Another U.S. President Wants iPhones Made in America. It Probably Won't Happen.

And if it did, it wouldn't mean much.

"What would it take to get iPhones made in America again?"

"Those jobs aren't coming back."

That is a conversation between a U.S. president and Apple's CEO — but not between president-elect Trump and Tim Cook. It was Barack Obama and Steve Jobs, at a dinner in 2011.

Five years later, the same conversation happened again.

President-elect Donald Trump, who takes office next January, told the New York Times last week that he had spoken with Apple CEO Tim Cook by phone.

Trump said he told Cook: "You know, one of the things that will be a real achievement for me is when I get Apple to build a big plant in the United States, or many big plants in the United States — instead of in China, Vietnam or someplace else."

By Trump's account, Cook answered vaguely: "Well, I understand that."

Apple sits at the top of American hardware manufacturing, and for three years running it has been the world's most valuable company. Its main product, the iPhone, sells 200 million units a year, worth more than $100 billion.

But as the line laser-etched on the back of every iPhone says — "Designed by Apple in California, Assembled in China" — the more than 1.6 million jobs Apple's hardware manufacturing supports sit overwhelmingly in China and the rest of Asia.

Which is why, whenever the talk turns to reviving manufacturing, Obama and Trump — who agree on almost nothing else — both point at Apple.

Trump Is Pushing Harder Than Obama to Make the iPhone American-Made

Unlike Obama, Trump has put something concrete on the table to get Apple to move its factories.

He has promised tax cuts for multinationals. Most of Apple's revenue comes from sales abroad, and under U.S. corporate tax law the company pays 35% when it brings that money home. Apple currently holds more than $200 billion in cash outside the United States.

If the government cut the corporate rate and — as people have speculated — opened a special repatriation window for a few months taxed at only 10%, Apple could bring that cash back, pay dividends to lift the share price, and buy itself more time to find whatever comes after the iPhone.

Trump has brought out threats, too. He has proposed a 35% import tax on goods from China to protect domestic manufacturing.

Ford has already felt it. Early this year Ford confirmed it would invest $1.6 billion in small-car production in Mexico. Trump said repeatedly during the campaign that he would not allow Ford to do this if he won, and aimed the same "35% tariff" line at the company.

After Trump won on November 9, Ford said it was willing to work with the new president and take his advice. A week later, at the Los Angeles Auto Show, CEO Mark Fields hardened his tone: Ford would not change its plan to build in Mexico, and a 35% tariff would have a "huge impact" on the U.S. economy.

Three days after that, Trump said on Twitter that he had reached a deal with Ford: the company would keep its plant in the United States and drop the plan to move to Mexico.

Made in the USA: The Easiest Route Is Assembling iPhones Here

As a rule, a product only has to be assembled in the United States to carry the "Made in the USA" label.

Apple and its suppliers have bowed to government pressure this way before.

In 2011, Foxconn built a plant in São Paulo, Brazil, to make iPhones. It existed to satisfy a government: then-president Dilma Rousseff had promised to transform Brazil's tech industry, raise employment, and bring iPhone prices down.

To protect local industry, Brazil's import tariffs run as high as 60%, which is why an iPhone costs twice as much there as in the United States. Apple built the plant to get around that.

Now it is weighing the same move in America.

According to information Japan's Nikkei obtained from the supply chain, Apple is talking with Foxconn and Pegatron, the two companies that assemble the iPhone, about the possibility of assembling phones in the United States.

So far Foxconn thinks it can be done, and Pegatron has refused. Pegatron's answer points to the other side of the problem: suppliers face far more cost pressure than Apple does.

Moving Foxconn to America Wouldn't Make the iPhone Much More Expensive

American labor costs more than Chinese labor. According to a Labor Department report, the median annual wage for "assemblers and fabricators" in 2015 was $30,000.

Pay at Foxconn's Chinese plants moves around. We found a November hiring notice from the Zhengzhou plant offering full-time workers a base of 2,100 yuan a month and total pay, overtime included, of up to 4,500 yuan. At that top figure, an ordinary Foxconn assembly worker makes 54,000 yuan a year, about $7,820 — a quarter of the American average.

