Apple, Other US Tech Firms Sign Letter Protesting India's PC Import Restrictions

[wegster]

...

For all the people who say "Buy American" or "Buy EU," how many when faced with a choice of a product made in their country vs one half as much that is imported buy the import?

Consumer behavior drives manufacturing decisions because many choices are based on price first.

Except it's not a labor shortage but the unwillingness of companies to pay what it takes to get workers. If McD's pays more than you do that's not a labor shortage when you can't hire; it's a problem with your business model.

...

Yeah, it's a combination of issues - people got used to 'cheap goods' but at the same time many companies profiteered keeping their 'known for high quality name/brand' while off-shoring and seeing reduced quality, grossly increasing their profit margins.

Lots of companies also switched hands into larger companies, so sadly there are entire swaths of 'used to make good stuff' still living of their diminishing quality/brand names.

It is cyclical though - used to be hiring India tech (and other 'reduced cost' areas) people for ~1/8th-1/10th of US salaries. At one point in the past couple of years it had jumped to nearly 50%, currently seeing around 35-45%. As is the case everywhere, not all of them are 10x performers, and in some cases, even at 50% they are not producing parity work or even 1/2 of what would be parity. This isn't to say there aren't some bright minds there because there are across most/al countries, it may be a failing in their entire tech contracting industry or in HR, a greediness not paying for the local market top talent, etc., but in some cases it's been bad enough (e.g. for 100 applicants, not one worth moving to next stage of interview) some positions that were originally open to some locations - now no longer are.

I've worked with various distributed teams worldwide, and don't care where someone is from remotely - bring the skills needed and do the work and all's well. Currently have or have had reports or team members from China, India, UK, France, Mexico, US, Romania, Ukraine, Russia, Germany, Ireland, Japan, Philippines, Australia, and probably a handful of others I'm forgetting now.

In many cases, it's probably finance/greed trying to push the envelope of 'how many can we get?' assuming all skills and experience are equal, but pushing for 'cheaper' and well, getting 'less skilled' in some cases. Happens everywhere when people fall into 'an engineer is an engineer' which is entirely untrue.

Too MUCH greed on the behalf of <lower cost areas> inevitably backfires, but usually causes a lot of chaos as <the next lower cost location> is sought out, and obviously in the case of actual manufacturing - that can be a looong process, while non-manufacturing is significantly easier to move.

Anyone doubting the 'corporate greed' part of the equation can take a look at CEO vs employee pay over time, here's one visualization:

Meanwhile the number of companies I will purchase things from personally continues to shrink...to avoid the 'used-to-be-good-name-but-is-now-overpriced-trash', for example for electric/cordless tools, I pretty much will only buy Makita, DeWalt or Milwaukee b/c 'all the rest are mostly trash now.' I do include some non-US companies for hand tools, but once a company ruins a 'buy by name, name == quality' reputation, it's a looong road for them to climb back up from.

Coming back to India - they will eventually cut their own throats if they continue trying to play games. Yes, it makes sense for them to try to keep more cash flowing internally, but at some point they will lose more and more foreign investment so it's sort of a dangerous game - there are probably some notable 'name brands' actually originating in India that may see some ongoing exports, but they could lose a lot of money depending on how it all plays out.

 

[itti]

Sorry, but I want Made in US.

 

[jlc1978]

Replace "jeans" with "iPhone". Apple's products are also priced at a premium.

Not in relation to the smart phone market

$200 for a pair of jeans has been pretty standard pricing for a while when it comes to premium jeans. Of course I'm not talking about jeans sold at Target or some place like that, but I'm also not talking about insanely expensive designer jeans either. Lucky Brand, True Religion, Seven for All Mankind, Joe Brand, even Levis all sell jeans in the $200 range.

But those are not mass-market jeans that could easily be made at the same price point as those made abroad.

Again, $200 isn't high end luxury when it comes to jeans. Many designer jeans sell for $500 - $1500 at places like Saks, Neiman Marcus, etc. $200 is premium pricing for sure, but it's not luxury. Many many people spend $200 on a pair of jeans. My point is simply that Kato makes great quality jeans in the US and prices them competitively with other premium jean brands who make their jeans overseas.

And Apple et.al. make phones abroad and are competitively priced; making them in the US or EU would put that company at a large cost disadvantage.

Luxury also depends on your economic bracket - $200 may not seem expensive for you or I (although I refuse to pay that much for some stupid label on my butt), but for a lot of consumers that is way too expensive for a pair of jeans.

