How Much Would The iPad 2 Cost If It Was Made In The U.S.A?

6 May

With all the talk about how globalization and outsourcing affect U.S. unemployment,  many people seem to be of the mindset that if we were to revive the U.S. manufacturing base, the unemployment problem would take care of itself.  Personally, I’d love to see more goods made here in the good ol’ U.S. of A and thus more manufacturing jobs, but its a two-way street: Labor costs in the United States are SUBSTANTIALLY higher than they are in other countries, namely developing ones like China, Taiwan, Malaysia, etc.

Currently, Apple has contracted with Foxconn to make their iPad 2’s in China, where employees are reportedly paid (after receiving a 30% raise) a king’s ransom of 1,200 Yuan/month, or about $185 at current exchange rates (y/$ = 0.154), or, if we assume an average 8-hour/day, 250-day/year (probably unrealistic assumptions), $1.11/hour.  But what if Apple decided to do the “patriotic” thing, and hire U.S. workers in the U.S. to make its heralded tablet?  How much more would it cost to make the iPad 2 in the U.S. versus in China?  Let’s run some back-of-the-envelope numbers and see:

Average U.S. manufacturing/mining/construction compensation is $32.53/hour as of December, according to the BLS. Research firm iSuppli estimates the iPad 2 costs $10 to manufacture, which – using the $1.11/hour rate – works out to about 9 hours each to complete.  If assembly and manufacture took the same amount of time in the U.S. as it does in China (another possibly unrealistic assumption), the cost of making each iPad 2 comes out to $292.77!

Again, according to iSupply, the material cost for the 32gb iPad 2 WiFi + 3g – which sells for $729 –  is about $325, or $335 including labor, which puts Apple’s gross margin (ex shipping/handling) at 54%.  Just using the simple math above, if the iPad 2 was made in the U.S it would cost $617.77, bringing Apple’s gross margin down to 15.25%!  Of course, Apple is not in the business of self-immolation, and given their relatively substantial pricing power, they could just make the iPad 2 more expensive, let’s say, increasing the price to the point where their gross margins stayed intact, from $729 to $1,144.02!

Is the demand curve for iPad 2’s normal, i.e. is it downward-sloping (with a negative price elasticity of demand), or is it a Veblen good, i.e. as the price increases, the quantity demanded actually increases?  Will consumers still keep lining-up to shell-out their (presumably) hard-earned money for a product that won’t make it into their hands for weeks, that will likely be rendered obsolete (in the “cool” sense) with the iPad3 a year or so down the road if the price rises 57%?

Even if Apple found that the demand curve was in-fact downward sloping, and that their revenue maximization point (price/unit * # of units sold) involved absorbing higher manufacturing and assembly costs, buyers would still be asked to pay significantly more for a “Made in The U.S.A.” iPad 2 than the comparitively cheaper “Made in China” version.  This brings us to the quasi-ultimate question (short of the larger macro-economic one, for another time): How much more are U.S. consumers willing to pay for the “Made in The U.S.A” stamp, if anything?

I don’t have an answer, at least not anything even remotely approaching a definitive one.

How much more would you pay? $100?  5%?  Zero?  Let us know in the comments!


98 Responses to “How Much Would The iPad 2 Cost If It Was Made In The U.S.A?”

  1. bond wimp May 6, 2011 at 1:12 pm #


    • ET May 7, 2011 at 2:55 am #

      They haven’t accounted for additional shipping cost to get it to the USA market. i suppose though it’s more or less negligible compared to overall pricepoint.

      • Tim May 11, 2011 at 10:58 am #

        That’s because bulk shipping isn’t that expensive when you’re talking about shipping cargo containers full of them from China to the US. If you buy one iPad online and have it shipped to you, the CUSTOMER is paying for shipping. Why do you think the people at the local Apple store aren’t concerned about telling people the fastest way to get an iPad is to buy one online? It increases their profit that little bit more, relieving the company of even having to freight the product in bulk. I bet if they thought people would go for it, they’d sell every unit online as opposed to in stores.

    • macmike100 May 7, 2011 at 2:50 pm #

      It is amazing to me how all these comments can be made and not one mention of unions. True, our govt charges too much corp tax. But the demands of union workers in the US is also the reason for these problems.
      Drastically lower taxes, get rid of unions, wars, fix our borders, quit supporting illegal aliens, drill here and throw the bums out of Washington. That would fix it.

      • Shawn Shambaugh May 8, 2011 at 12:22 am #

        You got it! UNIONS – in one word, the major problem in America.

      • maria rose May 8, 2011 at 12:19 pm #

        obviously you have a job at a non-union site where you are getting paid enough to cover your health cost, rent, utilities,food, etc. And you must be so good at that job that they would never fire you since not having a contract with they they can fire you at will for no reason other than budget cost. I work in a union job where we don’t average over $50,000 yearly for a skilled job but the company (a supermarket chain) claims it is over paying the workers while paying very high salaries to its VP’s plus their bonuses

        • The Analyst May 8, 2011 at 12:22 pm #

          I was laid off from my 1st job a decidedly non-union one. It sucked (a lot), but you deal with it. Such is life. I am 100% anti union. Unions ensure that fewer people are employed at an artificially hige rate; good if you’re one of the union people employed, bad for everyone else.

        • 21ravens May 12, 2011 at 12:24 pm #

          You’re right, you are overpaid. If you don’t like what you’re doing, quit and get a better paying job! And get really good at it so nobody in their right mind would fire you. What? It’s too much work? Mmm… sounds like that’s the root of your problem, Maria Rose.

          • maria rose May 12, 2011 at 6:44 pm #

            i am not overpaid if i barely make $40,000 a year before taxes. And the work is not too much. Problem is there is no team effort. I am too old to get considered for a better paying job and believe me i have looked. They want my experience but they don’t want to pay for it. i believe the term used is overqualified (a polite way to say we don’t hire people over 50) So i am biding my time until i can retire at the age i want to without having the job kill me because of poor performance by fellow workers

        • maria rose May 12, 2011 at 6:36 pm #

          apparently someone misread my comment because they feel that anyone working in a union job gets over paid and is guaranteed a job even if they do a poor job. As a survivor of 2nd downsizing, I know no matter how good i am at job it is only a clock ticking to losing the job because i am just a number. The generation of workers behind me don’t care about job only how much they can make with the least amount of effort and the companies want to pay the least amount they can for what they get. Don’t blame me when you get slow service and poor quality products. I will be out of the work force

      • Really? May 11, 2011 at 5:50 pm #

        Sounds good, albeit without any supporting proof your solutions hold water, they are simply nothing more than dry self satisfying rhetoric.