Even so, moving assembly home would not push costs up absurdly, because assembly barely registers in what an iPhone costs to build. Take the 64GB iPhone 6s, which launched at $749: IHS's teardown put the cost of all its components at $230 and the labor cost of assembly at $4.50.

MIT Technology Review cited an estimate by Syracuse University professor Jason Dedrick that moving assembly to the United States would add $30 to $40 to Apple's costs and raise the iPhone's retail price by 5%.

The iPhone's gross margin is above 40%, so if Apple gave up a slice of profit, the phone would not have to get absurdly expensive. Add Trump's promised tax cuts and the effect on Apple could be small.

All of this assumes, of course, that only assembly — the last step in making an iPhone — moves.

Why Would Jobs and Cook Resist?

Making an iPhone mostly involves suppliers in Asia. They supply the parts, which come together at assembly plants in China.

Apple changes production volumes at any moment, and that demands suppliers who can react fast.

A 2012 New York Times story captured what that looks like. A former Apple executive described how in 2007, weeks before the iPhone went on sale, its screen design was changed at the last minute, forcing a complete rebuild of the assembly line.

Close to midnight, the new screens began arriving at the plant. Foremen woke 8,000 workers in the dormitories; each got a packet of biscuits and a cup of tea and was walked to the workshop for training.

Thirty minutes later, 12-hour shifts began. Within 96 hours the plant was turning out more than 10,000 iPhones a day.

"The speed and flexibility is breathtaking," the executive said. "There's no American plant that can match that."

The iPhone is rebuilt every year, and most of its suppliers are in Asia, so putting the assembly plant next to the parts makers is sensible and efficient.

Chinese labor isn't even the cheapest. A recent report from the consultancy WTW found Chinese labor costs 30% more than Indonesian labor. Apple keeps its contract plants in China anyway, because they sit closer to hundreds of parts suppliers.

Move the assembly plant alone to America and changing production becomes very hard. At the current level of American manufacturing, hiring 8,700 hardware engineers and starting production with 200,000 assembly workers would take more than nine months; a Chinese plant needs 15 days.

Even if many companies brought production home, the United States does not have enough skilled workers to hire. In a 2015 interview with CBS's 60 Minutes, Cook said America has been steadily giving up on investing in "vocational skills." Gather every tool and die maker in the country — the technicians who make molds and parts — and, he said, they would "fill a room." He meant the conference room where the interview was taking place. "In China, you would need several football fields."

And the Jobs Foxconn Would Bring Aren't Good Ones

What the U.S. government wants is simple: more jobs and more wealth at home. Having Foxconn open an assembly plant in America may not do much for either.

The Wall Street Journal has traced where the money spent building an iPhone goes. Most of it goes to Japanese suppliers, then Germany, South Korea and the United States. The Chinese suppliers, who mostly do assembly, get 3.6%.

Foxconn employs 1.2 million people and draws more than 60% of its revenue from Apple's orders. Apply that share to its workforce and roughly 720,000 jobs are tied to the iPhone. If government pressure pushed Apple to move production of the iPhones sold in America — about 30% of the total — that would carry over some 200,000 jobs.

That is not a small number. Apple itself employs only 110,000 people directly, most of them Apple Store staff earning close to minimum wage.

But the jobs on the line may not appeal to anyone. Foxconn adjusts how many people it hires each month according to what it has to build. Entry-level jobs ask for no schooling, offer little training, and post their fixed overtime rates in the hiring notices.

This is not work with a future. Next to chipmaking or carmaking, the assembly jobs the iPhone would bring are unlikely to attract the white blue-collar workers hoping to "Make America Great Again."

The economic gain matters even less. In the iPhone business Apple still makes the most money, and it has never left its manufacturers much profit.

The Real Source of Jobs Is Those 800-Plus Companies

Look at the whole supply chain, though, and the employment Apple drives is staggering.

