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 3:50 PM EDT, Mon August 25, 2014
Julian Zelizer says it's not crazy to think Mitt Romney would be able to end up at the top of the GOP ticket in 2016.
updated 4:52 PM EDT, Mon August 25, 2014
Roxanne Jones and her girlfriends would cheer from the sidelines for the boys playing Little League. But they really wanted to play. Now Mo'ne Davis shows the world that girls really can throw.
updated 12:29 PM EDT, Mon August 25, 2014
Peter Bergen and Emily Schneider say a YouTube video apparently posted by ISIS seems to show that the group has a surveillance drone, highlighting a new reality: Terrorist groups have technology once only used by states
updated 5:04 PM EDT, Mon August 25, 2014
Kimberly Norwood is a black mom who lives in an affluent neighborhood not far from Ferguson, but she has the same fears for her children as people in that troubled town do
updated 5:45 PM EDT, Fri August 22, 2014
It apparently has worked for France, say Peter Bergen and Emily Schneider, but carries uncomfortable risks. When it comes to kidnappings, nations face grim options.
updated 1:27 PM EDT, Tue August 26, 2014
John Bare says the Ice Bucket Challenge signals a new kind of activism and peer-to-peer fund-raising.
updated 8:31 AM EDT, Fri August 22, 2014
James Dawes says calling ISIS evil over and over again could very well make it harder to stop them.
updated 9:05 PM EDT, Sat August 23, 2014
As the inquiry into the shooting of Michael Brown continues, critics question the prosecutor's impartiality.
updated 6:47 PM EDT, Fri August 22, 2014
Newt Gingrich says it's troubling that a vicious group like ISIS can recruit so many young men from Britain.
updated 10:50 AM EDT, Thu August 21, 2014
David Weinberger says Twitter and other social networks have been vested with a responsibility, and a trust, they did not ask for.
updated 7:03 AM EDT, Fri August 22, 2014
John Inazu says the slogan "We are Ferguson" is meant to express empathy and solidarity. It's not true: Not all of us live in those circumstances. But we all made them.
updated 8:23 AM EDT, Fri August 22, 2014
Retired Lt. Gen. Mark Hertling says he learned that the territory ISIS wants to control is amazingly complex.
updated 3:51 PM EDT, Wed August 20, 2014
Cerue Garlo says Liberia is desperate for help amid a Ebola outbreak that has touched every aspect of life.
updated 1:42 PM EDT, Thu August 21, 2014
Eric Liu says Republicans who want to restrict voting may win now, but the party will suffer in the long term.
updated 11:38 AM EDT, Thu August 21, 2014
Jay Parini: Jesus, Pope and now researchers agree: Wealth decreases our ability to sympathize with the poor.
updated 8:00 AM EDT, Thu August 21, 2014
Judy Melinek offers a medical examiner's perspective on what happens when police kill people like Michael Brown.
updated 6:03 PM EDT, Tue August 19, 2014
It used to be billy clubs, fire hoses and snarling German shepherds. Now it's armored personnel carriers and flash-bang grenades, writes Kara Dansky.
updated 1:27 PM EDT, Wed August 20, 2014
Maria Haberfeld: People who are unfamiliar with police work can reasonably ask, why was an unarmed man shot so many times, and why was deadly force used at all?
updated 5:52 PM EDT, Mon August 18, 2014
Ruben Navarrette notes that this fall, minority students will outnumber white students at America's public schools.
updated 5:21 PM EDT, Tue August 19, 2014
Humans have driven to extinction four marine mammal species in modern times. As you read this, we are on the brink of losing the fifth, write three experts.
updated 4:06 PM EDT, Mon August 18, 2014
Pepper Schwartz asks why young women are so entranced with Kardashian, who's putting together a 352-page book of selfies
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT