Apple may shift iPhone production from China to U.S., but move may prove difficult, costly


iphonePresident-elect Donald Trump really wants Apple to move its iPhone production to the U.S. And he may be happy to learn that Apple is considering it, according to a published report.

In June, Apple asked two of its chief iPhone manufacturers, Foxconn Technology Group and Pegatron, to explore shifting their iPhone production to the U.S., the Nikkei is reporting, citing an unidentified source who claims to have knowledge of the talks. Pegatron ultimately declined to pursue the idea because of fear of “cost concerns,” the source told Nikkei. But Foxconn continues to weigh it, the source said.

Apple gets iPhone components from all over the world, but relies on Pegatron and Foxconn to manufacture the smartphone in China in part because of cheaper labor.
That reduced cost has been a boon for Apple, which sells hundreds of millions of iPhones annually and generates billions of dollars in profits on those sales each quarter.

Apple’s AAPL -0.11% success didn’t go unnoticed by President-elect Donald Trump, who in March voiced concerns the iPhone maker’s reliance on China. He said during a speech that he would “get Apple to start making their computers and their iPhones on our land, not in China.” Trump this year also called for a boycott of Apple products after the company declined to provide the FBI with a method for unlocking an iPhone used by San Bernardino terrorist Syed Farook.

Trump has also said that he would slap China with expensive tariffs on its goods and accused it of being a “currency manipulator.” While Trump’s comments were viewed merely as rhetoric earlier this year, his election has caused many to question whether he could make good on his promise.

Earlier this week, the Chinese government published an editorial through state-run Global Times warning of the possibility of Trump ruining “Sino-U.S. trade.” The editorial specifically cited Apple’s iPhones as a potential victim in that possible trade war.

“China will take a tit-for-tat approach then,” the Global Times said in its editorial. “A batch of Boeing orders will be replaced by Airbus. U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted. China can also limit the number of Chinese students studying in the U.S.”

While it’s unclear why Apple asked its manufacturing partners to explore building iPhones in the U.S., the company could be coming to the realization that it might not make sound financial sense to move to the U.S. According to one Nikkei source, moving iPhone production from China to the U.S. would “more than double” what Apple pays now to have its iPhones manufactured.

That comment follows similar statements that industry experts made this week in interviews with The Wall Street Journal. According to the Journal, those experts, including Sanford C. Bernstein’s Alberto Moel, say it’s possible that Apple would move iPhone manufacturing to the U.S., but the effort would be exceedingly difficult, costly, and take a considerable amount of time. The chances, then, are slim.

Still, Apple does do some manufacturing in the U.S. That includes the company’s high-end desktop computer, the Mac Pro, while nearly all of its research-and-development efforts are done in its home country.

Apple declined to comment on the Nikkei report. Foxconn and Pegatron did not immediately respond to a request for comment.