How Much Would The iPad 2 Cost If It Was Made In The U.S.A?

With all the talk about how globalization and outsourcing affect U.S. unemployment,  many people seem to be of the mindset that if we were to revive the U.S. manufacturing base, the unemployment problem would take care of itself.  Personally, I’d love to see more goods made here in the good ol’ U.S. of A and thus more manufacturing jobs, but its a two-way street: Labor costs in the United States are SUBSTANTIALLY higher than they are in other countries, namely developing ones like China, Taiwan, Malaysia, etc.

Currently, Apple has contracted with Foxconn to make their iPad 2′s in China, where employees are reportedly paid (after receiving a 30% raise) a king’s ransom of 1,200 Yuan/month, or about $185 at current exchange rates (y/$ = 0.154), or, if we assume an average 8-hour/day, 250-day/year (probably unrealistic assumptions), $1.11/hour.  But what if Apple decided to do the “patriotic” thing, and hire U.S. workers in the U.S. to make its heralded tablet?  How much more would it cost to make the iPad 2 in the U.S. versus in China?  Let’s run some back-of-the-envelope numbers and see:

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!

Is the demand curve for iPad 2′s normal, i.e. is it downward-sloping (with a negative price elasticity of demand), or is it a Veblen good, i.e. as the price increases, the quantity demanded actually increases?  Will consumers still keep lining-up to shell-out their (presumably) hard-earned money for a product that won’t make it into their hands for weeks, that will likely be rendered obsolete (in the “cool” sense) with the iPad3 a year or so down the road if the price rises 57%?

Even if Apple found that the demand curve was in-fact downward sloping, and that their revenue maximization point (price/unit * # of units sold) involved absorbing higher manufacturing and assembly costs, buyers would still be asked to pay significantly more for a “Made in The U.S.A.” iPad 2 than the comparitively cheaper “Made in China” version.  This brings us to the quasi-ultimate question (short of the larger macro-economic one, for another time): How much more are U.S. consumers willing to pay for the “Made in The U.S.A” stamp, if anything?

I don’t have an answer, at least not anything even remotely approaching a definitive one.

How much more would you pay? $100?  5%?  Zero?  Let us know in the comments!

131 thoughts on “How Much Would The iPad 2 Cost If It Was Made In The U.S.A?

    • They haven’t accounted for additional shipping cost to get it to the USA market. i suppose though it’s more or less negligible compared to overall pricepoint.

      • That’s because bulk shipping isn’t that expensive when you’re talking about shipping cargo containers full of them from China to the US. If you buy one iPad online and have it shipped to you, the CUSTOMER is paying for shipping. Why do you think the people at the local Apple store aren’t concerned about telling people the fastest way to get an iPad is to buy one online? It increases their profit that little bit more, relieving the company of even having to freight the product in bulk. I bet if they thought people would go for it, they’d sell every unit online as opposed to in stores.

        • But, if they were made in US for North American consumption then that would use less fossil fuels and could then probably get “green” stamped instead of shipping across the ocean to a country that is a HUGE polluter, and that is supposed to mean something to this particular company. People have been willing to pay more for green items for the past 5 years. I think with Apple’s influence on the culture and media, they could make more similar profits because people would be very aware that they are trying to bring manufacturing back to US and that is a huge deal and every news outlet would do stories, politicians would have sound bites and more US jobs/economy is the hottest topic going. PR is expensive, but PR like this would be free! SO less fossil fuels used, promoting US manufacturing/jobs, spaces are dirt cheap due to realestate issues here, Free PR for doing so would all offset wage increases and Americans would easily pay $50 more for that–so no real profit losses is my guess.

    • It is amazing to me how all these comments can be made and not one mention of unions. True, our govt charges too much corp tax. But the demands of union workers in the US is also the reason for these problems.
      Drastically lower taxes, get rid of unions, wars, fix our borders, quit supporting illegal aliens, drill here and throw the bums out of Washington. That would fix it.

