Why the iPhone isn’t Made in America

Why isn’t the iPhone made in the United States? Sure, Apple brands its product as “designed in California,” but the actual production happens in China. In this excellent New York Times piece, where more than thirty individuals were interviewed, we learn why the largest company in America has made the dramatic shift of producing its product in America to China. Apple executives believe there simply aren’t enough American workers with the skills the company needs or factories with sufficient speed and flexibility.

First, mind-boggling statistics about the scale of production at Foxconn, the factory in which iPhones and iPads are made:

The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he said.

Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility’s central kitchen cooks an average of three tons of pork and 13 tons of rice a day.

This anecdote sounded familiar. I first read it in Isaacson’s biography of Steve Jobs:

In 2007, a little over a month before the iPhone was scheduled to appear in stores, Mr. Jobs beckoned a handful of lieutenants into an office. For weeks, he had been carrying a prototype of the device in his pocket.

Mr. Jobs angrily held up his iPhone, angling it so everyone could see the dozens of tiny scratches marring its plastic screen, according to someone who attended the meeting. He then pulled his keys from his jeans.

People will carry this phone in their pocket, he said. People also carry their keys in their pocket. “I won’t sell a product that gets scratched,” he said tensely. The only solution was using unscratchable glass instead. “I want a glass screen, and I want it perfect in six weeks.”

After one executive left that meeting, he booked a flight to Shenzhen, China. If Mr. Jobs wanted perfect, there was nowhere else to go.

On the Chinese preparation for a contract. So methodical:

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

So why is the iPhone made in China? It’s not just the low wages paid to Chinese workers. The flexibility, scale, and the formidable supply chain of Chinese factories, combined with the ability to raise an army of workers (sometimes literally overnight), cannot be matched in the United States.

And so, as quoted in the article, the consumer electronics business has become an Asian business. On a final note: while other companies have sent call centers abroad, Apple has kept its centers in the United States. It’s only a matter of time when Apple decides to outsource the call centers abroad…

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