Apple publishes a supplier transparency report every year. More than 800 factories and companies now work for it, spread across more than 20 countries and employing 1.6 million workers.

Before an iPhone is assembled, most of its parts come from Asia:

China has the most suppliers, 346, followed by Japan (126), the United States (69) and Taiwan (41). Apple has 18 assembly plants worldwide: 14 in China, 2 in Brazil, 2 in the United States.

Most of the American suppliers are design and creative firms — service businesses.

Only 18 plants do assembly, and 14 of them are on the Chinese mainland. Two more are in the United States, one in Ireland, one in Brazil. Almost every iPhone plant is in China; only the Brazilian one makes a small number of iPhones for the local market.

Moving Those Companies Would Be Much Harder

Apple holds enormous power over the companies in its supply chain, something Jobs was proudest of. It runs a tight cost-control system: suppliers must disclose their exact cost accounting, down to how many workers are needed and what they are paid, and then Apple sets a price. Apple, not the supplier, decides how much profit a part should carry.

When a new plant has to go up somewhere else, the supplier pays for it too.

Of the two assembly plants on American soil, one makes the Mac; the other, in Austin, Texas, belongs to Samsung. Samsung funded it in 2011, and it mainly makes Apple's core processors.

Apple's Austin campus is now its largest office site outside its Cupertino, California, headquarters, and it has put a large customer-service team there as well.

This is the favorable example of "Apple coming home," but it probably owes as much to timing and place as to any wish to create local jobs.

Austin is the center of the chip industry, home to the semiconductor company Freescale, and ARM, Intel, AMD and others have plants there. They built there for a simple reason: chip talent is concentrated in Austin. That is plain business interest, not an effort to fix local employment.

But iPhone sales have now fallen for three straight quarters, and the balance of power has shifted a little. Pegatron's refusal to open an American plant shows it from another angle.

Most of Apple's partner factories lack Foxconn's scale, so investing in an American plant is out of reach. And most of them do not work for Apple alone.

Apple is still the most profitable company in the phone industry. A recent analysis from BMO Capital Markets put its share of industry profit in the third quarter of this year above 100% — meaning nearly all of its rivals are losing money.

Apple can use its high margins to absorb higher assembly costs. Companies with thin margins cannot cover the cost of moving to America.

Next to What Technology Will Do to Work, Where the iPhone Is Made Hardly Matters

According to this year's Labor Department figures, there were 1.834 million assembly technicians in 2014, and engineers in the "IT" category already outnumber them. As Cook said, American society has moved away from manufacturing.

Every technological upgrade has brought a shift like this. First the Industrial Revolution moved farm populations into cities to work in factories. Then factories automated, production went global, factory work in rich countries shrank, and services flourished.

Now, as computers and smartphones spread, a software industry has grown out of nothing.

As Silicon Valley's voices against Trump say, manufacturing jobs are not attractive, and Apple along with America's software and chip companies has already captured most of the iPhone's profit.

What they prefer not to say is that the captured profit has nothing to do with the workers who lost their jobs and worry about retirement. Most people cannot get into software, and waiting tables or working a store register leads nowhere.

And the technology companies show no sign of stopping.

Uber's founder told reporters that drivers are his single largest cost and that he is waiting for self-driving cars — and he has poured huge sums into developing them and put driverless trucks on the road.

Amazon has deployed warehouse robots at scale; workers stand still and sort the goods the robots bring them. The humans are probably still there only because of an experiment the company ran, which found that human hands are still faster than robotic arms.

IBM runs ad after ad about how Watson will make companies more efficient, starting with the call centers of hospitals and banks. If the number of incoming calls stays the same and efficiency rises, there is only one possible result.

Next to what comes after this, where the iPhone is assembled hardly matters.

Governments can use tax policy to try to reverse the global division of labor, and it still will not change what rising efficiency does to jobs.

This is not something a president can turn around in four years, or eight.

In the end, it is not only America's problem. Factories in China cannot find young workers, and technology is replacing jobs here on almost the same schedule.

Cover image from the film Charlie and the Chocolate Factory.