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  • Making iPhones in the USA?

    Posted by David Foster on September 12th, 2018 (All posts by )

    Trump’s proposed tariff increase on Chinese imports would affect Apple products including the Apple Watch, though apparently not the iPhone itself.  Here is Apple’s response.

    And from President Trump:

    Apple prices may increase because of the massive Tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive. Make your products in the United States instead of China. Start building new plants now. Exciting!

    There has been much discussion for some time about the economic feasibility of building Apple products–especially the iPhone–in the United States, and considerable new commentary in the wake of the tariff controversy.  In 2011, then-President Obama asked Steve Jobs what it would take to make iPhones in the US.  Steve’s response was that, basically, the problems were more about skill levels and cultural factors–in particular, he is said to have mentioned a need for 30,000 manufacturing engineers.

    This strikes me as a very improbable requirement.  Manufacturing engineers are the people who design and improve manufacturing processes:  I can’t imagine why you would need 30,000 of them for all of Apple’s product lines combined, let alone for the iPhone alone.  (It’s possible that the term “manufacturing engineers” was a misquote of what Jobs actually said, or the Jobs was speaking very loosely–indeed, he apparently went on to say that the people in question could be educated in trade schools.  Maybe he meant toolmakers…although also, 30,000 toolmakers sounds like an awful lot for iPhone or indeed all of Apple…or shift supervisors, or something of the sort.

    There was a Quora discussion in 2016 on the topic:  How much would an iPhone cost if Apple were forced to make it in America?  Out of all the responses, which were of various quality, Forbes chose in January of this year to reprint one that seems to me to be rather extreme:  In the $30,000 to $100,000 range…assuming it could be made at all.

    The author quotes Apple CEO Tim Cook on the skills gap between China and the US:

    … the reason is because of the skill … and the quantity of skill in one location … and the type of skill it is. The products we do require really advanced tooling. And the precision that you have to have in tooling and working with the materials that we do are state-of-the-art. And the tooling skill is very deep here.

    In the U.S. you could have a meeting of tooling engineers and I’m not sure we could fill the room. In China you could fill multiple football fields.

    The author says:

    Tooling engineering is a highly skilled position that requires years of training and experience. It is an “analog” type skill that combines artisanal craftsmanship with precision engineering skills. And as Mr. Cook alludes to later in the talk, the Chinese have developed and scaled these skills over the last three decades while the U.S. and other countries have gone the other direction and de-emphasized them.

    (The author also talks about the fact that the iPhone supply chain is now largely centered in the Far East, which is true–but “moving iPhone manufacturing to the US” does not imply that every single component or subcomponent or raw-material element in the periodic table would need to come from the US.)

    It is certainly true that the US over the past couple of decades has deemphasized manufacturing-related skill sets:  but I doubt seriously that the problem is so severe as to make the US manufacturing of a product like iPhone infeasible.  After all, cars and trucks are made in the US, and they involve quite a lot of production engineering and tooling.  Airplanes and jet engines, too, are made here, and I’d expect that the production engineering challenges for a GE or P&W jet engine equal or exceed anything involved with making an iPhone.  And there are plenty of other products and components manufactured in the US as well.

     

    One would think that Tim Cook’s comments about the decline in manufacturing skill levels would lead to widespread concern about what America has done to ourselves, and to the conclusion that maybe Trump is right to think that the hollowing-out of manufacturing needs addressing.  It may be true that a very rapid and comprehensive switch of manufacturing now done in China to the US instead would lead impossibly-severe skill shortages.  But I don’t think that a few product lines for a few companies, growing over time, would necessarily yield this result.

    Just the other day, a ran across an article by a woman who–when working as a summer intern–implemented a 3-D printing approach to streamline a complicated mold-making process.  To accomplish this, she worked with an employee (“Gary”) who had been a mold-maker for for 30 years.  He was very highly skilled at his trade, and although concerned about what the project would mean to him personally, he was very helpful to the author.

    The new approach succeeded, and Gary’s job became redundant.   The company moved him to a new area, but he chose to retire from the company.  He is now working in a customer-service job somewhere.

