iPhone: Made in America?

In the past decade, Apple has grown to be the largest information technology company in the world, thanks, in part, to its most ubiquitous product: the iPhone. Since 2007, this line of smartphones has sold over one billion units, working its way into the hands of everyone from blue collar laborers to the President himself. One can reasonably attribute the singular achievement of the iPhone, as having propelled us into an age of connection and communication previously thought unimaginable.

Despite this achievement, the production of these devices have a darker side to them. In 2010, Apple started to gain some scandalous media attention, due to the manufacturing process of the iPhone. Investigators and reporters uncovered that these devices were being produced by severely underpaid laborers in atrocious conditions at megafactories in China, owned by none-other Apple’s largest manufacturing partner, Foxconn. At  Foxconn’s height, they employed an estimated 450,000 laborers that not only worked but lived together in one single factory. These laborers were working up to 70 hours per week, for an annual salary of only $1600.

longhua
A satellite image of the massive, sprawling Longhua campus Image: http://www.newgeography.com/content/001764-china-two-modernizations-decentralization-and-living-away-job

Between long work shifts, brutal living conditions, and low pay  it was no surprise the suicide rate increased dramatically in these factories. The suicide rate became so high, that the largest of these factories, in the Longhua district outside Shenzhen, China, came to be known as the “suicide factory”.  Ironically, factory workers committed suicide by jumping off Foxconn factory rooftops. As seen in the picture below, “anti-suicide nets” were installed around Foxconn compounds to prevent this form of suicide. 

Untitled
“Anti-Suicide Nets” visible around every tall building in the enormous Foxconn compound. Image: https://guestlist.net/article/88856/the-foxconn-suicides-bad-history

This all begs the question: What if we manufactured the iPhone here in the United States? Would state workers suffer similar working conditions? Time after time, this question has captured our collective imagination — especially during the campaign season. In the United States, there are  unions, worker rights, labor laws, safer working conditions, as well as efficient and environmentally-friendly manufacturing technology. We would like to believe that moving iPhone production to the United States would change Apple’s employee factory work ethic. However, is Apple willing to sacrifice cheaper labor and material costs to produce in the United States? What impact would it have on manufacturing costs, in terms of money as well as in terms of the environment?

Our questions will soon be answered after Foxconn sets up shop in Wisconsin. However, we explore the difference in material and labor costs in the United States compared to China,  as well as the difference in the current labor laws in China and the United States.

 

Foxconn Milwaukee

 

Industry experts estimate the total manufacturing cost of the iPhone to be around $12-$30, not including parts, transportation, etc. We can start with that $30 figure as a baseline, to see the what the most dramatic change in the phone’s price would be.

In the wake of Foxconn’s 2010 media scandal, new labor rules were enacted such that workers could only work 40-hour weeks with no more than 60 hours of overtime per month. Workers also saw their wages drastically increase from $136 per month to $400 per 40-hour week. Due to the increased cost, the factories saw a huge decline in numbers, with the Longhua factory being reduced to only around 140,000 workers total, though that’s still a staggering quantity.

apple_good_foxconn-factory-apple-mac-china-steve-jobs-suicide
A small fraction of the workers at one Foxconn facility Image: http://www.nkkhoo.com/2013/04/21/5-million-iphones-return-to-foxconn-for-rework/

 

$400 per 40-hour week brings us to approximately a $10/hour wage for the factory workers, which is well within the realm of reason. It’s not glamorous, but it’s well above minimum wage, even in the United States. Labor law in China mandates that their overtime pay is at least 1.5x their base pay, so we can assume that if they maximized their overtime in a 4-week month, working 55 hours per week (40 plus 15 overtime), they would receive a wage of $625.

In Wisconsin, the minimum wage is $7.25 per hour, meaning that the manufacturing costs may actually drop if the workers are paid minimum wage. Law in Wisconsin, however, mandates that any work beyond a 40-hour work week must be paid at 1.5x the nominal rate. Using that rate, a minimum-wage worker in Wisconsin working the same 55-hour week would receive a wage of $453.