        • Why so quick to blame the unions when the average American CEO makes 262 times the average worker? The problem isn’t coming from the unions. It’s coming from the corporate leaders that can’t stop giving themselves raises.

          • Quite frankly, the guy running the operation deserves more than the goon on the assembly line.

      • obviously you have a job at a non-union site where you are getting paid enough to cover your health cost, rent, utilities,food, etc. And you must be so good at that job that they would never fire you since not having a contract with they they can fire you at will for no reason other than budget cost. I work in a union job where we don’t average over $50,000 yearly for a skilled job but the company (a supermarket chain) claims it is over paying the workers while paying very high salaries to its VP’s plus their bonuses

        • I was laid off from my 1st job a decidedly non-union one. It sucked (a lot), but you deal with it. Such is life. I am 100% anti union. Unions ensure that fewer people are employed at an artificially hige rate; good if you’re one of the union people employed, bad for everyone else.

          • You got laid off? You got another job paying the same or more straight away? If not you are a gift. You think they give a shit about you? Ram it.

        • You’re right, you are overpaid. If you don’t like what you’re doing, quit and get a better paying job! And get really good at it so nobody in their right mind would fire you. What? It’s too much work? Mmm… sounds like that’s the root of your problem, Maria Rose.

          • i am not overpaid if i barely make $40,000 a year before taxes. And the work is not too much. Problem is there is no team effort. I am too old to get considered for a better paying job and believe me i have looked. They want my experience but they don’t want to pay for it. i believe the term used is overqualified (a polite way to say we don’t hire people over 50) So i am biding my time until i can retire at the age i want to without having the job kill me because of poor performance by fellow workers

        • apparently someone misread my comment because they feel that anyone working in a union job gets over paid and is guaranteed a job even if they do a poor job. As a survivor of 2nd downsizing, I know no matter how good i am at job it is only a clock ticking to losing the job because i am just a number. The generation of workers behind me don’t care about job only how much they can make with the least amount of effort and the companies want to pay the least amount they can for what they get. Don’t blame me when you get slow service and poor quality products. I will be out of the work force

      • Sounds good, albeit without any supporting proof your solutions hold water, they are simply nothing more than dry self satisfying rhetoric.

        • I agree. Unions, excessive taxes, and government interference in the free market are the banes of American employment. Get rid of all the crap in the way of a free market, and watch the price of manufacturing it in the US come way down.
          Why doesn’t Apple give us a choice? Why not have an American plant manufacture the IPad2 and sell a “Made in the USA” version for $1,174 AND a “Made in China” version for $729? Personally, I would buy the USA version and just pay more if given a choice, many others would not. But with at least some electronics being manufactured in the US, more engineering students would be able to find jobs, our engineering schools would improve, and a possible domino effect may ensue. Why not give us a choice?

      • If unions are so bad, how did we ever become the greatest industrial nation on earth? Maybe you haven’t noticed the correlation between the downward spiral of our economy and the concurrent destruction of unions. Unions played a very critical role in balancing the wealth in our nation. That has just about ended and we are a sterling Plutocracy. If you want to destroy this nation and the middle class, keep on destroying the unions. The people who hate unions are the same people who don’t want to tax the “job creators.” My question is that if lower taxes on the super-wealthy, $250,00 net per year and over, cause the “job creators” to create jobs, then where are the jobs. After all, we’ve been keeping their taxes low. But, where the hell are all those jobs?

    • This figure is distorted because we the taxpayer subsidize the apple for having the jobs shipped overseas. Apple gets a tax break to have the product built over seas.
      As for the distorted figures that were given.
      Now the 54% profit margin is another distorted figure. If it costs approximately $90.00 to make in China and the same item is for sale for $600 that is not a 54% profit margin. It is closer to 400% profit.

