How Much Would the iPad 2 Cost If It Were Made in the U.S.? About $1,140

[pauldun170]

Apple has contracted to make its iPad 2s in China, where the typical worker makes a hardy $185 a week. What if, in a fever of uneconomic patriotism, Apple chose to make its iPads in the U.S.? Assuming typical U.S. manufacturers worked at the same speed as the Chinese, and assuming Apple raised the price to maintain its profit margin, the iPad 2 would cost more than $1,100.

The Analyst does some back-of-the-envelope math:

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!

It's a rough approximation, but the final point is uncontroversial: We make stuff overseas because the Chinese are paid 1/30th of our median manufacturing salaries. (Attn. "China's Cheap Currency Is Stealing Our Jobs" Crowd: That's not a ratio that you can wipe out with a few years of currency appreciation.) Read the full story at Stone Street Advisors.

____

Afterthought: My colleague Dan Indiviglio and I were discussing this very question yesterday. When I forwarded him this article, he pointed out that the fully domestic production of iPads would require that we import all their elements, which would change the final price. Changing the supply chain isn't just a geographical swap, it's a cost. If we chose to mine the metals domestically (for whatever reason ... it's only a thought experiment!) the price would rise again, since U.S. miners are paid more in California than, say, Peru.

http://www.theatlantic.com/business/...-1-140/238508/

[Homeslice]

For one thing, I doubt if any batteries are made in the US anymore........Wouldn't want them anyway, too many toxic heavy metals. Let other countries pollute their land and poison their population.

[Trip]

Originally Posted by Homeslice

For one thing, I doubt if any batteries are made in the US anymore........Wouldn't want them anyway, too many toxic heavy metals. Let other countries pollute their land and poison their population.

http://maps.google.com/maps?oe=utf-8...ed=0CBoQnwIwAA

[Apoc]

Originally Posted by Homeslice

For one thing, I doubt if any batteries are made in the US anymore........Wouldn't want them anyway, too many toxic heavy metals. Let other countries pollute their land and poison their population.

You really are clueless, arent you?

[Particle Man]

Originally Posted by Homeslice

For one thing, I doubt if any batteries are made in the US anymore........Wouldn't want them anyway, too many toxic heavy metals. Let other countries pollute their land and poison their population.

wut

[Homeslice]

Originally Posted by Apoc

You really are clueless, arent you?

Cuz I didn't know whether any batteries were made in the US? Yeah, like the average person is up on that kind of trivia.

[goof2]

Originally Posted by pauldun170

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!

I think there are a few issues . Because of very high turnover rates for workers in China most workers are the definition of unskilled. Those workers also require pretty much constant supervision. If it is taking Chinese workers 9 hours then American workers should be able to do it significantly faster. An American workforce should also be more consistent in the long run resulting in less defects.

That turnover creates other issues too because it tends to be unpredictable. Everybody leaves for almost a month for Chinese New Year (creating its own issue because all the factories are shut down including suppliers) and you never know who is coming back. I've heard on bad years it can be as much as 30-35% of a factories workforce just never returns. Now that factory has to desperately hire a ton of new people at the same time every other factory in the area tries to do the same.

Everything I have heard, though anecdotally so take it for what that is worth, is that operating in China is a major pain in the ass with costs significantly higher than anticipated. I have also heard from most that there are significant regrets about moving production and if the costs weren't so high to relocate back they would be doing it. It wouldn't surprise me if Apple had similar regrets with the bad press they have been getting, especially since Apple is based on image more than most.

Originally Posted by Homeslice

Cuz I didn't know whether any batteries were made in the US? Yeah, like the average person is up on that kind of trivia.

It may also be because the batteries used in modern electronics don't "pollute the land and poison the population" of the countries in which they are made. They have lithium-ion batteries and because of the form the lithium is in most constructions have nowhere near the environmental issues associated with older battery technologies like lead-acid and nickel-cadmium.

[Particle Man]

^ plus, the place in which they're disposed really gets it so the joke is on us...

[tommymac]

Originally Posted by goof2

I think there are a few issues . Because of very high turnover rates for workers in China most workers are the definition of unskilled. Those workers also require pretty much constant supervision. If it is taking Chinese workers 9 hours then American workers should be able to do it significantly faster. An American workforce should also be more consistent in the long run resulting in less defects.

That turnover creates other issues too because it tends to be unpredictable. Everybody leaves for almost a month for Chinese New Year (creating its own issue because all the factories are shut down including suppliers) and you never know who is coming back. I've heard on bad years it can be as much as 30-35% of a factories workforce just never returns. Now that factory has to desperately hire a ton of new people at the same time every other factory in the area tries to do the same.

Everything I have heard, though anecdotally so take it for what that is worth, is that operating in China is a major pain in the ass with costs significantly higher than anticipated. I have also heard from most that there are significant regrets about moving production and if the costs weren't so high to relocate back they would be doing it. It wouldn't surprise me if Apple had similar regrets with the bad press they have been getting, especially since Apple is based on image more than most.



It may also be because the batteries used in modern electronics don't "pollute the land and poison the population" of the countries in which they are made. They have lithium-ion batteries and because of the form the lithium is in most constructions have nowhere near the environmental issues associated with older battery technologies like lead-acid and nickel-cadmium.

But these will probably be american union workers so will it realy get done faster

[Apoc]

Originally Posted by tommymac

But these will probably be american union workers so will it realy get done faster

Yes, god forbid a group of workers want to do their job safely and correctly, so they can go home uninjured at night, as opposed to having their bodies thrown in a vat of battery acid when they get hurt, only to be replaced by another underpaid worker while their own family starves.