Apple market has to rely on China

The "backflow of US manufacturing industry" was a topic that was widely discussed in 2012. At the end of recent years, Apple Corps added new footnotes to it. Recently, Apple CEO Tim Cook said that next year will invest 100 million US dollars, part of the Mac computer production line in China transferred back to the United States. Is Cook's decision a political show or business logic. Is this a wise decision?

“What I want to say to business leaders is simple: ask how you can bring your job opportunities back to the United States, and your country will do everything to help you succeed.” It was blown by Obama in his speech at the beginning of the State of the Union address. In response to the clarion call of “encouraging the relocation of manufacturing industries in the United States”, some US companies relocated their production from China to the United States, including food giant Gayton, construction machinery giant Caterpillar and headset manufacturer Sleek Audio. The toy manufacturer Wham-O, etc., these high-end manufacturing companies have received widespread attention and praise from the US media. One of the most successful companies in the United States is also the world’s largest market capitalization company—Apple cannot ignore this call. Cook’s decision is a response to domestic pressure.

Technology always creates new opportunities while destroying old jobs. Apple's job offerings are remarkable. In November, Apple announced to the outside world that the application of software only provided 290,000 jobs for the United States. Many of them had full-time jobs and only used spare time to create programs. Over the past four years, Apple has paid programmers more than $3 billion in royalties.

"Manufacturing backflow" is a false proposition. According to the “gradual industrial gradient transfer” theory proposed by Harvard University professor Ratan Vernon, with the high production costs of raw materials and manpower, the number of employees is reduced, and companies are unprofitable due to diminishing marginal returns, and they are reluctant to make additional investments. Or it will stop production of the product one after another, and eventually cause capital outflow. It is from this point that the industry has shifted from high-gradient countries and regions to low-growth countries and regions. Numerous empirical cases have proved that this process is irreversible. Regardless of the amount of subsidies provided by the government, it can only delay the speed of industrial transfer and it is impossible to change this process. It is precisely through the tax cuts and even the double tax reduction subsidy that the Obama administration attracts manufacturing industries. The effect remains to be assessed.

Apple's success is the success of globalization. Apple’s iPhone and iPad are the products of “Designed in America, Made in Global, Packaged in China”. Not only do more than 100 suppliers come from all over the world. Globally, the global division of labor reduces the cost, the ecosystem is open to global developers, and the market is more global. Domestic policies affect company decisions and ultimately hurt competitiveness.

In recent years, China’s labor wages have gradually increased, and the costs of such factors as land, environmental protection, natural resources, and capital have increased rapidly, and the comparative advantages have ceased to exist. Chinese companies need to find new competitive advantages. However, if China’s labor advantage is significantly higher than that of the United States, unless Apple does not want to maintain its leading position in front of its competitors, it will have to rely on its foundry in China—and hundreds of thousands of people such as Foxconn and Quanta. In comparison to the large number of employees, Mac’s production capacity in 200 jobs in US factories is minimal. And it can be expected that the new plant will use a large number of robots to improve its work efficiency; the main products will also be mainly mainframes, supply the U.S. market nearby, and shorten the delivery period.