Skip to main content
Part of complete coverage on
 

Can iPhone and iPad be made in the USA?

By Clyde Prestowitz, Special to CNN
updated 10:56 AM EDT, Thu October 18, 2012
STORY HIGHLIGHTS
  • Clyde Prestowitz: Debate shows neither candidate understands details of global trade dynamics
  • Prestowitz: The major value of iPhones is in the semiconductors and other key parts
  • He says U.S. producers don't know how to make these key components anymore
  • Prestowitz: If we want high-wage jobs in the U.S., we need a competitive strategy

Editor's note: Clyde Prestowitz is the founder and president of the Economic Strategy Institute. A counselor to the commerce secretary in the Reagan administration, Prestowitz is the author of "The Betrayal of American Prosperity" and blogs about the global economy at Foreign Policy.

(CNN) -- Both President Obama and Mitt Romney flubbed the big question on jobs at Tuesday night's debate.

Moderator Candy Crowley noted that Apple makes its iPhones and iPads in China and asked, "How do you convince a great American company to bring that manufacturing back here?"

Romney talked about reducing corporate taxes, getting tough with China by making it "play by the rules," and stopping its currency manipulation.

Clyde Prestowitz
Clyde Prestowitz

Obama said that some jobs are just never going to come back because the labor wages abroad are so much lower than in America. What the president wants to do is to double U.S. exports and create new high-wage jobs to replace the low-wage jobs that have been sent offshore.

Obviously, neither debater knows the details of how the dynamics of trade and globalization work.

Why Apple will never bring manufacturing jobs back to the U.S.

For starters, the iPhones and iPads are not really made in China. They are only assembled there. According to the Asian Development Bank, the assembly accounts for $6.50 of the final $178.96 wholesale cost of an iPhone. Researchers at the Personal Computing Industry Center estimate the assembly value of a $500 iPad at about $12.

Become a fan of CNNOpinion
Stay up to date on the latest opinion, analysis and conversations through social media. Join us at Facebook/CNNOpinion and follow us @CNNOpinion on Twitter. We welcome your ideas and comments.



The major value of these devices is in the semiconductors, electronic displays and other key components. These high-technology and high-capital components are largely made in Japan, South Korea, Taiwan, and to a lesser extent Germany. A few are even made in America. None of these are low-wage countries. Japan and Germany, in fact, are high-wage countries. The labor component of making these parts is quite small.

What about taxes? Japan's 39.5% corporate income tax rate topped the 39.2% of the United States until it was dropped to 38.01% earlier this year. So it's not exactly a tax haven or low tax jurisdiction. Nevertheless, Japan's computer chip and electronic display makers are major suppliers of components to the iPhone and iPad as well as to the whole range of competing phones, tablets and computers. Furthermore, Apple and many global electronics companies are already paying less taxes by dint of elaborate accounting schemes that funnel revenue to tax havens like Singapore, the Cayman Islands, Bermuda and Liechtenstein.

Body language and the debate
Undecided voter has made decision
Apple supplier progress in China

As for China's practice of currency manipulation, it has been an irritant, but not an insurmountable one. Technically at odds with international trade and monetary rules, the Chinese government has intervened frequently in currency markets to keep the dollar strong and the yuan weak by buying dollars. More recently, China has allowed the yuan to rise closer to market rates, although many analysts believe it is still undervalued because present rates do not fully reflect increases in Chinese productivity. Romney may thus be justified in his critique.

The risks of doing business in China must also be taken into consideration. In the past two weeks, we have seen Japanese factories in China trashed by mobs in the wake of a dispute between Japan and China over who owns a few specks of rocky islets in the East China Sea. Even if Chinese labor is cheap, incidents like these can be costly.

The real reason that these kinds of jobs aren't coming back is that U.S. producers no longer know how to produce many of these product components. There is no significant U.S. producer of flat panel electronic displays. And U.S. semiconductor makers have continually been losing to competitors like South Korea's Samsung and Taiwan's TSMC.

The jobs involved in the production of these components are exactly the high-wage, high-benefit jobs Obama said he wants to create. The only way to get them back is for the U.S. to regain the strong position it once occupied in making things.

Obama seems to be edging in this direction with his call for spurring manufacturing. But a U.S. production renaissance will require a lot more than the president's piecemeal approach so far. It means we need a comprehensive competitiveness strategy similar to those now pursued by South Korea, Germany, Taiwan, Japan, Singapore, China and others. It is not written that America must suffer a drain of ever more highly skilled jobs to overseas locations. To halt this dynamic, we must fight fire with fire.

The opinions expressed in this commentary are solely those of Clyde Prestowitz.

ADVERTISEMENT
Part of complete coverage on
updated 9:05 AM EDT, Tue September 16, 2014
LZ Granderson says Congress has rebuked the NFL on domestic violence issue, but why not a federal judge?
updated 7:49 AM EDT, Tue September 16, 2014
Mel Robbins says the only person you can legally hit in the United States is a child. That's wrong.
updated 1:23 PM EDT, Mon September 15, 2014
Eric Liu says seeing many friends fight so hard for same-sex marriage rights made him appreciate marriage.
updated 3:38 PM EDT, Mon September 15, 2014
SEATTLE, WA - SEPTEMBER 04: NFL commissioner Roger Goodell walks the sidelines prior to the game between the Seattle Seahawks and the Green Bay Packers at CenturyLink Field on September 4, 2014 in Seattle, Washington. (Photo by Otto Greule Jr/Getty Images)
Martha Pease says the NFL commissioner shouldn't be judge and jury on player wrongdoing.
updated 9:15 AM EDT, Tue September 16, 2014
It's time for a much needed public reckoning over U.S. use of torture, argues Donald P. Gregg.
updated 8:25 AM EDT, Tue September 16, 2014
Peter Bergen says UK officials know the identity of the man who killed U.S. journalists and a British aid worker.
updated 7:28 AM EDT, Tue September 16, 2014
Joe Torre and Esta Soler say much has been achieved since a landmark anti-violence law was passed.
updated 4:55 PM EDT, Fri September 12, 2014
David Wheeler wonders: If Scotland votes to secede, can America take its place and rejoin England?
updated 8:41 AM EDT, Tue September 16, 2014
Jane Stoever: Society must grapple with a culture in which 1 in 3 teen girls and women suffer partner violence.
updated 4:36 PM EDT, Fri September 12, 2014
World-famous physicist Stephen Hawking recently said the world as we know it could be obliterated instantaneously. Meg Urry says fear not.
updated 6:11 PM EDT, Fri September 12, 2014
Bill Clinton's speech accepting the Democratic nomination for president in 1992 went through 22 drafts. But he always insisted on including a call to service.
updated 6:18 PM EDT, Fri September 12, 2014
Joe Amon asks: What turns a few cases of disease into thousands?
updated 1:21 PM EDT, Thu September 11, 2014
Sally Kohn says bombing ISIS will worsen instability in Iraq and strengthen radical ideology in terrorist groups.
updated 6:31 PM EDT, Tue September 16, 2014
Analysts weigh in on the president's plans for addressing the threat posed by the Islamic State of Iraq and Syria.
updated 9:27 AM EDT, Thu September 11, 2014
Artist Prune Nourry's project reinterprets the terracotta warriors in an exhibition about gender preference in China.
updated 9:36 AM EDT, Wed September 10, 2014
The Apple Watch is on its way. Jeff Yang asks: Are we ready to embrace wearables technology at last?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT