By Kathy Chu and Juro Osawa
HONG KONG--Asia's sophisticated electronics supply chain and
massive labor pool are two obstacles standing in the way of
President-elect Donald Trump's pledge to make U.S. companies bring
manufacturing jobs home.
When Jabil Circuit Inc., the world's third-largest contract
manufacturer by revenue, needed to quickly ramp up production of
its electronics components a few years ago, the company was able to
add 35,000 workers in China in less than six weeks.
"In no other country can you scale up so quickly," said John
Dulchinos, vice president of digital manufacturing at Jabil, a St.
Petersburg, Fla., supplier to companies such as Apple Inc. and
Electrolux SA. "You have the ability to move quickly and there's a
really strong electronics supply chain in Asia centered around
Jabil's experience underscores the integral roles of China's
armies of migrant workers and Asia's decades-old supply chain in
global electronics production. It is an issue Mr. Trump will need
to address if he wants to bring large-scale production back to a
U.S. economy that Washington, D.C. think tank Economic Policy
Institute estimates has lost more than 5.4 million manufacturing
jobs and 82,000 factories between 1997 and 2013.
"I'm going to get Apple to start making their computers and
their iPhones on our land, not in China," Mr. Trump said in March,
a theme he repeated throughout his campaign. "How does it help us
when they make it in China?"
The president elect has threatened to impose a 45% tariff on
Chinese imports to the country. This move could hurt companies
manufacturing in China such as Apple, Dell Technologies, and HP
Inc. It would drag down China's GDP by 4.8% and Chinese exports to
the U.S. by 87% in three years, according to Daiwa Capital Markets
Hong Kong's Kevin Lai.
To be sure, there is uncertainty as to whether Mr. Trump will
tone down his campaign rhetoric as President. He has indicated
potential for compromise in other policy points since his election
A stiff tariff on Chinese imports could accelerate the migration
of electronics factories from China to lower-cost Asian countries
like Vietnam, rather than boosting U.S. electronics production,
some analysts warn.
Apple, in a statement, said it has created over 2 million jobs
in the U.S. for engineers, retail and call-center employees and
delivery drivers. The company said it works with more than 8,000
suppliers in the U.S. and is "investing heavily in American jobs
HP declined to comment. A Dell spokesman said the company looks
forward to working closely with the new administration on "priority
IT issues like security, trade and cloud computing."
While U.S. electronics companies already manufacture high-end,
lower-volume products such as the Apple Mac Pro in the country,
President Obama and Sen. Bernie Sanders have questioned whether
mass-produced electronics--and specifically the ever-popular
iPhone--can also be made profitably in the U.S.
The answer, experts say, is that while iPhone assembly in the
U.S. is theoretically possible, it is highly improbable because of
the difficulty of relocating assembly and other parts of Asia's
sprawling electronics chain to the West.
While iPhones are designed in California, Apple sources memory
chips from Korean suppliers and displays--which are the most
expensive component in the iPhone--from Japanese suppliers, then
uses Taiwanese companies such as Hon Hai Precision Industry Co. and
Pegatron Corp. to assemble iPhones in mainland China. Apple also
uses U.S. suppliers to make components such as glass and
radio-frequency parts in the country.
Mr. Trump "wouldn't be able to finish (such a move) during his
presidency," said Sanford C. Bernstein's Alberto Moel.
Another barrier to moving manufacturing back to the U.S. is that
U.S. electronics companies often outsource production, so they
don't always have full control over where their goods are made.
With China now the world's largest consumer market for
smartphones and other gadgets, it makes sense for U.S. companies
and their assemblers to keep manufacturing bases in Asia, says
Steve Chuang, chairman of the Hong Kong Electronics Industry
Council, which represents manufacturers in mainland China. Some
manufacturing jobs done in China with human labor could be lost to
machines if production moves back to the U.S., economists warn.
Last December, Apple Chief Executive Tim Cook said on the CBS
program "60 Minutes" that the company manufactures its products in
China in part because Chinese workers possess "vocational kind of
skills" increasingly difficult to find in the U.S. "That is the
reality," Mr. Cook said.
Even if Apple finds enough workers to assemble in the U.S., the
cost of making an Apple iPhone 7 could increase $30 to $40,
estimates Jason Dedrick, a professor at the School of Information
Studies at Syracuse University. Since labor accounts for only a
small part of an electronic device's overall costs, most of these
higher expenses would come from shipping parts to the U.S.
If the iPhone components were also made in the U.S., the
device's costs could climb up to $90, according to Mr. Dedrick's
research with UC Berkeley's Greg Linden and UC Irvine's Ken
Kraemer. That means that, if Apple chose to pass along all these
costs to consumers, the device's retail price could climb about
Write to Kathy Chu at email@example.com and Juro Osawa at
(END) Dow Jones Newswires
November 16, 2016 06:08 ET (11:08 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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