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

[jlc1978]

Great, the $7,000 Mac Pro is manufactured in the US. Buy it.
The reason only the Mac Pro is Made in US is because that's the only product that has the cost buffer to accommodate manufacturing in US. So if you don't want a Mac Pro, are you willing to pay twice of what you would pay now for it?

While I agree with your sentiment, it's only assembled in the US and carries a Product of Thailand label.

For it to be labeled Made in USA the FTC requires:

Marketers and manufacturers that promote their products as Made in USA must meet the “all or virtually all” standard.

 

[_Spinn_]

Something tells me this won’t make any difference to India.

 

[webkit]

You seem fixated on the 1.5 to 2x, a number I said may be on the high end.

Even so, the issue is not fixed, but variable costs; which don't change per unit based on units shipped.

Fixed costs may go up due to difference in the commercial environment and be spread out over all units.

Variable costs,, such as labor, shipping costs, wip all would contribute to a price increase. Add the required margin and any price increase could be non-trivial. All it would take is a 35% increase in the cost to make an iPhone to result in a 50% increase in price a at 40% margin. While 35% is unlikely, even a 10% increase results in a 14% increase in price.

All that assumes a company can get the amount and skill levels of labor they need, some of which who will work seasonal jobs, at the place they need them when the need them. That may be a bigger challenge than costs.

The "1.5 to 2 times" comment is simply what I had originally replied to and disagreed with, and still disagree with as nothing has been posted to change my mind. It is a significant factor in the labor/cost argument here but as I have already stated, I understand that these are just estimates and various things can go into pricing. This can include tax breaks or other government incentives. I don't know how things work in the various European countries, but I could potentially see states (and possibly even the federal government) offering Apple very generous incentives to move iPhone assembly to one or more specific U.S. states.

 

[jlc1978]

The "1.5 to 2 times" comment is simply what I had originally replied to and disagreed with, and still disagree with as nothing has been posted to change my mind.

Fair enough.

It is a significant factor in the labor/cost argument here but as I have already stated, I understand that these are just estimates and various things can go into pricing. This can include tax breaks or other government incentives. I don't know how things work in the various European countries, but I could potentially see states (and possibly even the federal government) offering Apple very generous incentives to move iPhone assembly to one or more specific U.S. states.

I suspect those breaks would be in the form of tax breaks, not actual money paid to Apple and thus have no impact on production costs.

The bottom line is it's currently not economically feasible to build iPhones in the US or EU. That may change once all in one designs minimize the number of parts and automated assembly does most, if not all, of the assembly.

Even so, it's more likely to be an Assembled in EU/USA device rather than made in... much like the Mac Pro today.

 

[webkit]

I suspect those breaks would be in the form of tax breaks, not actual money paid to Apple and thus have no impact on production costs. .

Government incentives, including tax breaks, can allow a company to save on costs that would otherwise be their responsibility and part of the related overhead. Overhead/costs that would go to having iPhones assembled in North America or Europe.

 

[jlc1978]

Government incentives, including tax breaks, can allow a company to save on costs that would otherwise be their responsibility and part of the related overhead. Overhead/costs that would go to having iPhones assembled in North America or Europe.

Government incentives such as tax breaks, are not overhead costs; and do not impact EBITDA.

While they may influence a location, they are not a part of the production costs.

 

[webkit]

Government incentives such as tax breaks, are not overhead costs; and do not impact EBITDA.

While they may influence a location, they are not a part of the production costs.

The incentives or saving coming from incentives can result in bringing down production costs/overhead which can therefore allow a company to keep prices lower than they otherwise would be able to do without the incentives.

 

[jlc1978]

The incentives or saving coming from incentives can result in bringing down production costs/overhead which can therefore allow a company to keep prices lower than they otherwise would be able to do without the incentives.

Tax incentives have nothing to do with production costs. A company may pay a lower tax rate to get them to locate a factory but that is independent of the cost to make an item.

That’s why you look at EBITDA when assessing a company’s financial condition.

 

[i_demigod]

The same India that is supporting Russia while it wars with Ukraine?

Yes the same india that was threatened and intimidated by US who were supporting Pakistan and supplying arms to them. on multiple occasions in the past 🤔🧐

 

[webkit]

Tax incentives have nothing to do with production costs. A company may pay a lower tax rate to get them to locate a factory but that is independent of the cost to make an item.

