Why It's So Hard for Apple to Move Production from China to India

Joe Weisenthal (0:00)

Hello, Odd Lots listeners, I'm Joe Weisenthal.

Tracy Alloway (0:02)

And I'm Tracy Alloway.

Joe Weisenthal (0:03)

Tracy, we're doing another live show, and it's right here in New York City.

Tracy Alloway (0:07)

Yeah, this one should be our biggest yet. And we're gonna have a bunch of Odd Lots favorites and do something maybe a little different to some of our previous live podcast recordings.

Joe Weisenthal (0:18)

When the guests are revealed, the show is gonna sell out right away, so you should really just go get your ticket right now. It's June 26th, it's at Racket NYC, and you can find a ticket link at bloomberg.com/oddlots or bloombergevents.com/oddlotsliveny.

Tracy Alloway (0:34)

We hope to see you there.

Patrick McGee (0:38)

Bloomberg Audio Studios. Podcasts, radio, news.

Joe Weisenthal (0:54)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:58)

And I'm Tracy Alloway.

Joe Weisenthal (1:00)

Tracy, I'm gonna confess something. I've kind of hinted it. It's not that big of a confession. And I've kind of hinted it already, which is that if Trump wants to impose a bunch of tariffs on a bunch of cheap, random, plastic goods from China, I'm fine with that. That's cool. 50%, 100%, 149%. I'll consume less. I'll be a little bit more of a monk or something like that. I'm fine with that.

Tracy Alloway (1:25)

Okay. But isn't the argument not necessarily the cost, although there is a cost on individual consumers, but the argument is why do we want to focus on shifting plastic production and toy manufacturing to the US.? That's the criticism, right? Like why specifically focus on cheap goods made in factories?

Joe Weisenthal (1:45)

Yeah. No, you might be right. Like I don't think there's much value in say, you know, moving a plastic step stool factory or a stroller factory or whatever to the US. I don't really see the point. I want there to be affordable strollers, obviously. Just by and large, a lot of this stuff, yeah, it's fine.

Tracy Alloway (2:04)

This is not much of a confession.

Joe Weisenthal (2:06)

Okay. But I will confess too that if the price of a new iPhone went up a lot, I would be pretty annoyed. I tend to notice these things. I tend to replace mine every two or three years or something like that. There are areas that we do import significantly from China that are not cheap chotskies, cheap junk as people like to fantasize that that's all China produces. There are areas that I would be very upset to pay a significantly higher price.

Tracy Alloway (2:34)

Well, getting back to the goal of tariffs and protectionist trade policies, I assume putting tariffs on iPhones would be about moving some of the production closer to home. I think there, there's an open question about whether we want that as well because for most of our lifetimes, the stories we've been hearing about iPhones in China are all about how terrible the labor conditions are and how difficult it is to actually make these things. So I can see some strategic argument. Obviously, semiconductors are considered a very important strategic goal nowadays, but the actual manufacturing, there is that China story out there.

Joe Weisenthal (3:14)

Anyway, I think the administration is very sensitive to people like me. One of the first things, even in the midst of the heat of the trade war, and I should note, we're recording this May 29th. It could be that the whole trade war is illegal. There was that court ruling made last night. We really don't know where things can end up. They're clearly sensitive to the iPhone thing. And so there were some carve-outs specifically related, more or less related to that. I think during the first Trump administration, Apple got some reprieve. These are sensitive areas. Yes, we want to build up the capacity to expand technological production, high-tech things, high-value-add things, and so forth. But we don't want the sticker shock. This explains, of course, some of the sort of multiple personalities of this administration, if you will.

Tracy Alloway (4:02)

Well, there's also the added complexity of building up these very, very advanced supply chains, right? And if you look at Apple and what they did in China, that was built over the course of many, many years, decades even. And the idea that the US is suddenly going to flip a switch, a tariff switch, and move all that production elsewhere seems a little optimistic.

Joe Weisenthal (4:23)

Right. And then there might be flipping a switch, but not in the full direction. Maybe there are multiple dials on the switch. So then one possibility that you hear is, OK, maybe we move more to India. But I don't think Trump likes that. But maybe that would be a little bit better from the US perspective in the sense that we're not contributing as much to Chinese economic development. And so, OK, it's not bringing jobs back. And Trump said, move it to the US. From time to time, you hear about maybe they could be built in Brazil or something. But all of these raise the question. There's two things. It's like, A, is this realistic at all? If there were a switch that you could pull, it's like move to the US., move to India, that switch would have been moved. And then the other thing, too, is what does it even mean to build the iPhone in India or the US.? Because there's final assembly, et cetera. But of course, component parts within the iPhone themselves, also much of it is actually made in China. And, you know, I'm sure there's thousands of tiny pieces of various things doing things. And there are, many of them are built in China. So even the idea of like, we're going to move X production to X country is not a clear statement because it could just be the final packaging or whatever. And that's not really where the value add lies, which means we really have to more deeply understand how and what gets built in China and what it would mean to even move that, what we're even talking about when we're talking about moving these things.