iPhone, he said, but is limited to the capacity of those already existing factories.

As to whether Apple will attempt something like that, Linden said, I guess it depends on how badly Tim Cook wants a win.

Read more: https://www.theguardian.com/technology/2016/nov/23/donald-trump-apple-tim-cook-phone-call-manufacturing-us

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