        • Thane Farmer May 16, 2011 at 5:07 pm #

          I agree. Unions, excessive taxes, and government interference in the free market are the banes of American employment. Get rid of all the crap in the way of a free market, and watch the price of manufacturing it in the US come way down.
          Why doesn’t Apple give us a choice? Why not have an American plant manufacture the IPad2 and sell a “Made in the USA” version for $1,174 AND a “Made in China” version for $729? Personally, I would buy the USA version and just pay more if given a choice, many others would not. But with at least some electronics being manufactured in the US, more engineering students would be able to find jobs, our engineering schools would improve, and a possible domino effect may ensue. Why not give us a choice?

    • 2garden May 16, 2011 at 10:36 am #

      This figure is distorted because we the taxpayer subsidize the apple for having the jobs shipped overseas. Apple gets a tax break to have the product built over seas.
      As for the distorted figures that were given.
      Now the 54% profit margin is another distorted figure. If it costs approximately $90.00 to make in China and the same item is for sale for $600 that is not a 54% profit margin. It is closer to 400% profit.

  2. apple hipster May 6, 2011 at 1:15 pm #

    Between 5 and 6 thousand dollars is fair for such a magical device

  3. Al Brockman May 6, 2011 at 1:36 pm #

    You seem to be making assumption upon assumption and the drawing a conclusion based upon the weight of the assumptions. My grand kids tell me what happens when you assume!
    First, it seems beyond belief that the iPad could take about 9 hours for assembly and support labor. I would ASSUME that most of the process is mechanized.
    I think it is back to the drawing board

    • The Analyst May 6, 2011 at 1:42 pm #

      If the numbers from iSuppli and the article mentioning wages at Foxconn plants are correct, the number is 9 hours. $10 manufacturing cost (assuming 100% of manufacturing cost is labor, in reality its likely slightly less) divided by $1.11/hour = 9 hours. If you think it takes more than that, the difference in cost between a U.S.-made iPad 2 is even more than that mentioned in the article. If you think its less, from start-to-finish, I’d like to see some data substantiating such claims.

      You may be right and it takes much less time than that, but absent any information supporting such a conclusion, its hard to just ballpark a number.

    • The Analyst May 6, 2011 at 1:48 pm #

      Additionally, I’m skeptical that workers in China put in the same hours as employees in the U.S. I wouldn’t be surprised if they aren’t working 50, 60+ hours, which means the hourly wage is even lower, and given the numbers we have, increasing the number of hours it takes to manufacture the tablet.

      Again, we’re just working with numbers we have because they are the best we have for now. If I find some better numbers I’ll GLADLY take them into consideration, but these do not seem totally unbelievable, and thus this approach seems to be more accurate than just taking a stab in the dark.

      Appreciate the comment!

      • DOn May 6, 2011 at 7:52 pm #

        Another factor is if Apple were to create an All-American iPad, it would likely have to source the parts from American manufacturers, inflating the cost of parts by a comparable percentage, but reducing the cost of shipping by some very small number. My guess is it’s over $1,500 to be truly made in the USA.

        That said, I think the point of the article was to ask us how much we’d pay to support our own economy. The answer for me is probably 30-50% on a product if and only if I believe that it won’t crap out in a year like so many Chinese-made products do.

        Karl Denninger had a great article a year or so ago about the intentionally crappy capacitors used in electronics today because it typically renders the device useless to those who can’t replace a capacitor, and because they’re cheap devices in the first place, people just by another one. Functional Crapsolesence.

        • The Analyst May 6, 2011 at 8:08 pm #

          YES, thank you, exactly, that is a great comment!

          In terms of your term, “Functional Crapsolesence,” I think its more of Engineered Crapsolesence, or forced engineered crapsolesence (e.g. a business decision, not an engineering one). Why should Gilette make Mach 3 blades that last a month or more when they can make ’em to last a week (or less!)? The same thing goes with virtually all consumer (and sadly, some business) products these days. Companies ‘got smart’ that we’re all largely stupid.

          My parents just replaced a refrigerator they’d had for over 20 years that was in fine working order. The new one may have fancier features and look a lot more modern, but it seems pretty clear even now that it has a low probability of lasting nearly as long as its predecessor. It seems the new rule is make products that last just long enough not to ruin brand loyalty but keeps the customer coming back for more and more. This, of course, is a much longer discussion for another post.

          • FLAUMANATOR May 8, 2011 at 3:44 am #


          • tangoromeo May 10, 2011 at 12:08 pm #

            Planned obsolesence. In 1981 my mother bought me a washing machine when I bought my first home. I NEVER had a service call on it and I just replaced that machine 2 years ago even though I could have fixed it. They don’t make ’em like they used to!! Had to call for service on new machine in the first month!

        • thom e parke May 8, 2011 at 1:21 am #

          for those without enough years on this planet crapolesence is the 21st century carry-on of the auto industries’ obsolesence of the 1950 and 60’s and look at where and what DETROIT is now…and the rest of thbe economy to boot…

    • Douglas Capon May 7, 2011 at 2:40 am #

      I agree with the mechanisation point.
      It should also be noted that, for all companies (not just Apple), if all components were sourced locally, there would be: a reduction in freight and duty costs; a reduction in logistics overheads – manpower, storage and distribution; an improvement in customer responsiveness; more stability in financial planning.
      For government. there would be: less political tension over exchange rates; less money wasted on unemployment benefits (less tax = more spending power); less of local money being transferred overseas to fund nuclear programmes.
      Outsourcing to the other side of the world was the craziest action of greedy corporations that should have been discouraged by western governments.

  4. mm May 6, 2011 at 4:18 pm #

    you’re forgetting a number of costs here, its not simple just the cost per hour for labor and the cost for parts, you have shipping, marketing and a number of other cost built into the retail price of any product.

    And lets not forget the reason companies have gone overseas in the first place is because we have very low tarrifs on imports from asia, something that needs to be corrected for US manufacturing to be competitive again.

    wages in China are actually rising, there have been numerous articles on this, which is why companies are starting to find the next china

    • The Analyst May 6, 2011 at 4:21 pm #

      Like I said 1. back of the envelope 2. just working with numbers we have available and 3. hard to just blanket apply D&A expenses to 1 product.

