Why Apple makes its iPhones in China: reasons by Tim Cook, its president, and debate

 Introdução aos leitores brasileiros:

Por que a Apple “fabrica” iPhones na China (a concepção é feita na Califórnia), e não o faz no Brasil (nem poderia, mesmo que ela desejasse nos agraciar)?  https://diplomatizzando.blogspot.com/2024/07/por-que-apple-fabrica-seus-iphones-na.html?m=1 

O Brasil simplesmente não oferece condições mínimas para tal. 

Um dos Threads mais interessantes que segui, aqui assemblado para instrução dos neófitos e entusiastas do capitalismo nacional com visão de “autonomia” decisória nas politicas estritamente nacionais de desenvolvimento. 

Que isto sirva de lição para nossos economistas ditos “desenvolvimentistas”, mas que não são, de verdade, nem economistas, nem de fato desenvolvimentistas, pois que deixam de ser observadores da realidade educacional brasileira, em condições realmente depressivas.

Os maiores responsáveis pela nossa atual “miséria industrial” são as elites políticas e econômicas nacionais, as classes dirigentes, uma oligarquia unida pelo que eu chamo de “pacto perverso” do não desenvolvimento, pois que marcado pela cegueira educacional, pela ideologia nacionalista tacanha, pelo medo da globalização — que reune e unifica esquerdas e direitas na mesma coalizão de embotados — e incapazes de perceber que o protecionismo oportunista imediatista está levando o Brasil à estagnação.

Paulo Roberto de Almeida 

Brasília, 21 jul 2024

Why does Apple make iPhones in China? No! It is NOT because of cheap labor. 

The "cheap labor" thing is just a rumor spread by media.

🧵 Here is what Tim Cook said 👇

"There's a confusion about China. The popular conception is that companies come to China because of low labor cost. I'm not sure what part of China they go to, but the truth is China stopped being the low-labor-cost country many years ago."

He continues…

"And that is not the reason to come to China from a supply point of view. 

The reason is because of the skill, and the quantity of skill in one location and the type of skill it is. (2/4)

…The products we do require really advanced tooling, and the precision that you have to have, the tooling and working with the materials that we do are state of the art. 

And the tooling skill is very deep here. 

In the U.S., you could have a meeting of tooling engineers and I'm not sure we could fill the room. In China, you could fill multiple football fields. (3/4)

The vocational expertise is very very deep here, and I give the education system a lot of credit for continuing to push on that even when others were de-emphasizing vocational. 

Now I think many countries in the world have woke up and said this is a key thing and we've got to correct that. China called that right from the beginning."

Found this valuable? Follow for such content daily. (4/4)

From: arjtraj_ (Threads, July 20, 2024)

Comment by tim.cronin.750:

That deep technical expertise doesn’t exist in the US because products made with US tech expertise would be too expensive compared to those same tech chops in China. Tim Cook isn’t wrong; he just missed the fundamental point - it’s not the low “manufacturing” cost that makes China attractive… Chinese technical expertise costs so much less than in the US, it’s lower TOTAL COST that makes China the clear outsourcing choice.

New comment by arjitraj_:

I have worked for American product based companies. 

Many times when asking for sourcing, American suppliers straightaway say things like: It cannot be made, it is impossible to be made, not feasible as such. 

With Chinese: they ask for time to deliver and almost always show a working prototype within a reasonable time for the same problem. Their expertise at low to mid end engineering is high. 

US is good at making high end engineering: reactors, rocket engines, turbines, etc.

Comment by george.eakin:

I have worked for American product based companies. 

Many times when asking for sourcing, American suppliers straightaway say things like: It cannot be made, it is impossible to be made, not feasible as such. 

With Chinese: they ask for time to deliver and almost always show a working prototype within a reasonable time for the same problem. Their expertise at low to mid end engineering is high. 

US is good at making high end engineering: reactors, rocket engines, turbines, etc.

New comment by arjitraj_:

It is definitely a chicken egg situation. But diving in the history and finding out why the current situation happened will unbox a lot of debatable stuffs on educational policies, monetary policies, military focus etc. Quite futile tbh.

A diverse comment by selman.gm:

Tim Cook is a good marketer ! 

Don’t believe him this is the real reason behind.

“How much it does to make an iPhone in China?

