Photo by Xinhua/Sipa USA

Apple And Trump Spar Over Where To Make iPhones

Mike Colgan
September 10, 2018 - 2:03 pm

Apple's stock price tumbled by almost $3 on Monday after President Trump targeted the tech giant on Twitter over the weekend. 

The friction started with Apple sending a letter last week to the US Trade Representative office, saying that tariffs on Chinese imports hurt competition and would lead the Cupertino-based company to raise prices on iPhones for American consumers. 

In response, Trump weighed in on Saturday saying that the company should move its manufacturing to the United States to avoid tariffs. 

Analyst Tim Bajarin, CEO of Creative Strategies, said the president’s tweet failed to take into account how the supply chain works.

“It is so much more effective and efficient to be able to do it in Asia, where the manufacturing costs are cheaper,” he said. “And they’re in a more centralized location for the components to come to a manufacturing facility.”

A product like the iPhone is made with parts from more than sixty vendors based around the world. They send the components to Asia, where the phones are assembled with relatively cheap labor.

Besides being impractical, Bajarin said that producing iPhones in the U.S. would likely make them prohibitively expensive. Manufacturing costs, especially for labor, are exponentially higher in this country than in other parts of the world. Technology firms currently manufacturing in Asia would have to build new facilities. It also may not be practical to bring all the components together in the U.S.

“We’ve estimated that if you tried to manufacture something like the iPhone here, the actual cost could be as much as 50 to 60 percent higher to the consumer,” said Bajarin. “It [would hit> Apple in a very big way because the demand would go down.”

Apple’s stock was down more than 1.3 percent on Monday, and shares at China-based Apple suppliers dropped as much as 10 percent following the President’s tweet.

Written by Jordan Bowen.