“You have to believe that there’s something about exciting the new generation of people into manufacturing,” Bangalore added. “You have to show the moms and dads this can be an exciting place to be.”
Why your iPhone may never be Made in the USA
“Made in America” is rare, even though polls show Americans want it.
Ian Sherr Former Editor at Large / News
Ian Sherr (he/him/his) grew up in the San Francisco Bay Area, so he’s always had a connection to the tech world. At CNET, he wrote about Apple, Microsoft, VR, video games and internet troubles. Aside from writing, he tinkers with tech at home, is a longtime fencer — the kind with swords — and began woodworking during the pandemic.
Ian Sherr
Sept. 16, 2021 2:00 a.m. PT
17 min read
The 15-minute video begins with upbeat music and a title slide that reads “We Are Manufacturing.” It cuts to a shot of the clear blue sky, with three flags ruffling in the breeze. There’s the Stars and Stripes, California’s Bear Flag and a multicolored Apple logo.
The camera pans toward a high-tech-looking building and a narrator tells us we’re in Fremont, California, about an hour’s drive from the heart of Silicon Valley.
“People and machines work together to build the highest-quality personal computers in the industry,” the narrator says. The screen cycles through images of microchips and boards moving through an assembly line while workers test and inspect them.
“This facility combines state-of-the-art equipment with a skilled workforce to achieve manufacturing excellence.”
Eventually, the parts end up inside a Macintosh computer, which is packed, boxed up and put on a truck headed to a store to be sold.
This isn’t some totem from an alternative universe where Apple builds the technology we depend on in the US. It’s a marketing video that dates back more than three decades — from the halcyon days when Apple co-founder Steve Jobs was obsessed with showing his company was savvy enough to manufacture its technology in the US, just as well as the powerhouse Japanese consumer electronics giants of the time.
Spoiler: Apple couldn’t. The factory was shuttered in 1992, and the company shifted those jobs to Asia.
Today, millions more American manufacturing jobs have shifted overseas, and many companies almost entirely rely on factories that are a boat, plane or long-haul drive away from their customers. But now that may be starting to change.
The COVID-19 pandemic exposed how fragile this whole system is. Many factories in China were forced to shut down as the virus began its spread. But that wasn’t all. Even as Chinese factories began to slowly restart manufacturing, companies faced disruptions in shipping, trucking, air travel. And soon enough, shelves in stores around the country started to go empty.
Manufacturing experts and advocates say the last year highlighted how, even in a pinch, American factories haven’t been able to fill the gap. It’s also partly why in January, President Joe Biden signed an executive order bolstering “Buy American” rules, encouraging the federal government to spend its multitrillion-dollar budget purchasing goods with up to 75% of parts made in the US. Boosting demand for American products, he hopes, will get companies to start reinvesting in manufacturing back home to fill that demand.
Those jobs aren’t coming back.
Apple’s Steve Jobs in 2011
Biden isn’t alone in trying to solve this problem. Jobs’ successor, CEO Tim Cook, pledged in April that Apple will spend $430 billion on US investments that’ll add 20,000 jobs in the United States over the next five years to work on 5G wireless, artificial intelligence and silicon chips.
But there’s a limit to how far this can go. Even with that multibillion-dollar investment, it’s unlikely Apple and Cook will make US manufacturing the next big thing for key Apple products. The iPhone, Apple’s top moneymaker, will most likely continue to be assembled at factories in China for many years to come. To make that change, the US would need to spend years investing in new manufacturing technologies while offsetting lower wages and other costs from overseas, experts and advocates say. The United States would also need to rebuild its apprenticeship and education systems to improve the pipeline of American workers for manufacturing jobs, and convince people it’s a worthwhile career field to join.
Making more products in America is an idea that presidents of both parties have long tried to push. Donald Trump, whose MAGA hat, ties and other swag are made in China, won the presidency in 2016 with the help of manufacturing-heavy states like Pennsylvania, Ohio, Michigan and Wisconsin. He promised to bring American factory jobs back home. Some of those jobs did come back to the US during his four years in office, but at roughly the same rate as during Barack Obama’s administration.