That's only one aspect. There's endless regulation and all of the associated costs.

True, and that's another reason in-shoring is not cost competitive; but the big reason for labor intensive products, which we are discussing, is labor costs.

Or Apple could reduce gross margins from their absurd 40+%...

Not happening, and Apple is just pricing at what the market will bear, like any well run company.

If we assume the average unlocked iPhone today is around $1,000 (USD) and Apple sells around 225 million iPhones per year, are you suggesting that it would cost around $112.5 billion to $225 billion ($500 to $1,000 extra per phone times 225 million phones) more every year to have them made in the U.S. or Europe? That seems way too high.

It probably is and depends a lot on the actual labor costs, but let's assume the average cost of labor for an iPhone is $50.(5% of price) The UE or EU wage rate is like to be 2 - 3 x China's, at a minimum. That's 100 to 150 extra in labor costs. Given the rule the final selling price runs at around 3x the costs, that's ~300 - 450 more per phone to the purchaser. Even at a straight pass through with 40% margin that adds ~150 - 225 per phone.

 

[wegster]

It probably is and depends a lot on the actual labor costs, but let's assume the average cost of labor for an iPhone is $50.(5% of price) The UE or EU wage rate is like to be 2 - 3 x China's, at a minimum. That's 100 to 150 extra in labor costs. Given the rule the final selling price runs at around 3x the costs, that's ~300 - 450 more per phone to the purchaser. Even at a straight pass through with 40% margin that adds ~150 - 225 per phone.

Yeah, it's not just labor either - if the components are coming from local factories vs shipping, this also factors into the supply chain/total cost to produce totals.

 

[JamesHolden]

Not in relation to the smart phone market

Not true. In relation to the premium top of the line smartphone market, yes, but in relation to the entire market, no. Most Android phones are significantly cheaper than iPhone.

But those are not mass-market jeans that could easily be made at the same price point as those made abroad.

Not the point. They are fairly priced, US-made jeans than compete with many other brands who make their products overseas and charge the same price. They aren't dirt cheap Walmart specials, but neither is the iPhone.

And Apple et.al. make phones abroad and are competitively priced; making them in the US or EU would put that company at a large cost disadvantage.

No argument on the cost disadvantage. Apple isn't giving up their absurd 40% margin, despite their feel-good corporate values schtick.

Luxury also depends on your economic bracket - $200 may not seem expensive for you or I (although I refuse to pay that much for some stupid label on my butt), but for a lot of consumers that is way too expensive for a pair of jeans.

And I refuse to pay $35 for some throw-away jeans made in an overseas sweatshop. I've bought cheap foreign-made Levis and Wranglers before and they're trash. You literally have to try on multiple pairs because the quality is so poor that the sizing isn't even consistent. To each his/her own, but for me, no thanks! iPhones are also way too expensive for a lot of consumers, but they're willing to go into credit card debt in order to have one.

 

[webkit]

Yes, part of it is the "money printing" (also called "tax on the middle class," "inflation," etc.). But why did the factories all move overseas? The answer is the GATT revisions of 94, 99, and 2003.

Considering that there are still places where you can buy Wrangler jeans for around the same price you said you were paying 20 years ago (even without adjusting for inflation!), I'm not sure what you were trying to point out here regarding prices. There are many factors than can impact prices (up or down).

 

[webkit]

It probably is and depends a lot on the actual labor costs, but let's assume the average cost of labor for an iPhone is $50.(5% of price) The UE or EU wage rate is like to be 2 - 3 x China's, at a minimum. That's 100 to 150 extra in labor costs. Given the rule the final selling price runs at around 3x the costs, that's ~300 - 450 more per phone to the purchaser. Even at a straight pass through with 40% margin that adds ~150 - 225 per phone.

Let's assume the average iPhone retails for $1,000 and costs Apple $600. If having the phones made in the U.S. or Europe would add an extra $100 to $150 in labor costs (using your figures) per phone, the new total cost would be $700 to $750. Sticking with a 40% margin, $700 to $750 cost would put the new retail price at around $1,167 to $1,250. That is notably less than the “1.5 to 2x today’s price” you had stated in your previous post.

 

[Jay Tee]

Some of the commenters on this thread are utterly disgraceful, and one has to consider the nature of their humanity.

 

[DFZD]

Who would buy a “made in India” PC?