    I expect there are a lot of underemployed former mold-makers, toolmakers, etc, who would be thrilled at the opportunity to help enable iPhone manufacturing in the US.

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    36 Responses to “Making iPhones in the USA?”

    1. David Foster Says:

      Here are a couple of related posts from manufacturing consultant Bill Waddell;

      Lean Manufacturing in the Age of Trump

      Undermining Trump’s Manufacturing Promise

    2. Anonymous Says:

      30 years ago, China had almost none of the needed skills and infrastructure – but they had lots of low paid workers, and a government-mandated exchange rate that made exports even cheaper.
      20 years ago, they still had relatively little, except for the low paid workers and the government-mandated favorable exchange rate, and favorable tariffs in the US.

      They have the skills today, but their worker costs have gone up. And the US has reduced our pool of skilled workers, but not eliminated it. If need be, we could tool up much faster than they were able to. And if their manufacturing costs go up – or even hold steady – they really need their favorable exchange rate and tariff treatment.

      Can the US take all manufacturing back? Unlikely. But I suspect we can take back a much higher percentage than they’d like, or the naysayers claim. And our relative advantages will be highest on higher-cost, higher-perceived-quality, products.

    3. David Foster Says:

      “And our relative advantages will be highest on higher-cost, higher-perceived-quality, products.”

      Also those for which transportation costs/delays are an important factor. Which probably doesn’t include iPhone.

    4. Brian Says:

      The notion that China is oozing with super skilled workers that the US can’t produce anymore is the most absurd thing I’ve ever heard. It’s up there with the notion that we can’t compete with India in producing computer programmers. There’s a surplus of people there who will work for cheap and can be trained for simple tasks. In the US there are barriers to finding those people. You have to pay more. Probably lots more. It’s an economic choice, ptetending otherwise is insulting and risible.

    5. L. C. Rees Says:

      A Boomer-aged man I knew growing up started his career in industrial engineering. As we exported national power overseas, he shifted the focus of his career to being the franchise owner of an income tax preparation store. Apparently a good money maker in poorer sections of the city.

      America since Nixon in a nutshell.

    6. David Foster Says:

      During WWII, the US had a program called “Training Within Industry” for rapid development of skills in employees…quite a few of whom were entirely new to manufacturing.

      https://en.wikipedia.org/wiki/Training_Within_Industry

      Some degree of revival of this program, or at least its concepts, in now occurring:

      https://www.td.org/magazines/td-magazine/the-training-within-industry-approach-resurges-in-the-us-workforce

    7. Mike K Says:

      The whole point of what Trump is doing is to restore manufacturing skills in this country.

      There was a time when I read that service “industries” were going to be the future in the US.

      What we need are apprenticeships linked to engineering programs and skilled trades.

      The electricians unions seem to be making some progress on this.

      We need more. I talk to kids joining the military, Many are joining for a useful skill. Showing up on time is one that will be helpful.

      I saw a young guy a month ago, who did an Air Force enlistment working on avionics, got out, went to college on GI Bill and got a BSEE. He was going back into the Air Force,

    8. Christopher B Says:

      I’m far from any kind of manufacturing expert but it sounds to me like the processes described are semi-automated, and when they talk about ‘tooling engineers’ they really mean people highly skilled at various manual assembly processes like soldering connections or setting chips, things that an American manufacturing operation would automate, and the product design would allow to be automated. So they’re probably right that you couldn’t simply transport a plant making a current iPhone to the US. We don’t have that kind of work force, and they’d have redesign the manufacturing process and maybe even the iPhone itself to allow for a higher degree of automation for US production.

      They’re just wording it in a way that makes it sound like the US has lost something when we’re actually just substituting capital investment in automation in place of wages for plant workers, and trying to use the old ‘jobs Americans won’t do’ dodge.

    9. Gavin Longmuir Says:

      As Anonymous below mentions, it has taken at least 20 years for China to build its manufacturing excellence in consumer electronics. Similarly, it took 20+ years for bombed out Germany & Japan in the aftermath of World War II to overtake the manufacturing capabilities of the victorious Allies.