Productio cost of iPhone 14 per unit in China is $ 10. (January 1, 2024)

Comment by ubrmthr:

What is gained in skill and infrastructure is balanced by risk. We have all our business’ tech manufactured in China, and our suppliers have no problem selling it on. On a recent visit we found our products, complete with our logo, in use by the CCP 😱😳😮🙊

New comment by arjitraj_:

Yes it is quite common.

A new comment by danke_memphis_danke_dad:

CEOs make decisions based on profits. It is more profitable to make iPhones in China. Thats it. If it was more profitable to make iPhones in Cambodia they would make them there.

Again from arjitraj_:

Here the issue is feasibility + profitability. If iPhone “cannot” be manufactured say in Africa, even if labor is cheaper, one can’t make it there.

From sksommers:

Then add in the additional cost of packaging, transportation, and levies of various types the cost rises AND does a tremendous amount of environmental and biosystems damage to the earth. There's more to consider than bean counting. It's also indubitably true that working conditions in China are horrible, even for skilled workers.

Addition by arjitraj_:

Transportation cost is pretty much very close to negligible when you use containers, via ship and over extraordinary large volumes.

From gagandeeps1ngh_:

You making the things clearer more than my teacher.

Thanks, I appreciate your work.

(…)

From thephotoonist:

So to summarize: American finance following its prime directive to 'unlock value' shipped fulfillment for demand for manufactured goods to China. And lo and behold over time the Chinese became skilled at doing while those skills wasted away in the US.  This state was created by chasing low labor costs, but ultimately training people in China,  while reducing everyone in the US to takers not ma is makers.

Again arjitraj-:

But… the work went there because there were people who could do that. So, first skills were developed then work was provided.

From England freeman:

We buy Chinese goods in the UK and believe me the quality is fantastic,they are far superior then our Indian counterparts,and they many things for every thing you require for your daily work/problems.

From martintintintinn:

So basically, it's not the cheap labor per se. It's the ABUNDANCE and SKILLS of that cheap labor they love. You won't have to raise wage when for every worker you hire, you can easily replace them with 3 or 4 more workers! And in China, they are expected to work at least 65hrs per week in low and as much as 87hrs/w in high season. Workers in the US, past the 50hrs/week mark, good luck keeping them more than a year.

From toofarousettosea:

Some years ago Cook said Apple needed 35k electrical engineers for a new factory. That’s more than some states here in the US. It’s probably a rounding error off this year’s graduating class in China.

Some stuff is made here though. The glass comes out of West Virginia and the CPUs are made in Texas, I think.

From gimballoker:

"which came first, the chicken or the egg"  they got those skills making things because  we sent the jobs there. Why would a young person go into those fields in the US when there weren't the jobs?

From luyandamandela:

As a result of the over-supply of tooling engineers and vocational expertise the labour becomes slightly cheaper than places like the US where there isn’t a lot of readily available tooling engineers, No?

From champa2k:

Tim forgot or didn't want to mention the system, the communist system where workers cannot say much or protest.

From zbilbo9:

And besides the political climate, why is manufacturing being moved out of China to Vietnam and other parts of Southern Asia. After the technological needs are met labor costs matter.

From neilpincus:

iPhones may be made by better paid workers but many Chinese products are so cheap that the only way to achieve the low price is by using cheap labour. Take musical instruments for example. Even with CNC shaping, a guitar is always sanded, painted assembled and set up by manual labourers. Selling a whole guitar for £150 means someone was paid very little for a lot of work.

From arjitraj_:

Only assembly is being done here in India. (I am from India).

From baumgartner.bill:

But why is tooling readily available in China? Because we shipped manufacturing to them  decades ago due to cheap labor costs and China developed expertise to support that work. There are always layers.

From ptee17:

That skill was developed over the last 30 years, BECAUSE manufacturing was moved there in the first place, owing to low costs. People in that region aren't born with relevant skills. Makes it easier for the CEO to parrot this narrative today. 

Margins are everything, would be borderline naivety to think otherwise.

From randolfus:

Here ya go, wanna guess how much lies there is in the TC story. 

As of February 19, 2024, Shanghai has the highest monthly minimum wage among 31 provinces (RMB 2,690/US$370 per month), and Beijing has the highest hourly minimum wage (RMB 26.4/US$3.7 per hour). china-briefing.com

From suocostudio:

Could both be true- that china has the engineers/laborers AND they are cheaper labor/cheaper parts? I don’t think cheap labor in China (or anywhere) is a rumor- it very much exists. It’s possible Tim Cook is just very good at marketing and seems like a trustworthy guy.