      You are right of course that wages in China are rising, but they’re nowhere close to the point where it’d be cheaper to produce in the U.S. especially with all the contract manufacturers. If Co’s had to build/buy, tool-up, and operate factories themselves, that’d maybe be another story, but fortunately for them (unfortunately for others), they often don’t.

      Thanks for the comment!

  5. Rob Honeycutt May 6, 2011 at 7:05 pm #

    Hm, yeah, this is a really bad article. Lots of assumptions presented with little research. It’s pretty lame excuse to say, “Hey I’m just working with the information I have.” But, I have to say, not atypical for reporting these days.

    There are far more factors involved in the cost structure of a product like this. I know for a fact (from a friend who works at Apple) that they have a team of auditors on the ground in China constantly tracking their supply chain transactions. You’d need less of that in the US. They have another army of manufacturing personnel on the ground there as well. Travel back and forth. Hotels, meals, the stresses that puts on Apple employee families (all have associated costs). Cost of shipping product from China. There are huge inventory carrying costs when your manufacturing is remotely located from your customers.

    All you’ve done in this article is compared wages between the US and China. And even there you’re not accurately comparing types of manufacturing. Electronics assembly work in the US would work out to less than you’re stating. And you’re also only counting workers wages in China rather than factory cost for those wages, which include full housing, meals and other benefits. So, you’re comparing wages WITH benefits in the US to take home pay in China.

    What bugs me about articles like this is less that they are so poorly researched. It’s more that they get repeatedly linked to and thus the bad information gets propagated around the internet as if it’s fact.

    • The Analyst May 6, 2011 at 7:35 pm #

      Thanks for the comment. I’m very well aware this is an oversimplication; the intent from the start was to go through an example to see what manufacturing costs both here and abroad, not to be a comprehensive and exhaustive exercise in corporate multinational accounting. Anyone who passed Econ 101 knows this is a simplification, so while I appreciate your comments, I think you missed the point.

      You say all I’ve done is compare wages between here and China, and you are exactly correct, as the difference is so large its a massive determinant in a corporate make/buy (or outsource, as it were) decision-making process.

      How does Foxconn apply A&D and other costs incurred in manufacturing the iPad? How does Apple? We can estimate these things, but that would introduce even more assumptions into the discussion. It is common practice in economic and financial modelling, we make assumptions we think are reasonable given the information we have.

      I don’t want to address all of the things you said because that could take forever, but I will simply point out the fact that Apple has little-to-no inventory of iPad 2’s, in fact everyone I know who’s gotten one in the past month has ordered it online and has gotten it shipped directly from China.

      Appreciate the comment.

  6. Earl Kaatz May 6, 2011 at 8:16 pm #

    When NAFTA was being negotiated and described in the media, there was mention that polution, health concerns, working conditions, vacation and holidays for workers were a part of the treaties. Chances for those provisions to be heeded by either the corporations or governments involved turned out to be somewhere between slim and fat. Turns out the relatively good life earned by generations of American workers is being ruined by all corporations and governments. The referenced discussion concerning the cost of an american produced device compared to one made in an “emerging” market is bluntly obvious. Can the workers who build them “cheep” afford to buy them? Henry Ford the first, when belittled by other carmakers for paying his workers several times what they were paying theirs, he remarked that he paid them enough so they could buy his products.

    • The Analyst May 6, 2011 at 8:23 pm #

      Great comment. I’m more apt to blame the Government – considering it (broadly) has the ability to make the laws, rules and regulations by which business is to abide – than the businesses for pursuing their duty as profit-maximizing entities by (attempting to) influence policy and the regulatory regime in which they operate.

      Either way, I’m not sure we can continue on in our current manner without some major changes. After all, like you said, if our employees can’t afford the products they make and the services they provide, the whole game comes screeching to a halt eventually.

      Thanks for commenting!

  7. Chin Tu May 6, 2011 at 8:18 pm #

    I am visiting China right now. The cost of everything is high already except food stuff. Restaurants are very expensive, almost or surpasses USA. Housing is very,very expensive (i.e.,Shanghai). Point being, we can demand USA made only, I think 10% to 20% higher is possible, but not 50% to 60% higher. We are not a rich nation anymore! So is the rest of the world. Is US the biggest market for Apple? How do we compete in the world market with all other same products coming into the market? Look at the auto industry you will reach your own conclusion.

    • The Analyst May 6, 2011 at 8:28 pm #

      Very much agreed. Europe started the automotive era, the United States turned it into a serious INDUSTRY, Japan brought in the finesse and quality, and now Korea seem to be taking it to the next level.

      I”m curious, if you’ve made it there, what is the cost differential between products/services in Shanghai (etc) and smaller cities and suburbs?

      Thanks for the comment!

  8. fenton May 6, 2011 at 8:21 pm #

    The point of the article seems to be “America just can’t compete — oh, well.” There are almost certainly far less than 9 hours of labor in each iPad2. American companies should use their ingenuity to figure out how products can successfully be made here. Instead, they lazily just go to China — because everyone else does. I would (and do) gladly pay 30% more for “Made in USA”.

    • The Analyst May 6, 2011 at 8:29 pm #

      The point is absolutely not that we can’t compete, quite the contrary, we should be trying harder than ever to do so in the way you mentioned!

  9. voxpop May 6, 2011 at 8:27 pm #

    This illustrates that outsourcing is all about increasing profit margins. The price is set by the market. If Apple believed they could get $1,500 for each iPad2 then that is what the price would be.
    If the US wants higher wages then tell the politicians to tax outsourcing out of existence.

    • The Analyst May 6, 2011 at 8:30 pm #

      Blame the government before you blame managers who are doing their fiduciary duty to shareholders to maximize profits. Look no further than our very own elected officials if you want to point blame (although acting on it, instead of just pointing is far more productive).

    • Knobby May 9, 2011 at 11:54 am #

      A few comments:

      Corporate Greed: The sad fact is, if you can get away with it, you must do it. Every consumer market is now a flash-in-the-pan event. To wit: After the release of iPhone 4, the formerly $200 iPhone 3g now sells for $50. By the way, the iPhone is ruined with one teaspoon of water. This is engineered-in product life reduction at it’s best. The consumer blames themselves.