Biden is hoping to make more progress than his predecessors by creating a new “Made in America” team within the Office of Management and Budget. In April he tapped Celeste Drake, a longtime labor rights advocate and government liaison at various unions, to act as its first ever director. Drake’s role is to make sure the federal government rewards US-based companies, including small businesses, by giving them government contracts.
“It’s true that procurement policy alone would not bring the manufacturing sector back to the power that it had 50 years ago, or even 20 years ago,” Drake said in an interview with CNET . Instead, one of the Biden administration’s primary goals is to rebuild the supply chain to be more reliable. “It really does take a lot of work to identify the critical components,” Drake said, “and to figure out how we can incentivize making those critical components here. And where we’re also going to work with our allies and our trading partners to make sure that we have that redundancy and resiliency, so that we’re not vulnerable to these problems when there is a pandemic, when there’s a natural disaster.”
To be sure, there are some things we still make in America, even if they aren’t iPhones. Wahl makes motors for its premium hair clippers here, and Weber makes its top-rated grills . The Airstream trailer is still made in Ohio, and jazz musician Doc Severinsen buys his instruments from a small company in Massachusetts. You can bake a cake with an American-made KitchenAid stand mixer . Corning makes glass for cars, kitchen appliances and phones out of factories in places like Kentucky . And don’t forget the famous Wisconsin Cheesehead foam hat, still made in Milwaukee .
If your motivation is always going to be how much profit I can make, you can never change the system.
Steven Yde, Wahl Clipper Corporation
But the truth is that though we do make some premium products domestically, buying completely American-made goods every day isn’t easy. A lot of stuff is no longer made in a single town or factory. Instead, it’s assembled from parts brought together from around the world. That’s especially true of anything with a battery or a microchip in it.
Even the cream for my chapped knuckles says it’s “Made in USA with Domestic and Imported Materials.”
“This is a problem, but not unsolvable,” said Harry Moser, head of the Reshoring Initiative, an advocacy organization whose tagline is “bringing manufacturing back home” and that’s supported in part by the Association for Manufacturing Technology.
He agrees with analysts who say there’s no one fix to bring “Made in America” back to what it once was. It would take about a decade of concerted investment, he says, to graduate people with the right skills, certificates, training or degrees necessary to build back up American manufacturing capability. It’ll also take years to shift supply chains currently focused on bringing parts into and out of Asia.
“As we bring the manufacturing back, we’ll put more people into those jobs, and then we’ll have all that expertise,” Moser says.
He also supports investing in apprenticeships and training centers, to help people learn skills they need to either enter or change their careers. And he believes the US government needs to carefully impose tariffs and value-added taxes to “take the tilt out of the playing field,” referring to the Chinese government’s reported subsidies to its industries to keep prices low.
“There is no one thing alone that can get this stuff done,” Moser adds.
No easy fix
Bringing back American manufacturing won’t be as easy as “Buy American” either, it turns out, because it’s hard to define what “American Made” even means.
Cars.com, for example, publishes an annual list of cars whose parts were made in North America, compiled using government labeling programs. But even that’s hard to track. “This notion of being ‘very American’ has dropped over the years,” said Kelsey Mays, the site’s consumer news editor.
Last year, 121 of the 344 passenger vehicles sold in the US were at least assembled here, the survey found. That includes the Ford Mustang and Jeep Cherokee, assembled in Michigan and Illinois respectively. The top of the list includes Tesla’s Model 3 and Model Y sedans, which are assembled in Fremont, not far from Apple’s old Mac factory site.
“In a perfect world, you’d buy a product where all the R&D, manufacturing, production and everything came from your neck of the woods,” Mays said. But as carmakers have expanded their reach — with cars made to be sold in Chattanooga and Chongqing alike — American manufacturing jobs and the skill-based expertise needed to work them have waned.
What needs to happen next, and hasn’t as much in the US, is investment and more innovation in new types of manufacturing. We need to invent things like processes to recycle used materials into new ones, or come up with advanced technology to make the next big thing. “That’s a huge workforce growth opportunity for us,” said MIT Associate Provost Van Vliet. “It takes technology and it takes investment.”