From saitama84831:

To be honest, even Tim Cook has a limited viewpoint on this phenomenon if he’s only thinking of Apple and why these conditions even exist in China. Companies started offshoaring decades ago and yes China was once and still is a place of cheap labor they have also invested a lot in technology. 

Now, do we think Apple would still be there if the people working at the manufacturer were making a decent wage? Answer that yourself, young man.

From ghostrwriter:

The World 🌎 is a Lie, This glorious Democracys supply-chain is reliant on a Communist Country?! Gtfo, sounds like a movie script but then u see it’s literally the case. America could be so much better but they sold us out.

From felizardo8655:

One of many reasons but not the only and main reason. Cheap labor is still a motive, so is deregulation. As with many other things, there is never one single contributing factor for something to happen.

From rbrtfcbk:

He’s right. We don’t have the team attitude here in the US, especially when it comes to high tech. One of the big challenges in IT nowadays is fighting egos.

From sachiliano:

I'm sure you could find similar skill in abundance in Germany if need be. Just that the price of an iPhone 15 Pro Max would then inflate to upwards of $12,000.

Frontal luna_the_tuna_dog:

iPhones are made in China because the supply chain is in China. But the supply chain moved to China because of the cheap labor.

From abberadon1:

China invested in people where other previous low cost countries didn’t. The low wage enticement doesn’t last as those economies start to grow. We’ve seen that as production has moved from Taiwan, India, Pakistan through Vietnam, Korea etc into China. Low cost/skill manufacturing is starting to move out now, moving in to the next cheap market. Chinas tech sector will survive and grow because of the steps taken by their government.

From glencoejoe:

Absolute pish , if Apple had wanted Americans to make ipads iPhone etc etc they would have done so years ago. However, when all their kit started to take off it was costing pennies to make in China and whilst it may have gotten more expensive over the years they dare not move manufacturing and reduce their exorbitant prices and profits. That's the American way money before everything else.

From l.munirr:

I dont think skill is the only thing, the other thing that apple come to China is because of the supply chain that happen to be more easy in China. For example, export from china is easy, but now because of the geopolitik tension and zero covid restriction when the covid hit, the production of Apple in China dropped.

If it only because of the skill, Apple will still hold their ground in China, but its not the thing.

From libero.gori:

Ok the reality is that only in China you can manufacture 60 million of iPhones every year with just three months to set up the production lines switching from the old generation to the new one.

From tremblay9200:

Cook knows what he’s talking about. The spirit of the American Craftsman was smashed to bits in the 20th Century. Now the only people with high manufacturing skills are the hipster kids of rich people who live in zip codes where the cost of living is too high to be able to offer them salaries for “good middle class jobs” with a straight face. Being a skilled prototyper, tool-modifier, foreman, assembler, finisher, etc etc, are elite boutique skills in the US & it’s a frugal unmarried lifestyle.

From paulreid007:

I worked for a very large US company. We outsourced a lot of work India. It was definitely an operating cost decision initially but we still needed to be able to source and hire well educated professionals. Over time these resources demonstrated their value in all aspects of the business. Compensation is increasing rapidly and there are more and more well educated young people coming into the booming economy. Anyone who doesn’t think this is about competitiveness doesn’t understand clients.

From iamhitshdewasi:

Very interesting and insightful, so good I gave you a follow right away.. As someone who into manufacturing of products in different sector I completely agree with the reasoning, happens all the time with us.

From jonathanloo723:

Interesting. It’s like Russia and its energy, other countries just lag behind on development so they all still rely on them despite their human rights concerns.

From PRA (I have myself written to the initiator of this thread to thank him for the initiative and inform of this work of assemblage):

Wonderfull Threads arjitraj_. Thanks for it. I’m from Brazil and have transcribed the most relevant stuff to my blog:

https://diplomatizzando.blogspot.com/2024/07/por-que-apple-fabrica-seus-iphones-na.html?m=1

arjitraj_ responded: 

Thank you for appreciation and supporting.

From the assembler, Paulo Roberto de Almeida:

One of the most interesting and instructive Threads that I have copied and assembled in my blog Diplomatizzando, mostly devoted to foreign policy and diplomacy from Brazil, but also dealing with all matters concerning development issues in all countries, as well as cultural matters in general.

Paulo Roberto De Almeida 

Brasília, July, 21, 2024

(And the Threads continues…)