      Let’s remember the tale of the French duke (pre-French Revolution) who was having a new mansion built. When the duke explained to the architect that he wanted a tree-lined avenue leading up to the mansion, the architect protested that it would take 100 years for those trees to grow. “Well”, said the duke, “we had better get started on planting them today”.

      Let’s also remember the other side of bringing back manufacturing to the US, which is the hostile regulatory environment that the Political Class has created — something which benefits lawyers and NIMBYs, but comes with a very high cost to the rest of society. There was a case a while ago of a state-of-the-art battery manufacturer who committed to build two identical plants, one in the US and one in China. The plant in China started up in 9 months; in the US, it took 27 months. To his great credit, President Trump is taking some steps to reduce US regulatory overkill, but sadly he is fighting a lonely battle.

    10. David Foster Says:

      Christopher….I doubt that anyone much would use the term ‘manufacturing engineer’ or ‘tooling engineer’ to refer to basic assembly work. Here are some examples of “manufacturing engineer” job listings:

      https://www.indeed.com/q-Manufacturing-Engineer-jobs.html

      The one for Douglas Autotech is interesting in terms of the scope and diversity of the work to be performed.

      I looked up ‘Industrial Engineer’ (I believe that term is more or less synonymous with ‘manufacturing engineer’) at the Bureau of Labor Statistics site: according to them, there are 257,900 of these people in the US today, earning a median of $85K.

      https://www.bls.gov/ooh/architecture-and-engineering/industrial-engineers.htm

      According to the same source, there are 73,500 tool & die makers, earning a median $53K.

      https://www.bls.gov/oes/current/oes514111.htm

      These numbers aren’t too consistent with Tim Cook’s comment about the possible difficulty of filling a room.

    11. David Foster Says:

      Christopher…also…certainly, a particular manufacturing operation transported from a low-wage country to a high-wage country won’t remain unchanged: capital investment options for automation that make no economic sense in the first case will be very logical in the second.

      A thought experiment: If Henry Ford had been able to manufacture Model Ts in Mexico while paying people 10 cents per day, would he have bothered with the assembly line and other productivity-enhancing technologies? (Well, *he* might, because it was the kind of thing he liked to do, but there were plenty of other businessmen who would have just made the cars with the low-wage workers, in the old-fashioned way.)

      I believe it is well-accepted in the history of technology that the US was especially eager to adopt labor-saving technologies because of its being a high-wage country.

    12. Mike K Says:

      A thought experiment: If Henry Ford had been able to manufacture Model Ts in Mexico while paying people 10 cents per day, would he have bothered with the assembly line

      My understanding is that he paid his workers well on the theory that they could afford to buy his cars.

      That is pretty much Trump’s attitude about tariffs.

      It may raise prices but will also raise wages.

      The end point is to have zero tariffs on both sides but that is unlikely.

      I do understand that the crony capital types are mobilizing to get Congress to rebel. Will they ?

    13. Mike K Says:

      Here is a lineup of the pro-China lobby in the tariff fight,

      The media are reporting on a “group” of lobbyists “uniting” in a common strategy to oppose President Trump, ahead of the mid-terms, based on Chinese tariffs. Those who have followed this “group”, also known as “the big club”, for decades know full well the lobbyists are financed through Wall Street multinational corporations and foreign money (hint: China). The foreign funding is passed through the U.S. Chamber of Commerce, President Tom Donohue, who then organizes the lobbying strategy to target politicians.

      President Trump has made it a pillar of his presidency to reset the global trade relationships and stop the trade imbalance that previously caused the destruction of the U.S. manufacturing base and the collapse of the middle-class. The America-First trade initiatives are adverse to the interests of the multinationals (globalists) and the control mechanisms within the U.S. Chamber of Commerce.

      Money and economic control is the real battle-space within the American political system. This latest move is only the beginning of that will follow in the next 56 days, as they to try and eliminate Trump by targeting republicans. The Big Club is the financial mechanism that constructed the UniParty in Washington DC.

    14. Stephen Price Blair Says:

      If you google “How the U.S. Lost Out on iPhone Work” there’s a New York Times article with a story about how Apple discovered six weeks from release date that they needed to completely retool their next iPhone model’s screen. According to the story, it’s not that workers are cheaper in China that drove Apple there. It was the ability to alter the supply chain quickly and reliably. In this particular case, it was the ability to literally tool up a new plant to build a completely different screen than previously designed, and have it all running in a month and a half.