      Unions: The theft-in-office and greed in union management makes the corporate leaders look like pre-schoolers. Unions spend all their efforts tying down the employers with miles of red tape and outrageous demands, while only giving lip service and a marketing pitch to their members. The members think they are getting guarantees from their union, but unions successfully transfer all the responsibilities back to employer. Why would anyone pay $2.50 per hour worked for a management fee? The union bosses are raking in millions, with little to no actual responsibilities, other than fanning the flames of discontent with the employer.

      Federal Government Pay: Since the Feds can print money, they have no realistic limits as to what they pay employees, or how many of them they can employ. These factors are leading to a crippling distortion of wage and price inflation in the USA in general. Someday we will have to pay the piper for this. Probably later than most believe, due to the sorry state of monetary affairs with the Yen and the Euro. As other fiat currencies collapse, the market will come back to the USD.

      There, I said it. Fire away.

  10. Ari May 6, 2011 at 8:30 pm #

    I believe this article should not be picked apart because of its so called “lack of research”, since the huge difference in the cost of manufacturing in the U.S. compared to China is(close to) COMMON KNOWLEDGE. You don’t need references to see that American jobs have been shipped overseas, outsourced. You can discredit the information and still answer the question…
    Would you be willing to pay a substantially higher price for a product because it was manufactured in the U.S.? (I would) And if so, how much more? (Depends on the product)
    That is really what needs to be researched. Nitpicking numbers without looking at the big picture is what hurts the economy.
    It’s easy to criticize the author; it’s harder to be honest with yourself.

    • The Analyst May 6, 2011 at 8:35 pm #

      Thank you! The point of the article was not to – as you said – fuss about inputs and numbers, but rather to try to see the forest for the trees.

      So many of us, pundits, politicians, business-folk, and average Joe’s say we need more (well-paying) American jobs, but we seldom if ever even think about the implications of our wishes, were they to *poof* come true.

      I agree with you; I would pay more for U.S.-made goods (assuming as another commentor said, they were of high-quality), the amount which depends on the product and the quality difference.

      Thanks for the comment!

  11. Joe Wilson May 6, 2011 at 8:34 pm #

    When I worked in a major electronics factory much of the solid state items were made by machine. It must cost too much for the machines to work in the USA because the company sent the machines to mexico!

    • Knobby May 9, 2011 at 12:22 pm #

      CAT division Towmotor sent all their machines from Mentor, OH to Korea to make forklift trucks back in the 80s, when they were the industry leaders. They are no longer industry leaders. What did they save from that move? Their union member employees got squat from the union. They got job placement and retraining assistance from CAT, plus their CAT medical and retirement benefits. Where did all that money from the members go? Yacht payments? Private island? African safari?

      Lots of facilities are unbolted and trucked to Mexico to get away from US unions, EPA harassment, excessive taxation, and employment practices liability (ie: firing a worker). One lawsuit can kill a small business that otherwise would employ 20 – 30 people.

      The US used to be the place to go if you wanted to start a business. Maybe it still is, but things are headed in the wrong direction. If your business is small, you fly under the radar of the Federal bureaucracy. Big business has the resources and lack of character to simply chase the lowest cost of operations.

  12. LongOfTooth May 6, 2011 at 8:48 pm #

    Imo within reason the U.S. needs to protect its middle class whether that be by tariffs or what. I’m all for competition between equals but that’s not what is going on with Asia. Competitiing with them is doing nothing more than bringing our middle class down closer to their level. Wipe out the middle class and I think we’ll see what’s going on in the Middle East happening in America and that includes the police shooting the citizens.

    • Knobby May 9, 2011 at 12:06 pm #

      Yes – tariffs! Oops, that a bad word, say Value Added Tax (or VAT). This is approved language by the WTO.

      Canada charges VAT on US made products, and WTO/NAFTA is OK with that? We shipped $1200 worth of US-made SS fasteners to China, and they charged us $800 in Duties and Tariffs. Seems a bit steep to me.

      Why not charge a flat tariff on everything that comes in from overseas so we do not get called out on subsidizing one particular industry? Would 8% be enough to bring back some manufacturing jobs?

  13. Jake May 6, 2011 at 8:58 pm #

    Very interesting article. A lot of people do not understand the concept of trade. The iPad’s that the Chinese make and send over to us may “take away” manufacturing jobs from Americans, but it gives American farmers jobs because of the food we send over to China. That is a very simple example but the concept is the same. In the long run trade is good for all parties involved because each country can specialize in what they are good at.

    • The Analyst May 6, 2011 at 9:13 pm #

      I was going to go into that here but I realized at least half of the people don’t even bother reading the main point, going into comparative advantage would likely have been a waste. I also hope(d) that I didn’t have to explain 2nd week of Econ 101 but apparently, I do. (argh)

      Thanks for the comment!

  14. Dale Follman May 6, 2011 at 9:08 pm #

    Functional Crapsolesence and refrigerators. Salesman tells me manufacturers are buying compressor from several different manufactures, warranty is 1 year. 3 year warranty costs $250.00 I would find it hard to believe that a refrigerator cannot be US produced for $300.00 more and included with the purchase a 5 year warranty. With a life span of 20 years.

    Remember the Maytag testimonials? The display showing their bearings being 3x the size of the competitors. Now instead of 20 years, life is about 6-7. You can’t buy a quality product anymore.

    Wrenches spread rather than turn the nut, sockets crack and phillips screwdrivers are turned into awls.

    In the early ninety’s, as these products started to be outsourced. The difference in price of US made compared to import was minimal.

  15. jack May 6, 2011 at 9:17 pm #

    I would pay $100 more.

    First. Building it here would create middle class
    jobs, which create spendable income, which buys
    ipads. Secondly, shipping would cost less, and
    marketing is already what it is.
    More to the point, since when is a 54% profit margin
    reasonable. Corporations have gotten used to highly
    inflated margins by paying dirt cheap wages and
    offshoring jobs. That doesn’t mean these margins
    are right or even necessary.
    A 15.75% margin is still excellent.
    Imagine what our corporately grown food, already
    skyrocketing in price, would cost at a 54% profit
    margin. Agribusiness at least has the common sense
    to accept a lower margin so that their customers
    don’t starve. Let’s hope they continue to have
    that sense.
    People in business have to ask themselves how much
    money is enough. Would CEO salaries be astronomical
    if profit margins were more reasonable. CEO salaries
    versus workers wages are beyond farsical. And it’s
    because there is so much profit sloshing around.
    There is a lot wrong with capitalism as practiced by
    US and foreign corporations in the “global” economy.
    “Global” is the code word for lowest possible wage.
    Predatory capitalism, as practiced now, unfettered
    by regulation, is the author of excess and busts.
    It is a sickness. Capitalsim isn’t a bad thing in
    and of itself….but as currently practiced, it’s
    a cancer.