    • With 98 Billion dollars on the books – and Trillions in other assets- it seems to me Apple could afford a lower profit margin for one. I would pay the appropriate price for the ipad…assuming I could even buy one. I currently do not own an ipad, however, maybe I could. If I stopped shopping at local co ops that pay farmers fair wages and if I stopped eating organic food that is sustainably farmed, or if I stopped eating meat and eggs that are sustainably raised or fish that is … ‘you guessed it’ sustainably caught. You see-we live in a land of excess, and while I don’t have an ipad, or iphone or any other ‘nice’ thing, I have a dang computer and thankfully it works. I don’t have a lot of money-but what little I do have, I spend on things that help sustain my local economy. It’s a lifestyle-not just the purchase of one gadget. Look around, if you don’t feel surrounded by excess and see that you could live with less and pay a little more for it – you may be delusional. And don’t think just because you don’t pay your neighbors wages through manufacturing that you don’t pay for them. Where do you think unemployment and welfare comes from? You think you can’t afford made in the USA? Think again.

  1. You seem to be making assumption upon assumption and the drawing a conclusion based upon the weight of the assumptions. My grand kids tell me what happens when you assume!
    First, it seems beyond belief that the iPad could take about 9 hours for assembly and support labor. I would ASSUME that most of the process is mechanized.
    I think it is back to the drawing board

    • If the numbers from iSuppli and the article mentioning wages at Foxconn plants are correct, the number is 9 hours. $10 manufacturing cost (assuming 100% of manufacturing cost is labor, in reality its likely slightly less) divided by $1.11/hour = 9 hours. If you think it takes more than that, the difference in cost between a U.S.-made iPad 2 is even more than that mentioned in the article. If you think its less, from start-to-finish, I’d like to see some data substantiating such claims.

      You may be right and it takes much less time than that, but absent any information supporting such a conclusion, its hard to just ballpark a number.

    • Additionally, I’m skeptical that workers in China put in the same hours as employees in the U.S. I wouldn’t be surprised if they aren’t working 50, 60+ hours, which means the hourly wage is even lower, and given the numbers we have, increasing the number of hours it takes to manufacture the tablet.

      Again, we’re just working with numbers we have because they are the best we have for now. If I find some better numbers I’ll GLADLY take them into consideration, but these do not seem totally unbelievable, and thus this approach seems to be more accurate than just taking a stab in the dark.

      Appreciate the comment!

      • Another factor is if Apple were to create an All-American iPad, it would likely have to source the parts from American manufacturers, inflating the cost of parts by a comparable percentage, but reducing the cost of shipping by some very small number. My guess is it’s over $1,500 to be truly made in the USA.

        That said, I think the point of the article was to ask us how much we’d pay to support our own economy. The answer for me is probably 30-50% on a product if and only if I believe that it won’t crap out in a year like so many Chinese-made products do.

        Karl Denninger had a great article a year or so ago about the intentionally crappy capacitors used in electronics today because it typically renders the device useless to those who can’t replace a capacitor, and because they’re cheap devices in the first place, people just by another one. Functional Crapsolesence.

        • YES, thank you, exactly, that is a great comment!

          In terms of your term, “Functional Crapsolesence,” I think its more of Engineered Crapsolesence, or forced engineered crapsolesence (e.g. a business decision, not an engineering one). Why should Gilette make Mach 3 blades that last a month or more when they can make ‘em to last a week (or less!)? The same thing goes with virtually all consumer (and sadly, some business) products these days. Companies ‘got smart’ that we’re all largely stupid.

          My parents just replaced a refrigerator they’d had for over 20 years that was in fine working order. The new one may have fancier features and look a lot more modern, but it seems pretty clear even now that it has a low probability of lasting nearly as long as its predecessor. It seems the new rule is make products that last just long enough not to ruin brand loyalty but keeps the customer coming back for more and more. This, of course, is a much longer discussion for another post.


          • Planned obsolesence. In 1981 my mother bought me a washing machine when I bought my first home. I NEVER had a service call on it and I just replaced that machine 2 years ago even though I could have fixed it. They don’t make ‘em like they used to!! Had to call for service on new machine in the first month!