      There was a time when you could imagine doing something like that in the United States, but there’s no way you could do it now. If we want to bring manufacturing of things like iPhones to the United States, we need to allow manufacturers to manufacturer without interminable regulatory delays.

    15. ErisGuy Says:

      Seeing the closed and abandoned manufacturing shops in Tukwila and Newark, makes me believe Cook’s claim. All that expertise; all that innovation once done in small shops—gone.

    16. Anonymous Says:

      Trump will prevail, however, simply because of his populist support…. They will not allow Trump to backslide on his promise even if he were inclined to do so.

      I can’t tell if this is prophecy or analysis, but I suspect it won’t be an easy or successful as he suggests. Trump is old and has no obvious successor. One stroke, one heart attack, one Hodgkinson and any revival will be over.

    17. David Foster Says:

      Mike K…”My understanding is that he (Ford) paid his workers well on the theory that they could afford to buy his cars.”

      He paid them well because otherwise they tended to quit, very quickly. People who weren’t used to assembly-line work at a fast pace found it very unpleasant.

      He probably did hope/expect that others would also raise wages, thereby enabling a larger market for his cars.

    18. David Foster Says:

      Here’s an analysis of iPhone components and costs:

      https://www.technologyreview.com/s/601491/the-all-american-iphone/

    19. Christopher B Says:

      I am cynical about anyone’s use of the job title ‘engineer’ ever since systems or software engineer became the preffered title in my line of work in place of ‘programmer’, almost overnight and without the establishment of any accreditation or standards for applying the title.

    20. Mike K Says:

      The comments to that article are interesting. Some declare there is no way qe could make those items here. Trump is just rabble rousing.

      I wonder how much the leftist mindset at Google is due to the number of foreign employees.

      H1B visa holders ?

    21. Grurray Says:

      Christopher is close. I think Jobs was using manufacturing engineer as a euphemism to hide his rough labor conditions. Because instead of fewer highly skilled technicians, Apples uses thousands of people sitting at an assembly bench performing one highly systematized, repetitive task for 12 hour a days. That’s the real barrier to bringing it back the US. We don’t and won’t work that way. And at the other extreme, no one has come up yet with a good way to automate complex consumer electronics. Current robot technology isn’t up to the job. David, you’ve probably seen those Baxter and Sawyer robots. Those are still toys compared to what will really be needed.

    22. David Foster Says:

      Automated assembly of digital watches, in Japan:

      https://world.casio.com/news/2018/0809_standard_en/

    23. David Foster Says:

      It is interesting…for two or three decades, the common assertion was that we didn’t really need manufacturing in the US since it was said to be a low-skilled activity with little intellectual content, and we would be better off focusing on higher-value types of work.

      And today’ it’s being asserted that the US can’t substantially increase its manufacturing because of the lack of skills….

    24. Brian Says:

      “for two or three decades, the common assertion was that we didn’t really need manufacturing in the US”
      The common assertion in DC, NYC, and the MSM. Pretty sure any public opinion poll would have showed the public never agreed with that.

    25. Grurray Says:

      Although those Casios were pretty sweet back in the day, I think we still have a long way to go to make the leap from $20 1980s watches to iPhones. It makes me think of the Swatch 51 that only has a single screw holding it together.

      Maybe that’s what we have to do for full automation. Instead of the ultimate, multi-functional, mirror-into-our-soul, miracle gadget, everything will get unbundled and reduced to its absolute base state.

      I may have mentioned this before, but I believe the foreseeable future of automation won’t be total replacement of humans. It will be operators using robots just like they have used any other tool. Such as with the Yumi robot.

      It will be evolutionary not revolutionary. It will take some time like everything always has. Some jobs are certainly going to be eliminated. Many of those Chinese kids assembling phones will eventually be out of work, but it won’t be the ‘Rise of the Machines’ or anything crazy like that.

    26. Gavin Longmuir Says:

      Grurray: “Some jobs are certainly going to be eliminated.”