  16. kurt May 6, 2011 at 9:26 pm #

    it is the idea that American companies must make 50% to 60% profits that is the root cause. If they were able to live with less than multi millions in annual corporate bonus, we would still have a middle class instead we have both Goverment and Corporate leaders wanting more for themselves and less for the average individual. Why wouldn’t 15% to 20% be enought? Until the greed factor is addressed our middle class will continue to shrink.If the average citizen purchased only made in America Product we could force the fat cats to rethink the ” lets outsource all that we can and drive up our personal bank accounts. F^#k the little guy!

    • The Analyst May 6, 2011 at 9:43 pm #

      That is not the root cause nor is that even a “must.”. I’m out now but will respond in greater length this weekend. Thanks for the comment.

    • ken May 6, 2011 at 11:12 pm #

      kurt – you’re confused. Apple’s gross margin of 54% doesn’t go into Steve Jobs pocket – that money funds the R&D and operations of a huge company with many thousands of employees. Without making the 50% to 60% profit you cannot run a successful small company.

      Do a thought experiment: You want to have a business selling potatoes. You buy your potatoes from northern growers at $0.05/pound and they cost $0.50/pound to ship them to your cleaning/packaging location. How much did your washing machinery cost? How much does the workspace cost for the bag packers. Who will sort out the damaged potatoes and how much will it cost to comply with government regulations to dispose of that waste?

      Will you have machinery to hope your baggers or will they have to put spuds in bags with their hands? How will the bags get weighed and corrected so they’re not under or over (yes, gov’t won’t allow you to sell a 10lb bad that actually has 11 lbs in it).

      How much do you pay for bags? Are they paper? Lined with plastic? Are they burlap, maybe made of hemp? Maybe plastic or woven nylon bag. There are environmental cost benefit decisions to be made there.

      Your business has 30 people, bookkeepers, laborers, baggers, packers, purchasing agents, salesmen, administrative support, IT support if you use computers heavily. What about the cost of the computes and the specialized software you’re going to need? How much is that?

      What about your hardworking staff of 30. Do you want to offer them a health plan that covers drugs, dental, vision? How much of the premium will you pay vs asking the staff to contribute. What about allowing them to accrue sick time or vacation time. That costs you money. Their salaries cost money, then you also have to pay 7.5% of their salary into SS and another percentage into Medicare.

      Don’t forget OSHA compliance because you’ll be working with mechanical washers and forklifts and probably mechanical baggers. Don’t forget the cost of USDA inspections. Better buy liability insurance in case your potatoes cause an illness outbreak.

      So, at the beginning of the day you have 2 tons of potatoes at a raw starting cost of $2,200. Wash them, bag them, get them inspected, two of your workers are out sick – pay their salaries and pay for two temp replacements, make the installment payments on the automated washer, automated bagger, payments on leased forklift, buy the pallets, load them onto your leased truck and take them to the store. Pay your workers for the day and then make sure there’s enough left over to research whether you’d like to see other kinds of potatoes or maybe a different vegetable. Now you have R&D costs.

      How much do you have to sell your 5 lb bag of potatoes for (pre-input cost of $2.75 before being washed, bagged, packed) in order to keep your operation going – an operation were 30 people count on YOU for their livelihood every day. You’d need MORE than 50% profit just to remain afloat. You could never expand your business at that level.

  17. Brady May 6, 2011 at 9:59 pm #

    The same thing applies to cars, computers, name your toy. I lose I’m the biggest patriot until you want me to dip deeper in my wallet. For example, simply refuse to pay 40 grand plus for a made in the USA auto. A sense of reality here people – come on.

  18. George May 6, 2011 at 10:45 pm #

    I don’t know how much ant American should be prepared to pay for “Made in the US of A” but I can tell you this , unequivocally, if they don’t start paying something ‘extra’ to get ‘Made in America’ then their level of living is going to deteriorate drastically very soon.

  19. B Larsen May 6, 2011 at 11:00 pm #

    As I understand it, many manufacturers complain much more about the US corporate tax structure than the cost of wages. Over regulation is right behind that and wages is a distant third. Operating overseas gives the large, multi-national corporations huge advantages both tax wise, regulation wise and, at the momemt, through the fact of earning money in more stable currencies. The US is the only really powerful country that has an actual constitutional structure that would allow it to potentially stand up for real freedom for the individual without having to riot in the streets. It is important that this exists in the world and when companies like Apple bring their business focus back on-shore, that will be a signal that we have begun to turn this around. There is a lot of political idiocy to be overcome before this happens, but it needs to happen. The manufacturing move to China is just a symptom of the political and financial raping of the once greatest and most free country in the world. It is understandable why those who want power push for more control of free enterprise, but what isn’t so clear is why anyone who has freedom from interference in their lives would be willing to give it away.
    The problem isn’t so much with the wage earners but rather the forcing of real wealth out of our country by our own politicians and financial policy. If that were fixed, the wages here wouldn’t be a problem and that would fix itself. Even if the Chinese assembled the Ipads, we would have plenty of good paying jobs because the money would be here. History has always shown this to be the case when free enterprise is allowed to function for everyone. The talented rise quickly and they hire everyone in sight. The key is that anyone can rise up and prosper, not just those already in power.

  20. Dave May 7, 2011 at 1:04 am #

    Okay … so COMMUNIST China requires their ‘workers’ (not human beings in their minds) to work 6 days a week for up to 18 hours daily! The Apple ‘workers’ put in 26 days per month & at 12 hours daily, that equals 312 hours per month … which equals 59 cents / hour.

    The working conditions at Foxconn are so horrible that young people in their 30’s REGULARLY commit suicide! And Steve Jobs is happy to roll out this new cool toy knowing it was assmbeled by modern-day slaves! OMG … why aren’t we all outraged??