        • for those without enough years on this planet crapolesence is the 21st century carry-on of the auto industries’ obsolesence of the 1950 and 60′s and look at where and what DETROIT is now…and the rest of thbe economy to boot…

    • I agree with the mechanisation point.
      It should also be noted that, for all companies (not just Apple), if all components were sourced locally, there would be: a reduction in freight and duty costs; a reduction in logistics overheads – manpower, storage and distribution; an improvement in customer responsiveness; more stability in financial planning.
      For government. there would be: less political tension over exchange rates; less money wasted on unemployment benefits (less tax = more spending power); less of local money being transferred overseas to fund nuclear programmes.
      Outsourcing to the other side of the world was the craziest action of greedy corporations that should have been discouraged by western governments.

  2. you’re forgetting a number of costs here, its not simple just the cost per hour for labor and the cost for parts, you have shipping, marketing and a number of other cost built into the retail price of any product.

    And lets not forget the reason companies have gone overseas in the first place is because we have very low tarrifs on imports from asia, something that needs to be corrected for US manufacturing to be competitive again.

    wages in China are actually rising, there have been numerous articles on this, which is why companies are starting to find the next china

    • Like I said 1. back of the envelope 2. just working with numbers we have available and 3. hard to just blanket apply D&A expenses to 1 product.

      You are right of course that wages in China are rising, but they’re nowhere close to the point where it’d be cheaper to produce in the U.S. especially with all the contract manufacturers. If Co’s had to build/buy, tool-up, and operate factories themselves, that’d maybe be another story, but fortunately for them (unfortunately for others), they often don’t.

      Thanks for the comment!

  3. Pingback: How Much Would the iPad 2 Cost If It Were Made in the U.S.? About $1140 | Apple Online

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  5. Hm, yeah, this is a really bad article. Lots of assumptions presented with little research. It’s pretty lame excuse to say, “Hey I’m just working with the information I have.” But, I have to say, not atypical for reporting these days.

    There are far more factors involved in the cost structure of a product like this. I know for a fact (from a friend who works at Apple) that they have a team of auditors on the ground in China constantly tracking their supply chain transactions. You’d need less of that in the US. They have another army of manufacturing personnel on the ground there as well. Travel back and forth. Hotels, meals, the stresses that puts on Apple employee families (all have associated costs). Cost of shipping product from China. There are huge inventory carrying costs when your manufacturing is remotely located from your customers.

    All you’ve done in this article is compared wages between the US and China. And even there you’re not accurately comparing types of manufacturing. Electronics assembly work in the US would work out to less than you’re stating. And you’re also only counting workers wages in China rather than factory cost for those wages, which include full housing, meals and other benefits. So, you’re comparing wages WITH benefits in the US to take home pay in China.

    What bugs me about articles like this is less that they are so poorly researched. It’s more that they get repeatedly linked to and thus the bad information gets propagated around the internet as if it’s fact.

    • Thanks for the comment. I’m very well aware this is an oversimplication; the intent from the start was to go through an example to see what manufacturing costs both here and abroad, not to be a comprehensive and exhaustive exercise in corporate multinational accounting. Anyone who passed Econ 101 knows this is a simplification, so while I appreciate your comments, I think you missed the point.

      You say all I’ve done is compare wages between here and China, and you are exactly correct, as the difference is so large its a massive determinant in a corporate make/buy (or outsource, as it were) decision-making process.

      How does Foxconn apply A&D and other costs incurred in manufacturing the iPad? How does Apple? We can estimate these things, but that would introduce even more assumptions into the discussion. It is common practice in economic and financial modelling, we make assumptions we think are reasonable given the information we have.

      I don’t want to address all of the things you said because that could take forever, but I will simply point out the fact that Apple has little-to-no inventory of iPad 2′s, in fact everyone I know who’s gotten one in the past month has ordered it online and has gotten it shipped directly from China.

      Appreciate the comment.

