Not long ago, the Apple Company announced its plan to build a manufacturing plant in America. Though most of Apple’s products are still exclusively designed in California, to date, almost all of the 31 million IPads, 72 million iPhones, and over 60 million other Apple products sold last year, are still China manufactured products. Why does Apple choose to send their business overseas? Some of the reasons why China is a beneficial place to manufacture highly popular products are as follows:
Skilled Worker Pool
China has a much greater amount of properly qualified engineers.. Workers that have the appropriate technical skills, can build complex items skillfully and quickly.
Larger Companies With Flexible Conversion
Chinese factories tend to be much larger and more proficient. These manufacturers are able to hire thousands of workers virtually overnight. Since many employees live near or on the factory grounds, workers can be put into action immediately. Moreover, due to the way overseas manufacturers are designed, many of these companies have the ability to easily switch what they are currently producing, into something else.
Lower Production Costs = Greater Profit
It is estimated that an iPhone made in China would cost approximately 8 dollars to make; whereas in the United States, the same product would cost about 70 dollars to produce. Subsequently, that additional 62 dollars puts a big dent into Apple’s profits; which could also put the same dent in the consumer’s pocket, were Apple to up the price. The average selling price of an iPhone is 600 dollars, and Apple’s gross margin is around 40%. Overall, the manufacturing costs in China are drastically lower, as the employees’ wages are significantly less, and the supply chain is closer.
Prototypes Readily Available
Most of the mechanisms in the iPad and iPhone are currently being made in China; as is the supply of raw materials. Therefore, it makes no sense to ship the components to the United States to assemble. This further makes it much more convenient for companies, like Apple, to use Chinese manufacturing to produce their products.