    The USA can absolutely build these things … and if people won’t pay $350 more for it, who cares?? Every Apple purchase supports this terrible Chinese slave-based state.

    • Carl May 7, 2011 at 2:35 pm #

      China Slaves jump out windows for many products, not just Apple’s. Apples may have tighter timelines than jeans, but I bet not by much.

      The USA CANNOT “absolutely build these things”, because there is such a thing as ICs in them, and many are only made one or two places. Specifically Taiwan and Japan. Remember during the Japan earthquake that some products that were not even built in the area could not be produced, because the ICs could not be sourced from having plants destroyed?

      We can all talk big here like we would or are paying more for MIUSA. But the VAST majority of US shoppers are going to pay what gets the job done and costs LEAST. And it’s the majority that matters. It’s too late to even care whether this manufacturing can be pulled back to the US. The bottom line is: either the WORLD will be pulled UP to what will amount to equity with the US (at the time that this all normalizes, say Dec 2012), OR the US will be pulled down to average WORLD wealth standards. Now, that later seems much more realistic to me, because the WORLD is a much larger entity to change than the US.

  21. Trend Trading Teacher May 7, 2011 at 4:09 am #

    As mentioned in the comments, there are a multitude of factors that affect the decision to move business/mfg functions offshore.

    Another, which I didn’t see mentioned here, is corporate tax rate. As mentioned several times by the author, the duty of a business is to maximize profits for it’s owners (usually the shareholders).

    There’s a groundswell voice in the US shouting “tax big business” & “tax the rich” louder & louder, but at 30+% it’s already high compared to other many other nations. (Canada’s, by way of example, is about 16%, with a further scheduled reduction expected in the next 12 – 18 months.)

    Point is, it’s another factor that’s been at least partly responsible for the amount of business/industry that’s got up & left the US of A.

    Anyway, it’ll take a little more than just Chinese wage increases to create a solid case for businesses to “bring it back home” to the US.

  22. Nelson May 7, 2011 at 4:50 am #

    If corporations like Apple, keep focusing only in the short term gain for its shareholders, I have to wonder what this companies will do when, because of the unemployment, the American population buying power gets further reduced to levels that just a few can afford those gadgets?
    Where is the social responsibility this corporations and their shareholders should be practicing at the moment?
    And I am not talking about socialism, I am talking about moderation. It is this country that has provided the platform for them to become successful in the first place. Why not feed the cow before it runs dry?
    Hardcore capitalism is killing the greatest society known to humankind.

    • Carl May 7, 2011 at 2:44 pm #

      I will present you with a challenge, then: Go to Walmart or ANY STORE, including your local mall, and find more than 5% of the stuffed animal toys that are NOT made in China. NOTHING we could make here can compete with China, save movies, music and software.

      And the reason Apple can’t make a difference? Suppose Apple’s products did go up in price, say 30% across the board. Acer, Tangent, in fact ALL other computer products, in competing lines, would now take over the market share, and Apple would die. You would have to get ALL the manufacturers on a level playing field, or market evolution would eat them alive. THAT is a larger challenge than changing a few million Americans to Buy USA.

      The fact is, with our corporatocracy, laws, regulations and taxes, nothing made here could EVER compete with a country where there are virtually no setbacks to production.

      So I have been wanting to move to Nicaragua for years, for the simple life. But if I just wait it out, third-world status is coming HERE!

  23. Dane May 7, 2011 at 6:35 am #

    If IPads were made in the USA, I would GLADLY pay $1200+ for one! China has it’s name all over everything in our homes and lives. I noticed we even import garlic from China! WHY? Are we short on garlic? Is it too cost-prohibitive to grow garlic right here in the USA?
    If Apple was wise, it would offer a choice of both American-made and Chinese-made IPads. Americans LOVE choice.

  24. Arthur Heitzler May 7, 2011 at 8:42 am #

    I thin a 25% increase charge for American labor would be OK by me, and we should have a tariff on imported goods from countries that tax our imports to their countries. There have to be manufacturing jobs in the US, or the lion’s share of the labor pool here will cease making a decent wage. American workers can’t compete for cost against semi-slave labor in communist China with no environmental concerns or OSHA lawyers raising the costs of manufacturing.

    • GARY KOSS May 12, 2011 at 6:58 pm #

      The reason we are importing food is the ENVIROMENTALISTS! Their lawyers with left wing liberals have DESTROYED the San Jouquin Valley! It used to be the “breadbasket of the world”. Now, because of environmentalists campaign to “save” the Delta Smelt, it is a shell of its former self! Those same “ENVIRONMENTALISTS” are the reason we are dependent on foreign oil! I say send the “ENVIRONMENTALISTS” TO CHINA!!

  25. Jeff Economist May 7, 2011 at 12:01 pm #

    Imports cost us more than people realize – we lose the velocity factor (GDP = money supply x velocity) which can be 8-12 for highly engineered products. For example, the purchase of a single foreign $37,000 vehicle causes 11 people to be unemployed for one year at a taxpayer cost of $275,000 ( these 11 people were paying an average of $10,000 taxes per year (income tax, payroll taxes-employee and employer, sales taxes on disposable income) and now receive unemployment benefits of $300/wk ($15,000/yr). 2 million imported vehicle plus foreign construction equipment etc. and you can see why we have 20 million people unemployed/underemployed and why we have Federal, State and Local tax deficits. I don’t have a problem with foreign ipads – if Americans just bought less foreign vehicles and construction equipment we would have full employment and tax surpluses. We need EQUAL trade with foreign nations (‘fair trade is not working because many nations cheat through import regulations, currency manipulation, tax policies, nationalized health and retirement, etc.). China, Germany, Sweden, Korea, Japan, and the Middle East must buy from the U.S. an amount equal to their exports to the U.S. each year.

    Velocity is the re-spending of a dollar over the course of a year – we don’t put our paychecks under our beds; we pay our taxes and bills and our money flows through the economy paying grocery workers, farmers, hairdressers, auto workers, steel workers,etc. When we buy a foreign product most of our money is sent to that foreign nation where the velocity factor then benefits their people. Now you know why every nation wants to sell to the U.S. – because we have ignorant politicians and ignorant consumers who don’t understand economic velocity.