Some Indians run Google, Microsoft, World Bank and heck even UK, and lowkey even the US of A. Don't you feel that some of us could also build something as simple as a PC?

 

[jlc1978]

Let's assume the average iPhone retails for $1,000 and costs Apple $600. If having the phones made in the U.S. or Europe would add an extra $100 to $150 in labor costs (using your figures) per phone, the new total cost would be $700 to $750. Sticking with a 40% margin, $700 to $750 cost would put the new retail price at around $1,167 to $1,250. That is notably less than the “1.5 to 2x today’s price” you had stated in your previous post.

Yes, as I said my number may be high and is very dependent on what % is labor costs; which is why I chose a very low estimate of teh cost of labor as a percentage of an iPhone's price. If it's 10% instead of 5%, all of a sudden you're adding at least 300 - 500 to a phone. It also depends on what a US wage would have to be to attract workers, especially if the work is seasonal based on sale patterns.

However, you can't just add labor costs a straight pass through as they are typically part of the marked up costs that determine the ultimate selling price.

 

[wegster]

Some Indians run Google, Microsoft, World Bank and heck even UK, and lowkey even the US of A. Don't you feel that some of us could also build something as simple as a PC?

Of course they can, and hopefully this thread isn't getting into outright racism/race comparisons.
There are bright people across the world, regardless of where various governments place different borders at different times. Nice website BTW - well done. (your sig link).

 

[impulse462]

Some Indians run Google, Microsoft, World Bank and heck even UK, and lowkey even the US of A. Don't you feel that some of us could also build something as simple as a PC?

of course indians can build computers/iphones. racism against south asians is normalized in the west, however.

 

[falainber]

"U.S. industry groups including the Information Technology Industry Council, the National Association of Manufacturers, and the Semiconductor Industry Association have objected to the planned licensing rules, which they say could impact the shipment of American-made computers and electronics into India, inhibit the free flow of goods, and complicate business operations for all countries involved."

I have not seen "American-made computers" for many years (if not decades) now. What exactly are they talking about?

 

[leicaman]

I’ve been to India twice, and from what my friends tell me, Modi is a Hindu Nationalist, but to such a degree that he is a defacto fascist. India has a lot to complain about when it comes to International businesses treating them poorly. Industry people I know there say Wal Mart is particularly bad. But that’s no reason to turn into a sectarian battleground.

 

[svish]

Hopefully the deadline will be extended

 

[picpicmac]

The action by the Indian government is clearly protectionism in service to nationalism. Those things tend to end badly, but governments do them anyway, to satisfy the nationalistic politics of their constituents.

It's obvious the Indian government wants the global tech leaders (such as Apple, or Samsung, etc.) to build products in India for Indians, instead of importing products into India.

What will happen in the coming years? We'll have to wait and see.

However, the flavor of some posts in this thread leave a bad aroma.

Nationalism and stereotyping are ugly things (to me anyway.)

And on the topic of Apple in light of these kinds of issues: Companies exist to make money and that is what they do or they go out of business.

Apple is good at making money. It's very good. It's so good most other companies are envious of it. And the sum of global investors tend to support and try to sustain such kinds of efforts, because money begets money and the people who have lots of money like that.

And getting back to India: South Asia is doomed by climate change. They are to be pitied, not scorned. Not just India, but Pakistan and Bangladesh (where some of that cheap clothes some of you are kvetching about is made) are facing existential issues that are much larger than what we sitting in the US are facing.

 

[NEPOBABY]

This whole situation sounds just like India's failures to create native computers in the past.

A lot of corruption goes on.

The wealthy in that country don't even believe in their own nation's future. They park their money in Dubai or the west.

 

[Moka Akashiya]

Apple wanted to get cheap work, instead of paying well in US, like any other company, because it will kill profit margins. But who would think, that US cannot control everyone again, and countries want to build domestic markets to be independent from sanctions, based on US opinion? After seeing what happens to Huawei, who would want to be dependant on government, that can block you in west world without providing good proofs about your espionage.

 

[femike]

I prefer my iPhone to be made in China as the quality is very good. India may or may not be good depending on the management. Manufacturing iPhone in the US, I don't care, I'm not in the US, and in any case, it will be twice as expensive with less quality.

 

[jlc1978]

Not true. In relation to the premium top of the line smartphone market, yes, but in relation to the entire market, no. Most Android phones are significantly cheaper than iPhone.

