It Would Cost Apple Over $4 Billion Extra to Build iPhones in the U.S.
Boy, math sure can be a buzz kill sometimes. For example, what a boon to the U.S. economy it would be if Apple suddenly decided to start building its iPhones stateside rather than outsourcing production to China. Unfortunately, if you crunch the numbers, such a move is cost prohibitive, even for a company that makes as much money as Apple.
Tim Worstall over at Forbes wore out his calculator adding up the various costs of moving production to the U.S. based on some rough and not so rough estimates, and the final figure is in the billions. Before we get there, let's have a look at some lower numbers.
Using figures borrowed from Motorola's stateside production, it costs about $4 extra to produce a Moto X handset in the U.S. versus overseas. If we apply that figure to the number of iPhones Apple sold last year -- in the neighborhood of 150 million -- then right off the bat we have an added cost of $600 million. That's only part of the story, however.
Factoring in the much higher tax bill Apple would face by producing iPhones stateside, which is 35 percent versus the company's current tax rate of 2 percent, there's an additional $3.6 billion added to the cost. Toss in the $600 million figure from before and you come to $4.2 billion, which is how much more it would cost to build iPhones in the U.S. than China, based on last year's sales totals.
Sobering, right? Again, part of this equation relies on rough estimates and a bit of fuzzy math, and it doesn't factor in negotiated tax rate deductions. Plus, that figure is representative of moving the entire production to the U.S. rather than a portion of it, as Motorola did. If Apple wanted to create some goodwill (and jobs) in the U.S., it could produce a relatively small number of devices stateside and not come close to spending a $4.2 billion premium, though it would inevitably end up paying more.
Tim Worstall over at Forbes wore out his calculator adding up the various costs of moving production to the U.S. based on some rough and not so rough estimates, and the final figure is in the billions. Before we get there, let's have a look at some lower numbers.
Using figures borrowed from Motorola's stateside production, it costs about $4 extra to produce a Moto X handset in the U.S. versus overseas. If we apply that figure to the number of iPhones Apple sold last year -- in the neighborhood of 150 million -- then right off the bat we have an added cost of $600 million. That's only part of the story, however.
Factoring in the much higher tax bill Apple would face by producing iPhones stateside, which is 35 percent versus the company's current tax rate of 2 percent, there's an additional $3.6 billion added to the cost. Toss in the $600 million figure from before and you come to $4.2 billion, which is how much more it would cost to build iPhones in the U.S. than China, based on last year's sales totals.
Sobering, right? Again, part of this equation relies on rough estimates and a bit of fuzzy math, and it doesn't factor in negotiated tax rate deductions. Plus, that figure is representative of moving the entire production to the U.S. rather than a portion of it, as Motorola did. If Apple wanted to create some goodwill (and jobs) in the U.S., it could produce a relatively small number of devices stateside and not come close to spending a $4.2 billion premium, though it would inevitably end up paying more.