  6. When NAFTA was being negotiated and described in the media, there was mention that polution, health concerns, working conditions, vacation and holidays for workers were a part of the treaties. Chances for those provisions to be heeded by either the corporations or governments involved turned out to be somewhere between slim and fat. Turns out the relatively good life earned by generations of American workers is being ruined by all corporations and governments. The referenced discussion concerning the cost of an american produced device compared to one made in an “emerging” market is bluntly obvious. Can the workers who build them “cheep” afford to buy them? Henry Ford the first, when belittled by other carmakers for paying his workers several times what they were paying theirs, he remarked that he paid them enough so they could buy his products.

    • Great comment. I’m more apt to blame the Government – considering it (broadly) has the ability to make the laws, rules and regulations by which business is to abide – than the businesses for pursuing their duty as profit-maximizing entities by (attempting to) influence policy and the regulatory regime in which they operate.

      Either way, I’m not sure we can continue on in our current manner without some major changes. After all, like you said, if our employees can’t afford the products they make and the services they provide, the whole game comes screeching to a halt eventually.

      Thanks for commenting!

  7. I am visiting China right now. The cost of everything is high already except food stuff. Restaurants are very expensive, almost or surpasses USA. Housing is very,very expensive (i.e.,Shanghai). Point being, we can demand USA made only, I think 10% to 20% higher is possible, but not 50% to 60% higher. We are not a rich nation anymore! So is the rest of the world. Is US the biggest market for Apple? How do we compete in the world market with all other same products coming into the market? Look at the auto industry you will reach your own conclusion.

    • Very much agreed. Europe started the automotive era, the United States turned it into a serious INDUSTRY, Japan brought in the finesse and quality, and now Korea seem to be taking it to the next level.

      I”m curious, if you’ve made it there, what is the cost differential between products/services in Shanghai (etc) and smaller cities and suburbs?

      Thanks for the comment!

      • Yep. Korea’s Hyundai/Kia seems to be the new gold standard for automotive value. Note that Korea is not a low-cost country; apartments, food, insurance and just about everything else except high-speed Internet and medical care are higher than here in the districts near Hyundai/Kia plants.

  8. The point of the article seems to be “America just can’t compete — oh, well.” There are almost certainly far less than 9 hours of labor in each iPad2. American companies should use their ingenuity to figure out how products can successfully be made here. Instead, they lazily just go to China — because everyone else does. I would (and do) gladly pay 30% more for “Made in USA”.

  9. This illustrates that outsourcing is all about increasing profit margins. The price is set by the market. If Apple believed they could get $1,500 for each iPad2 then that is what the price would be.
    If the US wants higher wages then tell the politicians to tax outsourcing out of existence.

    • Blame the government before you blame managers who are doing their fiduciary duty to shareholders to maximize profits. Look no further than our very own elected officials if you want to point blame (although acting on it, instead of just pointing is far more productive).

    • A few comments:

      Corporate Greed: The sad fact is, if you can get away with it, you must do it. Every consumer market is now a flash-in-the-pan event. To wit: After the release of iPhone 4, the formerly $200 iPhone 3g now sells for $50. By the way, the iPhone is ruined with one teaspoon of water. This is engineered-in product life reduction at it’s best. The consumer blames themselves.

      Unions: The theft-in-office and greed in union management makes the corporate leaders look like pre-schoolers. Unions spend all their efforts tying down the employers with miles of red tape and outrageous demands, while only giving lip service and a marketing pitch to their members. The members think they are getting guarantees from their union, but unions successfully transfer all the responsibilities back to employer. Why would anyone pay $2.50 per hour worked for a management fee? The union bosses are raking in millions, with little to no actual responsibilities, other than fanning the flames of discontent with the employer.

      Federal Government Pay: Since the Feds can print money, they have no realistic limits as to what they pay employees, or how many of them they can employ. These factors are leading to a crippling distortion of wage and price inflation in the USA in general. Someday we will have to pay the piper for this. Probably later than most believe, due to the sorry state of monetary affairs with the Yen and the Euro. As other fiat currencies collapse, the market will come back to the USD.

