Trump’s plan for iPhone production is a bad one

The late Apple co-founder Steve Jobs introducing the iPhone on Jan. 9, 2007,
Image: apple

At a fancy dinner in 2011, President Barack Obama asked Steve Jobs: What would it take to convince Apple to make the iPhone in the United States?

Jobs’ response: Those jobs aren’t coming back.

Fast forward six years, and a new president is asking the same question and possibly finding a different answer.

President-elect Donald Trump reportedly said in an interview with Axis that Apple CEO Tim Cook has “his eyes open” to the possibility of a U.S.-made iPhone, adding that Cook wants to “do something major here.”

Trump has referenced a desire to bring iPhone production back to the U.S. since June 2016, part of his broad stance against companies outsourcing jobs overseas. Since the election, numerous companies have been touting their investments in the U.S. regardless of when those moves were first announced or planned.

Apple has been among them. The tech giant is pitching in $1 billion to a new tech-focused fund run by Softbank, a major Japanese telecommunications company that has cozied up to Trump. Softbank has pledged to create 50,000 U.S. jobs and invest $50 billion in the U.S.

Apple’s investment is a drop in the bucket for the company, which currently sits on more than $215 billion in cash and other investments. Much of that money, however, is sitting overseas to avoid taxes something that could prove to be an important detail if Trump begins changing around the corporate tax structure. Apple could end up pleasing its shareholders mightily if it works out a deal with Trump to bring that money back to the U.S.

What wouldn’t please Apple shareholders is making iPhone production markedly more expensive, which is exactly what would happen if it was moved stateside.

The iPhone is made up of a variety of different components, many of them supplied to Apple by different companies that operate around the world. Assuming that Trump isn’t interested in disrupting that part of the equation, Cook could focus on assembly.

MIT Technology Review ran a scenario on what would happen if all iPhones were assembled in the U.S. It’s hard to forecast exactly how much more expensive that would be, though its June 2016 estimate found the move could add around 5 percent to the overall cost of an iPhone 6S Plus.

It’s also worth noting that Apple doesn’t actually assemble its own iPhones. That task goes to a company called Foxconn, which you might have heard in the news for coverage of the brutal conditions in which its workers are employed. Foxconn and Apple have a very close relationship, with Apple at one point convincing Foxconn to assemble some iPhones in Brazil (instead of China) to get around that country’s import taxes.

The Brazil situation also serves as a warning of what these kinds of deals can become. When Foxconn, Apple and Brazil made a deal to have iPhones made in Brazil, it was touted as opening the door to a massive investment in the country’s technology sector. The few phones made there ended up costing almost twice as much as those sold in the U.S. Few of the promised jobs materialized.

Could Trump strike a better deal? Maybe. But it might not even matter. The U.S. has already lost more manufacturing jobs to automation than it has to outsourcing. Going forward, economists expect advanced robotics and artificial intelligence to continue to take jobs, especially those in the manufacturing sector. Even Carrier, the air conditioner manufacturer that gave Trump something to brag about by keeping 800 jobs in the U.S., said they’re investing in more automation.

That’s the stark reality that Obama, who once asked the same question about the iPhone as Trump, pointed to in his final interview, conducted on a podcast released Thursday.

“The fact is, and the data just shows this, the jobs that are going away are primarily going away because of automation and thats going to accelerate,” Obama said, later warning that when companies like Uber begin to automate their workforces, the effect is “going to be scary for folks.”

Like Jobs said, they’re not coming back.

Read more: http://mashable.com/2017/01/19/apple-trump-make-iphone-in-us/