With the recent release of Apple Inc.’s iPhone 6, many consumers are left wondering why the Cupertino, California-based company has continually chosen to manufacture its flagship phone in Chinese factories rather than at home on American soil.
Scale and cost is a large part of why Apple continues to turn to China manufacturing. If the iPhone were produced in the United States, economists estimate that the additional cost of the device would hover around $65. Additionally, there would be no way a generally smaller American workforce– who would command higher hourly rates, health plans and long term savings accounts which accompany traditional western full-time employment packages–could support the rate at which new devices are released.
Due in part to the influx of Chinese manufacturing in a myriad of industries, Asia is also uniquely poised to hire an abundance of skilled workers virtually instantaneously. A former Apple employee recently spoke to a major news organization on the record, stating that a single manufacturing center can hire up to 3,000 employees overnight. Clearly, this is a major factor that keeps costs low.
Aside from manufacturing expertise, China also excels in educating an impressive number of industrial engineers—far exceeding the United States, in fact. According to a recent New York Times article, Apple Inc. higher ups originally estimated they would need approximately 8,700 industrial engineers to supervise the more than 200,000 line employees responsible for piecing together the iPhone. Apple analysts figured it would take about nine months to find that many qualified candidates in the U.S. It took 15 days in China.
This does not seem as shocking when you take a minute to consider the hard facts: according to recent data, Chinese higher education institutions annually churn out roughly 600,000 engineers, while the United States falls way behind with 70,000 each year.
It is also important to keep in mind that China currently acts as a hub for a majority of the global economy’s electronic manufacturing: computers, stereos, televisions, notebooks, speakers…the list literally goes on and on. This means that parts crucial to iPhone assembly are cheaper and easier to access since they are typically located within the same geographic area. This keeps shipping costs shockingly low.
In fact, attempting to build the iPhone, as well as similar electronic devices, in the states would prove to be a logistical nightmare since the U.S. is largely cut off from supply chain networks that China has built. Well-known for closely controlling this chain, China is also an ideal selection for the production of Apple’s often secretive products.
The Chinese government also offers Apple a great deal of subsidies to ensure their continued business in Asia. Historically, the United States has failed to offer major tax breaks to companies seeking manufacturing hubs, forcing businesses to relocate their assembly lines. In fact, current trends indicate that more than 80 percent of United States workers are now employed in service-based industries such as health care and legal assistance—up leaps and bounds from just half a decade ago.
If you want to experience the benefits of China manufacturing for your own company, contact ITI today.