That’s why you look at EBITDA when assessing a company’s financial condition.

Again, tax incentives can go to reducing a company's costs/overhead which therefore can be used/applied to keep prices lower than they otherwise would be without the incentives. The incentives don't simply disappear into some sort of black hole that the company can't use to their advantage one way or another. The incentives allow them to be able to have lower costs/overhead and therefore lower prices.

 

[jlc1978]

Again, tax incentives can go to reducing a company's costs/overhead which therefore can be used/applied to keep prices lower than they otherwise would be without the incentives.

Except that's not how taxes work. They are not an overhead cost, no matter how often you say they are. A lot can be done to minimize taxes independent of incentives; and companies do that all the time. That's why earnings are before tax, free cash flow doesn't take into account tax impacts, etc.

The incentives don't simply disappear into some sort of black hole that the company can't use to their advantage one way or another. The incentives allow them to be able to have lower costs/overhead and therefore lower prices.

Again, tax incentives are not overhead, so your whole argument is not correct. You can't simply say, hey we're saving X in taxes so we can lower the price of the product by x/number sold. That's not how cost accounting works, not even Hollywood accounting (where no picture makes a profit and everyone but the backers get rich).

You are trying to make the argument that tax incentives can make manufacturing in the EU and US competitive, and that is simply not the case. It will take a redesign of the product to further automate production, supply chain changes, etc. for that to happen.

 

[webkit]

Except that's not how taxes work. They are not an overhead cost, no matter how often you say they are. A lot can be done to minimize taxes independent of incentives; and companies do that all the time. That's why earnings are before tax, free cash flow doesn't take into account tax impacts, etc.

Again, tax incentives are not overhead, so your whole argument is not correct. You can't simply say, hey we're saving X in taxes so we can lower the price of the product by x/number sold. That's not how cost accounting works, not even Hollywood accounting (where no picture makes a profit and everyone but the backers get rich).

You are trying to make the argument that tax incentives can make manufacturing in the EU and US competitive, and that is simply not the case. It will take a redesign of the product to further automate production, supply chain changes, etc. for that to happen.

It is absolutely how government incentives, including tax breaks, can work. If they didn't, there would be no (added) financial incentive for a company to consider moving to a particular city, state or country. A purpose is to help companies be able to lower their overall overhead and in doing so can allow them to charge lower prices than they might otherwise be able to without the incentives. I am not going to continue going back and forth with you on this.

 

[jlc1978]

It is absolutely how government incentives, including tax breaks, can work. If they didn't, there would be no (added) financial incentive for a company to consider moving to a particular city, state or country. A purpose is to help companies be able to lower their overall overhead and in doing so can allow them to charge lower prices than they might otherwise be able to without the incentives.

Again, taxes are not overhead. As I pointed out, incentives can influence where a company does buisness but has no impact on production costs; a fact that will not change no matter how often you say tax incentives reduce overhead costs.

If location A offers a lower tax rate than B, ceteris paribus, a company will locate in A, since they can retain a greater percentage of their profits. They don't however, say "Since we saved X in taxes our costs are lower and we can thus reduce or price by X/units sold," which is what you are claiming. If that were the case, not locating in a place with a 100% tax on profits you are "saving" a huge amount of money and can really lower prices. That, of course, is absurd and why tax incentives do not impact operating or other costs; only net profit.

Companies locate in locations for a lot of reasons beyond incentives and taxes. India, as a growing economy makes sense from political (stuff sold there is made there), avoiding high tariffs and as production capacity grows a way to diversify production and get cheaper labor than elsewhere.

I am not going to continue going back and forth with you on this.

Good, because your argument about tax incentives as overhead is incorrect.

 

[NEPOBABY]

Billionaires do not care because they are stateless. If the US collapses they will just live in Switzerland etc.

All these billionaires are working over time to move their bases offshore or to dictatorships like Dubai. They have paid people like Vivek and others to make society so confused and make voters fight each other so that people will keep forgetting who is robbing and fleecing the whole of society. They want a world that becomes chaotic and lawless with easy money laundering and tax havens. The Panama Papers and other exposés really angered them and they don't want to be exposed again.