Skip to main content
Part of complete coverage on
 

Can iPhone and iPad be made in the USA?

By Clyde Prestowitz, Special to CNN
October 18, 2012 -- Updated 1456 GMT (2256 HKT)
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
April 18, 2014 -- Updated 2047 GMT (0447 HKT)
Jim Bell says NASA's latest discovery support the notion that habitable worlds are probably common in the galaxy.
April 18, 2014 -- Updated 1817 GMT (0217 HKT)
Jay Parini says even the Gospels skip the actual Resurrection and are sketchy on the appearances that followed.
April 18, 2014 -- Updated 1752 GMT (0152 HKT)
Graham Allison says if an unchecked and emboldened Russia foments conflict in a nation like Latvia, a NATO member, the West would have to defend it.
April 18, 2014 -- Updated 1311 GMT (2111 HKT)
John Sutter: Bad news, guys -- the pangolin we adopted is missing.
April 19, 2014 -- Updated 1710 GMT (0110 HKT)
Ben Wildavsky says we need a better way to determine whether colleges are turning out graduates with superior education and abilities.
April 18, 2014 -- Updated 1026 GMT (1826 HKT)
Charles Maclin, program manager working on the search and recovery of Malaysia Flight 370, explains how it works.
April 18, 2014 -- Updated 1250 GMT (2050 HKT)
Jill Koyama says Michael Bloomberg is right to tackle gun violence, but we need to go beyond piecemeal state legislation.
April 17, 2014 -- Updated 1845 GMT (0245 HKT)
Michael Bloomberg and Shannon Watts say Americans are ready for sensible gun laws, but politicians are cowed by the NRA. Everytown for Gun Safety will prove the NRA is not that powerful.
April 17, 2014 -- Updated 1328 GMT (2128 HKT)
Ruben Navarrette says Steve Israel is right: Some Republicans encourage anti-Latino prejudice. But that kind of bias is not limited to the GOP.
April 16, 2014 -- Updated 2323 GMT (0723 HKT)
Peggy Drexler counts the ways Phyllis Schlafly's argument that lower pay for women helps them nab a husband is ridiculous.
April 16, 2014 -- Updated 1642 GMT (0042 HKT)
Rick McGahey says Rep. Paul Ryan is signaling his presidential ambitions by appealing to hard core Republican values
April 16, 2014 -- Updated 1539 GMT (2339 HKT)
Paul Saffo says current Google Glasses are doomed to become eBay collectibles, but they are only the leading edge of a surge in wearable tech that will change our lives
April 15, 2014 -- Updated 1849 GMT (0249 HKT)
Kathleen Blee says the KKK and white power or neo-Nazi groups give haters the purpose and urgency to use violence.
April 16, 2014 -- Updated 1156 GMT (1956 HKT)
Sen. Sheldon Whitehouse and Rep. Henry Waxman say read deep, and you'll see the federal Keystone pipeline report spells out the pipeline is bad news
April 16, 2014 -- Updated 1153 GMT (1953 HKT)
Frida Ghitis says President Obama needs to stop making empty threats against Russia and consider other options
ADVERTISEMENT