However, that part of the market is the mass market for a good bit of teh world.

Not the point. They are fairly priced, US-made jeans than compete with many other brands who make their products overseas and charge the same price. They aren't dirt cheap Walmart specials, but neither is the iPhone.

However, those jeans are not a mass market product the same way an iPone is; just as McIntosh is a fairly priced made in US product for it's market segement.

And I refuse to pay $35 for some throw-away jeans made in an overseas sweatshop. I've bought cheap foreign-made Levis and Wranglers before and they're trash. You literally have to try on multiple pairs because the quality is so poor that the sizing isn't even consistent. To each his/her own, but for me, no thanks! iPhones are also way too expensive for a lot of consumers, but they're willing to go into credit card debt in order to have one.

You're thinking with your wallet, as most people, including myself, tend to do. However, for many consumers, price matters and trying to manufacture a product that sells across a borad range of incomes in the US would put that company at a serious price disadvantage.

You can afford the labor rates for a $200 jean but not in one sold for $50. $1000 phones, IOS or Androids, are, even at that price, a mass market item given the ability to finance them. Apple could probably absorb a price hike better, given iOS is only on iPhones, than Android phone makers can give Android is not manufacturer specific.

Still, I think my main point is valid - until devices can be assembled with even less labor than today you will not see them made in the US or EU. Even if that hapens, they will likely be made in the cheapest country or state to cut costs.

 

[mlody]

it is about time US considers in-house manufacturing for everything. Most tech, is garbage tech anyway, and does not deserved to be made in the first place. If prices go up, that is actually force people thinking twice before buying some useless gadget in the first place. It will help save the planet from trashing it with disposable tech. On the other hand, I can't imaging a $2000 MacBook costing much more if produced in USA - perhaps $100 more?

 

[jlc1978]

it is about time US considers in-house manufacturing for everything. Most tech, is garbage tech anyway, and does not deserved to be made in the first place. If prices go up, that is actually force people thinking twice before buying some useless gadget in the first place.

So what is usless tech garbage. Cheap phones? Chromebooks? Cheap tablets?

It will help save the planet from trashing it with disposable tech.

What really needs to be done is design for recycling to make recovery economic.

On the other hand, I can't imaging a $2000 MacBook costing much more if produced in USA - perhaps $100 more?

A lot depends on teh labor costs. If we assume labor is 5% of the sale price, and US labor rates are 2-3x the current ones, that's and additional 100 - 200$ for labor pre-margin, or 166 to 320$ added to retail. If labor is 10%, double those numbers. Until manufacturers can replace a bunch of assembly line labor with a few techs running an automated factory your not like to see assembly move from low cost areas.

 

[wegster]

So what is usless tech garbage. Cheap phones? Chromebooks? Cheap tablets?



What really needs to be done is design for recycling to make recovery economic.



A lot depends on teh labor costs. If we assume labor is 5% of the sale price, and US labor rates are 2-3x the current ones, that's and additional 100 - 200$ for labor pre-margin, or 166 to 320$ added to retail. If labor is 10%, double those numbers. Until manufacturers can replace a bunch of assembly line labor with a few techs running an automated factory your not like to see assembly move from low cost areas.

Still ignoring supply chain and shipping. If assembly is done in the US but majority of components are still coming from overseas, it's going to have an impact.

I'd love to see more chip and component fabs and assembly brought back into the US, but as it is, it's more than just the assembly labor being an issue vs pricing if Apple or others want t continue to retain the (excessive IMO) profit margins today without raising prices.

 

[jlc1978]

Still ignoring supply chain and shipping. If assembly is done in the US but majority of components are still coming from overseas, it's going to have an impact.

Of course, it's a very complex process.

I'd love to see more chip and component fabs and assembly brought back into the US, but as it is, it's more than just the assembly labor being an issue vs pricing if Apple or others want t continue to retain the (excessive IMO) profit margins today without raising prices.

It is, and there is more than just labor, there's a whole infrastructure of suppliers, companies that build and maintain production facilities, availability of people with the skill sets needed, etc. I just focused on labor as an example of why stuff that is not tailored to a niche and expensive is generally not made in the EU or US.

Edit:Typos

 

[Realityck]

I have not seen "American-made computers" for many years (if not decades) now. What exactly are they talking about?

Customized PCs that are prebuilt with various motherboard, CPU, graphics cards, in chassis’s. Yes there are multiple brands that are based in the states, assembled here.