Tsay Media Appearances

The Financial Times interviewed Professor Tsay about the feasibility of Apple moving iPhone assembly to the United States. "Reshoring" of manufacturing jobs is a stated goal of the Trump administration's increasing tariffs on imports from China.

Full story (with dynamic visual effects)

(subscription might be required)

Excerpts:

“Remember the army of millions and millions of human beings screwing in little screws to make iPhones?” commerce secretary Howard Lutnick said in early April. “That kind of thing is going to come to America.”

Supply chain experts believe that the Trump project would face the same problems as Motorola — indeed, some predict an iPhone could cost as much as $3,500 if fully assembled in the US.

But the reason it is so hard to shift Apple’s manufacturing to America is not solely down to the armies of workers that Lutnick referenced. The bigger issue is moving the sophisticated global supply chains built up over decades that sustain Apple’s operations in China.

“In the beginning it was about low labour costs — companies went to China because it was cheap,” says Andy Tsay, professor of information systems at Santa Clara University’s Leavey Business School. “But they stayed in China, and now they are stuck with China for better, or for worse. China is fast, flexible and world class, so it’s about much more than low labour costs now.”

...

The bulk of iPhones (around 85 per cent) are still assembled in China, with the rest made in India.

The close proximity of suppliers and manufacturers is crucial to Apple’s productivity. “There are a lot of advantages to co-locating the activities in the supply chain, in terms of speed and quality of communication and innovation in the product and process design,” says Tsay, the professor at Santa Clara’s Leavey School of Business.

“It means that you can get deliveries very quickly, and you can communicate with your supplier very easily. And when you put an ocean between the customer, in this case Apple, and the component supplier, there is a disadvantage,” he adds.

...

Policy uncertainty is another problem, according to Tsay. “The American system as it stands, where everything can completely flip-flop every four years, is not conducive to business investment. When people and companies make investments, they need to have a longer horizon than that.”

Mark Randall was senior vice president at Motorola when it was owned by Google and looking to build its US smartphone factory. The idea was not impossible, he says, but “I just knew it was going to be incredibly hard”.

Tariffs create a “nightmare” when modelling the costs of a new plant, Randall adds. “This is why most companies don’t make short-term, knee-jerk reactions to the sort of changes that we are seeing today. You’ve got to be super strategic and know where you are going in the long term.”

...

With a US workforce likely to be unwilling to do such repetitive tasks at a salary that would sustain Apple’s profit margins, an American manufacturing process would require automation — the technology for which has yet to be developed.

“We have to imagine what that facility [in the US] would look like,” says Tsay. “It’s not going to be a 300,000-person facility with dormitories and gymnasiums like they have in China. It wouldn't be the small city factory town, because the amount of human labour versus automation you use in a facility is a function of the relative cost of those two.”

...

Other potential disruptions loom. In response to reports that the Trump administration planned to use trade talks with multiple countries to isolate China, Beijing warned it will retaliate against any nation negotiating deals at the expense of its interests. Any broader constraints on Chinese exports crossing borders would ripple through Apple’s supply chain.

“This is a pivotal moment for Apple because of their dependence on China, and the dual nature of that dependence — as both a supplier and a growing consumer market,” says Tsay. “And is China going to let Apple go that easily? Because China needs Apple too.”