  26. Kurt May 7, 2011 at 12:33 pm #

    America’s tax system gives a competitive edge to foreign manufacturers. We should no longer allow our income tax to help make foreign-produced goods, including ipads, more competitive than our own. Replacing the income tax with the FairTax (one word), a highly progressive federal consumptiion tax, will end this practice and make American products 20 to 30 percent more competitive, both at home and abroad! Getting rid of the income tax will dramatically lower production costs in this country. And competition will ensure that these cost savings will flow to American manufacturers (who will be able to create more and better jobs here at home) but also to the pockets of American consumers who will be able to buy more (including American-made ipods, etc.), save more, and invest more.
    It’s time to give American producers and consumers a break by passing the FairTax into law. I encourge readers to contact Americans for Fair Taxation toll free at 1-800-FAIRTAX to learn more about the FairTax, or log onto their web site at

  27. E Money May 7, 2011 at 1:55 pm #

    This article assumes that it would be possible to manufacture the product in the US, which it isn’t. The technology base has already left the country.

    Another question is if we would even have the IPad 2, because the attempt to account for the higher manufacturing costs would likely be attempted by reducing manufacturing hours (lean manufacturing) and this would necessitate automation. China is an upside-down market in this case, where there is minimal automation because human labor is so cheap.

    If a high defect rate is acceptable (and at a 50% margin go ahead and take some crazy scrap number like 5%), there’s really no more flexible manufacturing system than handing people new materials and assembly instructions. If we did it here, the iPad2 would probably be in manufacturing tooling development, coming out sometime in 2013.

    If you’re really crowdsourcing prices, I think you could probably raise the price by 20%, and pay off the rest of the cost by some sort of secondary revenue stream. Also Apple would have a huge case to make to a state (and maybe the federal government) to get a significant tax incentive.

  28. keith May 7, 2011 at 2:09 pm #

    False and misleading article.

    It ONLY covers the labor cost difference. What about all the regulatory, federal/state/local, environmental standards and OSHA costs, plus benefit costs for the workers?

    • The Analyst May 7, 2011 at 2:11 pm #

      The 32.53/hr includes benefits. I have absolutely no idea or information on benefits paid to Chinese workers, unfortunately. If you do, please share. Thanks.

  29. Tom May 7, 2011 at 2:32 pm #

    The analysis of labor costs is probably wrong. When they say it costs $10 to manufacture it, that is not all labor. They use automated equipment to populate the PC boards and do some of the assembly, so this cost probably reflects those costs as well. I would be surprised if there is more than 1/2 hour of actual labor in and ipad. If so, this would imply and increase in cost of $20 max. Probably the biggest reason the ipad is made in China is the fact that Asia is probably the only place that has the production capacity (meaning proper equipment and trained labor) to do it. Sadly, we’ve lost much of this here in America as companies have abandoned North America to chase relatively small (total) cost savings.

    • The Analyst May 7, 2011 at 2:34 pm #

      I wouldn’t be surprised if there was more manual labor involved in manufacturing than you think, considering how dirt cheap it is. Why buy a $100,000 robot and pay maintenance/training/etc when your labor cost is barely over $1/hour?

  30. luca signorelli May 7, 2011 at 2:42 pm #

    I would pay nothing–I would not own this piece of crap at any price, including as a gift.

    Pure garbage foisted on the sheeple.

    Like paying the outrageous phone bills that accompany this piece of crap?

    You’re welcome to your misery.

  31. Max Haag May 7, 2011 at 8:38 pm #

    20 to 25 % seems to be acceptable. We assemble much more comlex stuff in half the 9 hours you say for the pod.
    I do not feel that you have it right on this point.

    Uninons may play a part in our problems here in the US.


    • The Analyst May 7, 2011 at 8:58 pm #

      I was initially skeptical, but when labor is so cheap, does it pay to invest in expensive machines to automate processes?

  32. New Approach May 8, 2011 at 7:06 am #

    The Samsung tablet already seems to be much more competitive that the iPad.

    I would definitely not pay more than the current price for an iPad whether it was made in the USA or not.

    If the iPad’s prices were to go much higher due to higher production cost and high margins, all the new tablets coming out will look ALOT more interesting.

  33. Old Timer May 8, 2011 at 8:08 am #

    When your kids and their kids are living with you because they cannot make it on their own. You can always tell them stories about how cheap things can be made in communist china.

  34. Bill May 8, 2011 at 8:14 am #

    It would cost the same if a big fat tax were slapped on Apple and any other company that made their product overseas. The technology to make the iPad was invented here (using a lot of our tax and tuition money) where it actually costs more to live because it is not a dump. It does not matter “what consumers are willing to pay.” If our congress had not been bought and paid for a tax like this to keep the playing field even is what you would see. As it is companies HAVE to outsource if they want to compete with the others that do.

  35. jack May 8, 2011 at 7:03 pm #

    How about a more realistic wage of $10/hr? How about a friendly investment climate which automates the manufacture down to less than an hour labor? (simple matter of tooling cost) But it is true; the unions fight either of these measures, which exports a lot of jobs while saving a few of their own.

  36. George Mesmer May 9, 2011 at 2:23 pm #

    Have you talked to WalMart, or Target corporate buyers for their input? Remember a few years ago Wal-Mart was pushing “made in the USA”. and the next time I looked they had quietly replaced all the labels with “made in China”. So here we have numbers that compare the same type of product before and after, in terms of unit volume sold. % results for electronics might be different from clothing.

  37. cc May 10, 2011 at 8:43 am #

    Benz made it work using US labor. Toyota made it work using US labor. So Apple isn’t up to making it work using US labor? At the extreme, illogical end, who will Apple, etal., sell there gizmos to when the average US pay rate is the equivalent of $185? If the US can’t fund and can’t produce the military hardware to fight the next Al Queda (sic) or the next Hitler (there’s at least one born everyday) who will?

  38. Teacher Steve May 10, 2011 at 6:35 pm #

    Were I in the market for an i-pad, I would be willing to pay as much as $100.00 more if I could confirm the entire manufacturing process actually took place in the U.S. Building entirely and buying U.S. products would be very good for our economy both on a macro and micro view.

  39. cctyker May 12, 2011 at 12:22 am #

    US reduces labor costs by automating production. Robots are expensive to buy, but cheap to use. I doubt China has many robots. The labor cost has to be higher to justify the cost of mechanical production.

    What surprises me is the exposure American companies operating in China seem to disregard. China steals trade secrets, proprietary information, and patents anytime it believes the Communist regime will benefit. There is no such thing as copyright or patent protecton in China.