For companies that get it right, there can be a big reward, she said. But right now US companies, schools and families aren’t focused on making that happen.
“There are skills that are associated with manufacturing that have left the US,” Apple’s Cook said in a 2012 interview with NBC. It’s not just the cheap labor screwing and gluing and testing parts as they go down a conveyor belt. Experts say the US isn’t teaching enough people the complex skills to help build and run these complex manufacturing lines.
“That’s sad. How do we get that back?” NBC anchor Brian Williams asked. Cook said it would take “a concerted effort to get them back.”
When Obama asked Jobs that question during a dinner with Silicon Valley luminaries a year earlier in 2011, The New York Times reported that Apple’s co-founder was less optimistic and more blunt. “Those jobs aren’t coming back,” Jobs said.
Making it in America
Steven Yde has worked in the consumer products world for three decades, but he keeps coming back to an experience he had about 20 years ago.
At the time, he watched up close as the consumer products company he worked for was bought, and its factory in Manitowoc, Wisconsin, was shuttered. His experience was far from unique; about half of the computer and electronic products manufacturing jobs in the US disappeared between 2000 and 2005, according to data compiled by the Brookings Institution. By 2010, more than 5 million manufacturing jobs of all stripes had disappeared. Many of them were shifted to China or Mexico, where Brookings said wages were reportedly as much as 80% lower than in the US.
“It was just devastating and a horrible thing to be involved with,” Yde remembered. “I always felt our competitive advantage was the fact that we could build a product right here in the United States.”
This is a problem, but not unsolvable.
Harry Moser, the Reshoring Initiative
Yde’s experience came at a time when Chinese manufacturing was booming too. Western companies learned that in the years since President Richard Nixon visited the country in 1972, China was transforming into an advanced manufacturing powerhouse. It wasn’t just cheap labor, which experts say helps offset costs that come with shipping goods across oceans and continents. In a country of more than a billion people, employers could, quickly and with little effort, hire thousands willing to work an assembly line.
“The movement to Asian suppliers accelerated as competition among them ramped up too,” said Shane Rau, an analyst at IDC. As a result, Asian suppliers “got even better at what they did,” pushing US manufacturers even further behind.
The demand meant that by 2005, China was pumping out at least 200,000 engineers a year, according to reporting from the Wall Street Journal, Duke University and others. The US, meanwhile, was graduating less than half that many.
In 2004, Yde started a job at Wahl Clipper Corporation, a family-owned company in Sterling, Illinois, that makes premium hair clippers. Unlike its Rust Belt colleagues, Wahl had resisted outsourcing all its manufacturing jobs overseas. Instead, it chose to set up factories in places like Vietnam, Hungary and China, to serve customers in those areas. Clippers for US customers were still largely made in Sterling.
Yde calls this approach “regional manufacturing.”
On his first day, Yde got called down to the boss’ office, and was told he had two responsibilities in his new job. He needed to increase sales and profit, of course, and to keep jobs at home. “Those are the best words I’ve heard from anyone’s mouth since I’ve been in business,” he remembers telling his boss.
Now, as head of consumer products marketing at Wahl, he’s a vocal advocate for American manufacturing. Yde argues that many profit-obsessed public companies need to reinvest in their communities with manufacturing jobs, which typically pay more than service sector work. He said internal surveys by Wahl also indicate that younger generations want to “buy local,” among other community-focused trends . Pew Research found that climate change and environmental issues are top concerns for millennials and Gen Z, too. That could be a threat to China’s image, considering its historically poor record on pollution at a time when US emissions are in decline. All that could be a strong incentive for a company that takes the leap to make products back home.
“If your motivation is always going to be how much profit I can make, you can never change the system,” Yde said. “There are benefits as a marketer to say, ‘Made in the USA.'”
But the parts inside Wahl’s products tell a more complex story. Yde says there aren’t US companies building the types of transformers, motors, controller boards and batteries needed to power a cordless rechargeable trimmer, and so those are made overseas and then imported to the US.