      Indeed! At the same time as automation is eliminating some jobs, other jobs are going to be created. Arguably, where the Western world has gone wrong in the last half century is that, while economic progress has eliminated some jobs, most of the new jobs have been created in government, law, administration — i.e. mostly non-productive jobs which do not increase the sum total of human wealth. Even worse, we have created many jobs in government which are not merely unproductive overhead but are actually counter-productive sand-in-the-gears. Overbearing regulators hard at work diligently enforcing excessive regulation is the classic example … and a significant part of what has driven many former productive jobs in the US overseas.

      There was a time when futurists talked of the Leisure Society — the working week would shrink to 30 or 20 hours. That would be one way of spreading the benefits of automation. Certainly better than continuing to create whole new classes of bureaucrats to get in the way.

    27. Mike K Says:

      where the Western world has gone wrong in the last half century is that, while economic progress has eliminated some jobs, most of the new jobs have been created in government, law, administration — i.e. mostly non-productive jobs which do not increase the sum total of human wealth. Even worse, we have created many jobs in government which are not merely unproductive overhead but are actually counter-productive sand-in-the-gears. Overbearing regulators hard at work diligently enforcing excessive regulation is the classic example … and a significant part of what has driven many former productive jobs in the US overseas.

      Oh boy ! Alex Comfort, a pretty well know British physician/ political type, once said, “Civil Service in England is a life calling. In the US it is a rogue form of private enterprise.”

      England, has become Britain with a Pakistani accent.

    28. Mike K Says:

      where the Western world has gone wrong in the last half century is that, while economic progress has eliminated some jobs, most of the new jobs have been created in government, law, administration — i.e. mostly non-productive jobs which do not increase the sum total of human wealth. Even worse, we have created many jobs in government which are not merely unproductive overhead but are actually counter-productive sand-in-the-gears. Overbearing regulators hard at work diligently enforcing excessive regulation is the classic example … and a significant part of what has driven many former productive jobs in the US overseas.

      Oh boy ! Alex Comfort, a pretty well know British physician/ political type, once said, “Civil Service in England is a life calling. In the US it is a rogue form of private enterprise.”

      England, has become Britain with a Pakistani accent.

      WordPress is having a seizure.

    29. MSimon Says:

      My #1 daughter got a degree in Chem E from a very good school. She was near the top of her class. She is a wiz at thermodynamics. I have quizzed her.

      She is in a low paid (for New York) sales job.

      Why? Engineers are too nerdy.

      Aptitude is not enough. You need desire.

      I worked my way up from bench technician to aerospace engineer. Desire.

    30. MSimon Says:

      Christopher B Says:
      September 13th, 2018 at 9:17 am

      Accreditation is killing us. Why? A business can’t have qualifying tests that “discriminate”. So degrees take the place of those tests.

      Affirmative action is killing us.

      How did I beat that? I took jobs as a contractor. They can be laid off without affecting the rules. In two weeks if I didn’t measure up I was gone. I made sure I measured up. Every new job started with a period of intense study.

    31. MSimon Says:

      I have written a few things about the cultural divide.

      A Thermodynamic Explanation Of Politics
      https://www.spartareport.com/2016/11/thermodynamic-explanation-politics/

      http://classicalvalues.com/2016/12/two-ecologies/

      The City vs Country divide has been a feature of human politics for 5,000 years or more. Too bad we haven’t figured it out yet.

      ===

      The Apple folks are city boys. They do not understand the country people. And it works the other way too.

    32. David Foster Says:

      MSimon….”So degrees take the place of those tests.”

      The ruling in the original Griggs v Duke Power case was that *neither* the intelligence test *nor* the high-school diploma requirement could be used unless they had some relevance to successful performance on the jobs in question, which apparently in this case, they did not.

      https://en.wikipedia.org/wiki/Griggs_v._Duke_Power_Co.

      Somehow, it seems that the second part of that ruling–the exclusion of nonrelevant eduational requirements–has been deleted or watered down, either by further court rulings or legislation, or maybe by being simply ignored. I’d be grateful if anyone could shine some historical light on this matter.

