How much extra would a US-made iPhone cost? MIT has done the sums

Discussion in 'Apple, Inc and Tech Industry' started by Michaelgtrusa, Jun 13, 2016.

  1. Zirel Suspended


    Jul 24, 2015
    BS numbers.

    Where are the rare earth materials in America? Who is making the components?

    It's China like everyone else, and why Apple? Why aren't they asking Samsung, LG, Microsoft, etc. to manufacture in America?
  2. ApfelKuchen macrumors 68030

    Aug 28, 2012
    Between the coasts
    The article makes me wonder just how exhaustive the economic analysis was. The articles, alas, are too imprecise in their use of language to make that clear.

    Labor isn't the only cost involved in operating a factory - both the day-to-day operating costs as well as the cost of construction must be accounted for as well. What's the economic impact on a Foxconn if they have to shutter Chinese factories that have yet to return their construction costs, and build anew elsewhere? That, certainly, has to be a factor in the fee they charge for manufacturing. And it's not like manufacturers pass along labor costs without a markup. So is that $4-$10 for labor supposed to be actual wage/employment costs, or the final cost of manufacturing charged to Apple?

    Considering the analysis went on to address the cost of shipping/logistics for bringing parts into the US, I'd hope it was as comprehensive in other ways, but all I have is hope.

    The articles refer to the additional "costs" of the device, but is that the manufacturing cost, or the selling price? The MIT article does have a graph that shows the impact on estimated selling price under the various scenarios - for Scenario 1, that's $30-$40. However, there's that nagging, imprecise usage of "cost" in the accompanying text.
    We have to assume Apple would want to maintain its customary 45%-48% gross profit margin. Was that, as well as retail markup factored into that $30-$40? No way to be sure.

    This is an issue I have with most reporting on Apple's manufacturing costs and product prices, and for that matter, consumer discussions of things like restaurant and ebook prices. People focus on the apparently low cost of specific components and wonder where the (presumably) high selling price comes from (or speculate on why the manufacturer can't just give that cheap component away as a free upgrade) . Usually, these analyses skip over fairly large factors, like wholesale and retail mark-ups. In the most simplistic terms, if manufacturing labor costs the factory $10 and the manufacturer aims for a 50% gross profit margin, labor adds $20 to the wholesale price of the product. If the wholesale price is 50% of the suggested retail price, then that $20 becomes $40 to the consumer who pays list price. Now, I'm not about to say that $30 of that $40 is profit - there are plenty of other non-manufacturing costs that are covered by those markups. But if consumers are willing to pay that higher price, nobody on the business side is going to walk away from making a higher profit, either.
  3. Tech198, Jun 26, 2016
    Last edited: Jun 26, 2016

    Tech198 macrumors G5

    Mar 21, 2011
    Australia, Perth
    u can say what u want about component cost, but Time has said these are not off the self parts, Apple doesn't provide, so where is IHS getting these figures from ?

    I would agree they'd skip over a large amount too, because it doesn't add up to what any reasonable company would sell.. unlocked,, including Android phones which would be around $600 up to date ones.

    Also, problem is most users wouldn't understand this wholesaler stuff, so they think Apple is ripping us off big time, if it only cost $150 to make these off the self components.. which would probably just fall apart anyway.

    Quality matters.... and i don't beleive (at least by the price) IHS or any, factors that in.
  4. Ulenspiegel macrumors 68030


    Nov 8, 2014
    Land of Flanders and Elsewhere
    I would be happy to hold in my hands an iPhone Made in USA, like I do in case of my ZiPPO or MagLite.
  5. Tech198 macrumors G5

    Mar 21, 2011
    Australia, Perth
    I doubt the iPhone would retain the same price tag if made in U.S
  6. maflynn Moderator


    Staff Member

    May 3, 2009
    It definitely wouldn't.

    How will they fund such a massive undertaking? Much of their money is off shore and if used for the domestic manufacture, they'll incur 40% taxes, which doesn't make sense.

    They then have to use debt to fund it. I'm not sure if that makes too much sense, i.e., incur more debt, to produce a more expensive phone that may reduce their profit margins. Why do that, when they have a system now that generates plenty of revenue and is working?[/QUOTE]
  7. monstruo macrumors regular


    May 5, 2009
    Ultimately, the more phones apple sells – the happier the board of directors would be.
    US-made iphone is very unattractive in terms of price wise especially comparing with other options in the market.

    No way apple or Tim would want to jeopardise the formula that earns apple so much profits.
  8. kdarling macrumors demi-god


    Jun 9, 2007
    First university coding class = 47 years ago
    Heck, Apple has already borrowed $80 billion to make US payments, since almost all their cash is unavailable directly. They'd have no problem raising money for almost anything they want to do here.

    As for costs, to assemble a phone in Texas raised the cost per unit by $8-$10 according to the Flextronics factory manager for the Moto X plant, with some of that offset by less cost to ship completed units to US customers. I wonder if it might make some sense to make, say, just the tens of millions sold to North Americans, here. Patriotism and providing local jobs is one pull.

    Oh. That article missed the fact that the Samsung-made Apple CPUs are made in Texas as well.

    Just some thoughts.
  9. maflynn Moderator


    Staff Member

    May 3, 2009
    I know they've borrowed money, for different projects, but my point is why borrow so much money for no real appreciable return, other then getting to put a "made in the US" on the back of the phone? There seems to be no business advantage to doing this.

    Also, Apple sells many phones internationally, and I'm pretty sure many (most?) of those customers will not care if it was made in the US, or somewhere else, so why incur more debt, produce a more expensive phone that impact the profit margin, only please a small segment of Apple's domestic market (I'm postulating that many US buyers won't care if its made in the US or somewhere else)?
  10. I7guy macrumors P6


    Nov 30, 2013
    Gotta be in it to win it
    You can thank the tax system for apples debt. They are only doing what everyone else is doing, trying to lower their corporate income tax by using their resources to fit within IRS guidelines.

    This reminds me that the iphone consists of $20.15(sic) in parts...anyone could make their own iphone for that amount of money.

    But I wonder how many billions it would take to move manufacturing on shore. If they did the government should give them a tax break to offset the increase in manufacturing cost. That's what would make sense.

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