    Apple could easily see an exact replica of their product being manufactured in China and sold more cheaply around the world.

    Good luck Apple.

  40. Apple iPad 2 First Look Review May 12, 2011 at 5:22 am #

    Great review! You actually covered some interesting news in this post. I came across it by using Bing and I’ve got to admit that I already subscribed to the site, it’s very great 🙂

  41. T W Huning May 12, 2011 at 9:52 pm #

    ….if it WERE made in……

  42. Norm May 14, 2011 at 1:18 pm #

    Having worked in China advising high tech firms facilitate joint venture deals from the west, I can tell you that labor, despite the disparity in costs commensurate with differences in cost of living; is only a minor part of the cost factors. The main reason for shifting mfg to China and Asia in general is capital costs. The cost to build a plant, equip it, deal with government red tape, environmental laws, east and west, is the most signficant factor in product costs NOT labor.

    But you are correct, jobs leave the USA because consumers will not pay the domestic prices. They want the best for the least; it’s part of our culture. Look in your closets, look at the electronic gadgets you buy. Read the labels, Mfg.In -we all buy products made elsewhere, not in the USA. We need to focus on what we have always done best, create new, innovative products and contract out their production to the new “rust belt” in China.

  43. MKC May 16, 2011 at 7:54 am #







  44. kkflash May 17, 2011 at 10:32 am #

    My comments are directed to no one in particular. First of all, the article simply points out the fact that there is great disparity in the cost to manufacture in the US vs. many other places on earth, China being just one of these. US workers are paid more in salary & benefits than anywhere else, largely due the extortion practiced by unions. US corporations are taxed and regulated more than anywhere else, a fact also influenced by unions and their members, who consistently lobby and vote to elect representatives who’ll legislate the redistribution of wealth to those less deserving than the entrepreneurs and business owners who created that wealth.

    Centuries of progress in transportation and communications have created a truly global economy for most goods and many services, and manufacturing sector labor is certainly one of those services. Until US workers realize that their mostly unskilled labor is no longer worth $32.53/hr in the global economy, we’ll continue to see those jobs move to where the job can be done more economically. This job shift is not going to be solved by ever-increasing tariffs on foreign produced goods, because other countries will simply do the same to us, leaving US produced goods still uncompetitive internationally. Blaming loss of US manufacturing jobs on corporate greed is a copout for workers who aren’t willing to compete for their jobs on an international scale.

    The solution is a return to the free market capitalism that made this country the wealthiest on earth. That means elimination of artificial wealth redistribution in all its forms: unions, over-regulation, high corporate and individual income taxes, unemployment compensation, and excess government spending. American business can compete with the rest of the world only if the US government gets out of its way. American workers can compete with the rest of the world too, but only when government stops molly-coddling them and forces them to actually compete. Darwin knew it is the strong, the intelligent, and the talented that cause a species to survive and prosper. The more unnatural support is provided for the weak, the stupid, and the unskilled, the greater their numbers become and the weaker the species becomes. By forcing the less gifted to survive on their own, we make them stronger and the country stronger too.

  45. dan May 19, 2011 at 6:31 pm #

    Now lets say we had a President that supported Capitalism and competition. Some won who understood the business that would be created if our 36% corporate tax rate were lowered to 27% , an amount that would be 2% lower than China’s. Then ask our unions to lower their
    wages about 5% / $1.57 per hr. from $31.50 per hour to
    $29.93 hr. That still computes to $58,860 yr. at 40 hrs.
    per week. Then impose a 3% Tarriff on all imported goods and call it a tax on foreign countries extremely low wages and unfair competition. Then tell me what the price difference is? If that does not get Apple to bring jobs home tell them there profits are much more obscene at 54% of product sale price than Exxon’s is at 19%.
    Hey after all what is good fore the goose is also good for the gander. Opps…I mean Obama’s cronies. It certainly would be good for the American people and our economy.

  46. Guy June 5, 2011 at 1:54 pm #

    Let us outsource our country. That way we could get rid of our debt, taxes, the issue of employment, medical, and ethics. It is absurd that are morals / values have diminished to a point where our own people and less than a 3rd world country. Let us outsource all the people who run this country…. We took pride in our work back in the 50- 70’s. Other countries purchased our products even with unions. Yes, there is corrupt unions just as there is corrupt companies. I would be willing to pay for a product which was made here, even at a higher cost as long as I can make a decent living. Also, I think it is time for Corporations to take responsibility for their actions. Companies want to make a profit, but at what expense? Let us not get greedy… If you want to continue to outsource our jobs, you should live under the conditions of the people who manufacture the products in China, India, and the Philippines. How many millions does a person or corporation need to make to make them happy?

  47. pepe June 16, 2011 at 3:53 am #

    I THINK YOU LOST SOMETHING. In countries like USA, the company would try to automate the process. So, the real cost of the ipad would be pretty less.
    The problem is that automation needs a initial investment and the ROI is slower than the way Foxconn offers.
    Automation is a key factor in the humanity development. I think, China is making humanity go in the wrong direction. Nowadays, it is less expensive to contract a group of people in China working as slaves than to invest in automation to reduce costs.
    I hope, one day, USA industry starts to invest in automation and stops moving to outside to make slaves.

  48. pf June 22, 2011 at 4:12 am #

    Do you know the price of the new products? I want iPad, but I think it’s so expensive as the usually new product. Anyway, I don’t care about the price for now because I knew the great cash advances agency to give me money with lowest fees charged.
    I found it from There are many reviews about cash advances agencies with ranking. It save my time to find it and save my money to pay for loan fees charged.

  49. NC July 25, 2011 at 4:44 pm #

    Nine (9) hours to assemble an Ipad–consider this, that in the 70’s it
    took 22 hurs to assemble a car on a Detroit asembly line that was nowhere as automated as assembly is today, and that a completed car came off the line every 90 minutes—If it takes more that 1/2 hour to
    assemble your apple device, then Apple is going to look elsewhere to get that service. (Also consider that each car comming off the assembly line had a different set of options-and generally got them installed corectly)

    • The Analyst July 25, 2011 at 4:47 pm #

      Labor is so cheap in china they can do it all by hand instead of on a mechanized assembly line. 1 ABB robot would cost about the salary of a few thousand workers + maintenance, conservatively.


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