For the sake of this article, we can assume that this is the most important factor determining the price of manufacturing. In other words, it is beyond our scope to estimate the difference in cost of utilities, the difference in pay of the factory administration, the difference in transportation and logistics costs, and the difference in efficiency of labor. We are also making the assumption that the same number of laborers working the same number of hours will produce the same result.

Bearing all that in mind, a weekly wage drop from $625 to $453 would bring costs down by 28%. Per iPhone unit, assuming our baseline manufacturing price of $30, that would result in the phone being a whopping $8.26 cheaper.

In Wisconsin, however, factory workers work well above minimum wage. In fact, their average salary is around $14 per hour. A 55-hour work week at that rate in Wisconsin would net a wage of $875. Making the same assumptions, that means a 40% increase in manufacturing costs, bringing the price of the phone up by a whole $12.

Compared to the total price tag of the iPhone, that’s hardly anything. It’s probable that due to demand elasticity for labor, the price of factory labor would drastically increase after moving the factory to the US, and that transportation costs may become a huge issue, but assembly costs are so little on an iPhone that it seems they hardly matter. A similar study was done by the MIT Technology Review in June 2016, and they found that even by the most generous estimate, constructing the iPhone in the United States would only add an additional $30-$40 per unit. The article cites that margin to be the result of the additional expenses of transporting all the parts to one place in the US.

From the United States Department of Labor, the Bureau of Labor Statistics reports that the state of Wisconsin, as of August 2017, has a labor force of 3,157,933 with  3,051,853 employed, resulting in an unemployment rate of 3.4%. With the assumption that Foxconn will provide an estimated 50,000 factory jobs, we can calculate the best case scenario for the decrease in unemployment rate for Wisconsin. For our best case scenario, we assume that individuals already employed will not just transition from their current job. Instead, the 50,000 new jobs provided by Foxconn will provide work for individuals in the labor force. We can now recalculate the percent change of the labor force and employed, for a new unemployment rate of 0.19%. Under the best case scenario, Wisconsin would then have the lowest unemployment rate in the nation.

Besides best case scenarios, determining the impact of a Foxconn factory on Wisconsin’s economy is hard to describe in concrete numbers. However, the impact will likely be negligible. Apple has reported that bulk of iPhone jobs are to be found supplying components — not in assembly. Additionally, Foxconn is likely to utilize robot and A.I. technology to minimize any increase in labor costs. In Taiwan, Foxconn was able to cut their labor force in half (from 110,000 to 50,000) due to robot technology.

 

iPhone and the Environment

 

In a recent Apple Environmental report, renewable resources and materials are being incorporated in attempt to decrease use of materials contributing to the carbon footprint. “For example, Apple utilizes aluminum that is smelted using hydroelectricity rather than fossil fuels, and has reengineered the manufacturing process to incorporate scrap aluminum.” Overall, production of even the latest iPhone models have increased in total greenhouse gas emissions — with the iPhone X recorded for the most greenhouse gasses produced (79 kg CO2e). The packaging of the device is considered the most environmentally friendly.
(Source: https://www.apple.com/environment/reports/)

e-waste(E-waste in Asia)

To further detail how the iPhone is affecting the environment, the iPhone 5c introduces polycarbonate material, which is extremely arduous to recycle since it requires chemical recycling to decompose so it can be reused for future use. The unique material is applied to the case, resulting in the device lasting longer, however to the expense of having to completely remove or burn off the material. If the material is burned, it adds to the atmospheric pollution that many researchers are claiming is the cause of climate change. Polycarbonate is considered an extremely rare yet environmentally damaging earth material, since its production establishes a grand amount of acidic waste and radioactive residue.
(Source:https://www.wired.com/2013/09/ifixit-teardown-apples-latest-iphones-not-as-green-as-schiller-claims/)