“I wish someone would come back and compete,” he said. Even if the costs pushed up the $15 starting price for his clippers, Wahl’s premium as a brand would convince people anyway. “But you can’t find them, they don’t exist.”
Your iPhone is already made in America
It wouldn’t take much for Apple Inc. to have U.S.-sold iPhones made outside China.
Foxconn Technology Group, the primary assembler of the devices, said Tuesday that it has enough capacity to make all iPhones bound for the U.S. outside of China if necessary because of Donald Trump’s tariffs on Chinese products. Apple hasn’t given the Taiwanese company such instructions, a senior executive of Foxconn’s listed flagship Hon Hai Precision Industry Co. said.
The question for Foxconn, Apple’s leadership, the U.S. administration and everyone else, though, is: What does “made” actually mean? This isn’t an esoteric question. As the technology and trade war escalates, billions of dollars hang on the answer.
That it’s feasible to avoid a “Made in China” label appears to have come as a revelation to many.
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Let me give you an analogy: Chef A designs a croissant recipe, sources and measures the ingredients, mixes the flour, sugar, butter and eggs; Chef B kneads and rolls the dough; and Chef C folds the pastry and puts it into an oven at the correct temperature for the right time.
So, who made the croissant?
Apple has been steadfast in insisting that the iPhone is an American product. That’s not just marketing speak. Not only does it do the design, its U.S.-based team is in charge of sourcing all components, ensuring they all work together, and deciding the layout and assembly of the circuitry that goes inside.
Foxconn is a master at production — kneading and rolling the dough — which means breaking manufacturing down into small, specific steps, and then replicating that process 200 million times per year. Foxconn also does the last step — folding the iPhone pastry and putting it into ovens.
Since the “oven” is in China, iPhones get stamped with “Made in China.” But Apple is right to insist that “Designed in California” be etched onto every device, because that’s where the product is also made.
An iPhone isn’t made only in China and California. It’s also made in Suwon, South Korea, the headquarters of Samsung Electronics Co.; Eindhoven, the Netherlands, where NXP Semiconductors NV is based; in Dallas, the home of Texas Instruments Inc.; and in Hsinchu, Taiwan, where Taiwan Semiconductor Manufacturing Co. is located.
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Who gets the most credit should come down to who adds the most value, in my view.
One way to look at this is through operating margin. While an imperfect measure, this is as good a rule of thumb as any. It tells you the difference between what a company paid to gather the inputs of a product (including staff) and what customers were willing to pay for those inputs after the company added its own value.
By this gauge, it’s clear that Apple really is the “maker” of the iPhone, even though it does very little manufacturing. Foxconn does the final assembly, yet its margins are one-tenth those of its client. Apple’s operating profit last year was $71 billion. Hon Hai, which gets half its sales from Apple, earned $4.5 billion.
Much value is added by other companies, from the southern U.S. to western Europe to northern Taiwan, where margins are even higher than Apple’s. None earn the label “Made in” because there are many more steps still to come.
Only some of Foxconn’s hundreds of thousands of employees in China do final assembly — the stage that garners the “Made in China” stamp. And that last step doesn’t need to done there. In 2011, at the behest of Apple and to get around tariffs, it set up assembly in Brazil. Most of the real work was still done back in China, with manufacturing in South America being more akin to assembling Legos. Nonetheless, the iPhones were branded “Made in Brazil.”
With around 40% of Apple’s sales coming from the Americas last year, and 217 million iPhones sold worldwide, that means around 90 million units per year would need to be manufactured outside China to serve the U.S. market. Roughly speaking, that’s close to 250,000 per day.
Foxconn once set up an entire iPad factory in Chengdu within 90 days, so it’s no stretch to believe that it could put together final-assembly lines for iPhones in a variety of locales — Mexico, Vietnam, Brazil, the Czech Republic, Taiwan — in short order. The company could also staff those factories if the wages are right, which means someone would have to pay the costs.
U.S. President Trump seems keen on removing the “Made in China” label from the U.S., but it really is just that. A label.
Tim Culpan writes a column for Bloomberg.