      My understanding is that tests *can* be used if they can be shown to have clear relevance to the job in question: indeed, certain companies (Google comes to mind) seem to have no problems when using tests where the relevance is considerably less direct.

      “How many piano tuners are there in the entire world?”

      https://www.businessinsider.com/15-google-interview-questions-that-will-make-you-feel-stupid-2009-11#you-need-to-check-that-your-friend-bob-has-your-correct-phone-number–10

      …many of these questions probably are reasonable measures of general intelligence and quick thinking under pressure, but I bet Google doesn’t have anything like statistically-valid evidence for this.

    33. MCS Says:

      I mostly agree with the above.

      I find both Jobs’ and Cook’s expertise in manufacturing questionable at best. The organizations that Jobs had most direct input were disasters. Think Next and Apple before he was forced out.

      You’ll hear that design for manufacturing was invented by the Japanese. In the 1910’s; the transmission for the Model T arrived at the factory in a curiously tightly specified crate. The crate when broken down, formed the floor boards of the Model T.

      The individual components and circuit boards for an I-Phone are produced with vanishingly small direct labor as are all modern electronic components. I doubt that many of the ones that are produced in China do so without foreign supervision. As Grurray says, what’s missing are the hundreds of thousands of workers willing to sit at a table inserting the same flexible circuit into the same tiny connector for 12 hours a day for cheap. It’ll be interesting to see if Apple can survive the day that is coming, when the 3d puzzle of a mobile phone resolves into something that can be assembled automatically. The I-Phone is actually an example of a horrible design that can exist because money is available to make up the difference. It and Apple actually exist at the top of a huge Jenga tower, where no one knows just what changing condition will bring down the whole thing. There are a lot of businesses that make good money out of “luxury” goods, none of them are close to trillion dollar companies.

      I’m so old that I can remember when the big thing in mobile phones was smaller and less expensive. Contrast that with Apple’s recent circus.

      Apprentice machinists used to start out with a file and a small piece of metal to turn into a perfect cube. Eventually they would progress to machining parts for Merlin aircraft engines. When Germany reoccupied the Ruhr it suddenly became possible for workers that couldn’t have filed a perfect cube to produce engines as well, even Americans.

      The “computer revolution” of the ’80’s saw a lot of software written by people that didn’t realize that they lacked qualifications and knowledge to do so. A guy named Bill Gates comes to mind. Some of it was pretty bad and could have been improved by properly trained programmers. I remember reading an article who’s author claimed to have invented the spreadsheet around 1970 on a main frame. His idea was shot down because computer time was far to valuable to waste making them easy to program. Think about how much better things are now while you wait for your computer to finish yet another update. Henry Ford obviously lacked any qualification in automotive engineering, we’d probably have flying cars if he had obtained to proper certification first.

    34. sch Says:

      Foxconn, the major assembly contractor for Apple, is just starting to build an LCD plant in Wisconsin.
      Some of the controversy and nay sayers are on exhibit here: https://www.npr.org/2018/04/30/606990270/critics-lash-out-against-planned-foxconn-factory-in-wisconsin

      Be interesting to see how long it takes to crank up the plant, how much the political rent seekers (eg diversity SJWs and the various environmentalists
      among others) can delay and increase costs. Be interesting to see if it is still functioning in 5 yrs. A plant sort of like this would be needed to
      build the iphone in the US.

    35. MSimon Says:

      David Foster Says:
      September 15th, 2018 at 10:02 am

      You are leaving out opportunity costs. If using degrees avoids litigation. Use degrees.

      Google has done what it has done because it can afford to fight. Or it has “greased the wheels”.

    36. MCS Says:

      I figured that requiring degrees reached bottom several years ago when I saw a help wanted ad for a company that picks up dog poop that wanted “some” college. Really pay of those student loans fast.

      When I did hiring, I wrote a simple test that covered the basics I was looking for (electrical/mechanical repair). It eliminated the worst hires, often before they even saw it. The alternative is to hire nearly anyone and be prepared to get rid of them fast. Hopefully, before they manage to get “injured”. This only works for fairly low skilled jobs that can be picked up quickly and where there’s close supervision.

      Interviews were pretty useless, but making them have to put down a number did wonders cutting through the BS.