However, in the most recent years, apple has taken a more environmentally friendly approach in the manufacturing of their newest models of the iPhone. They have removed harmful materials such as beryllium, benzene, and n- hexane in the most recent phones, however that is not to say that their usage and production still impacts the environment negatively. According to the article “iWaste, the iPhone Environmental Impact” it claims that, “Apple reports that 77% of the greenhouse emissions they produce comes from the manufacturing process alone. Only 17% of emissions are produced from actual product usage by the consumer.” The more the iPhone is being produced in these factories, the more greenhouse emissions are being released into the environment.(Source: https://www.getorchard.com/blog/iphone-environmental-impact/)

The production of the iPhone is also contributing to the looming E-Waste predicament that is also causing an negative impact to the environment. Electronic waste refers to when any electronic device is discarded or tossed away. It becomes a tremendous problem when the device is not properly recycled as it contains harmful materials that could cause havoc environmentally. For instance, very few people properly recycle their iPhone, as the United Nations University claims that fewer than “16% of E-Waste is recycled”, but , “3 million metric tons of e-waste was produced in 2014 alone.” There is a very high possibility that harmful materials such as tungsten or cobalt will enter the groundwater and result in damaging health effects. Water that has been retrieved from cobalt mines have shown to pollute water systems exhibiting on how mining metal for the iPhone can also result in detrimental environmental and health consequences.(Source:http://www.marketwatch.com/story/why-apples-new-iphone-is-bad-for-the-environment-2017-09-12)

Below explains three production strategies and consumer practices that make the iPhone more sustainable.

  1. For one, most iPhones are manufactured so that they cannot be easily repaired, leaving the consumer no option other than to replace their phone. Reengineering the iPhone for the battery to simply be easily replaced, is the most efficient and direct way to reduce the amount of electronic waste caused by iPhones. A battery is a crucial part of any smartphone, in most smartphones, the battery is easy to access and thus easier to replace. The battery is also the key towards extending the life smartphones, which in most cases the life is extended up to another 2 years. In comparison, an iPhone’s battery is not easily accessible by the average consumer and it the cost to replace the battery be expensive depending on the model of the iPhone. 

    (Source: https://www.nytimes.com/2014/03/13/technology/personaltech/the-radical-concept-of-longevity-in-a-smartphone.ht)

  2. In addition, Apple products tend to be difficult to recycle, especially now that each new product is slimmer and compact with components that laborious to remove. The glue used in a lot of the products Apple produces a considerable amount of not just electronic waste, but a waste of raw materials. Since it is already difficult to remove each individual component of an iPhone, the glue is another added obstacle towards the recycling process. In the end, Apple products are shredded and then key components are separated and melted down (such as, glass, aluminum and other metals). In turn, Apple can reduce this waste by using less glue in their products so that disassembly is more effective and saves raw materials from being wasted.

    (Source: https://www.wired.com/2014/12/product-design-and-recycling/)

  3. As a consumer, it is easy to be tempted to move on to the newest iPhone model. With the average use of any smartphone being only about 2 years, it is more sustainable either trade in or buy a used phone. There are many trade in programs that the consumer could engage in, and depending on the condition of their phone, the phone is either refurbished, resold or recycled. Meanwhile, the consumer is able to receive a new iPhone that fits their needs while their old iPhone continues to circulate. By trading in a used phone, the phone is given a second life and is less likely to harm our environment. Buying a used phone poses a lot of the same benefits for not only the environment but the consumer as well. It is cheaper to buy a used and slightly older model of any iPhone. In all, both are cheap alternatives that also prevent unnecessary electronic waste and can ultimately reduce the large amount of greenhouse gases inducing climate change.

    (Source: https://www.gazelle.com/thehorn/2015/03/09/life-spans-of-used-phones-consider-smartphone-longevity-when-buying/)

 

 

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