      There, I said it. Fire away.

  10. I believe this article should not be picked apart because of its so called “lack of research”, since the huge difference in the cost of manufacturing in the U.S. compared to China is(close to) COMMON KNOWLEDGE. You don’t need references to see that American jobs have been shipped overseas, outsourced. You can discredit the information and still answer the question…
    Would you be willing to pay a substantially higher price for a product because it was manufactured in the U.S.? (I would) And if so, how much more? (Depends on the product)
    That is really what needs to be researched. Nitpicking numbers without looking at the big picture is what hurts the economy.
    It’s easy to criticize the author; it’s harder to be honest with yourself.

    • Thank you! The point of the article was not to – as you said – fuss about inputs and numbers, but rather to try to see the forest for the trees.

      So many of us, pundits, politicians, business-folk, and average Joe’s say we need more (well-paying) American jobs, but we seldom if ever even think about the implications of our wishes, were they to *poof* come true.

      I agree with you; I would pay more for U.S.-made goods (assuming as another commentor said, they were of high-quality), the amount which depends on the product and the quality difference.

      Thanks for the comment!

  11. When I worked in a major electronics factory much of the solid state items were made by machine. It must cost too much for the machines to work in the USA because the company sent the machines to mexico!

    • CAT division Towmotor sent all their machines from Mentor, OH to Korea to make forklift trucks back in the 80s, when they were the industry leaders. They are no longer industry leaders. What did they save from that move? Their union member employees got squat from the union. They got job placement and retraining assistance from CAT, plus their CAT medical and retirement benefits. Where did all that money from the members go? Yacht payments? Private island? African safari?

      Lots of facilities are unbolted and trucked to Mexico to get away from US unions, EPA harassment, excessive taxation, and employment practices liability (ie: firing a worker). One lawsuit can kill a small business that otherwise would employ 20 – 30 people.

      The US used to be the place to go if you wanted to start a business. Maybe it still is, but things are headed in the wrong direction. If your business is small, you fly under the radar of the Federal bureaucracy. Big business has the resources and lack of character to simply chase the lowest cost of operations.

  12. Imo within reason the U.S. needs to protect its middle class whether that be by tariffs or what. I’m all for competition between equals but that’s not what is going on with Asia. Competitiing with them is doing nothing more than bringing our middle class down closer to their level. Wipe out the middle class and I think we’ll see what’s going on in the Middle East happening in America and that includes the police shooting the citizens.

    • Yes – tariffs! Oops, that a bad word, say Value Added Tax (or VAT). This is approved language by the WTO.

      Canada charges VAT on US made products, and WTO/NAFTA is OK with that? We shipped $1200 worth of US-made SS fasteners to China, and they charged us $800 in Duties and Tariffs. Seems a bit steep to me.

      Why not charge a flat tariff on everything that comes in from overseas so we do not get called out on subsidizing one particular industry? Would 8% be enough to bring back some manufacturing jobs?

      • I suspect it would take a ~20% tariff on all imported goods and services to make a substantive difference. And I’m fine with that. George Washington, Thomas Jefferson. John Adams, and the other Founding Fathers used tariffs to raise revenue and protect American industry. Sing it! –

        Give me those old-time import tariffs
        Give me those old-time import tariffs
        Give me those old-time import tariffs
        On everything from overseas

        They were good for the founding fathers
        They were good for the founding fathers
        They were good for the founding fathers
        And they’re good enough for me

  13. Very interesting article. A lot of people do not understand the concept of trade. The iPad’s that the Chinese make and send over to us may “take away” manufacturing jobs from Americans, but it gives American farmers jobs because of the food we send over to China. That is a very simple example but the concept is the same. In the long run trade is good for all parties involved because each country can specialize in what they are good at.

    • I was going to go into that here but I realized at least half of the people don’t even bother reading the main point, going into comparative advantage would likely have been a waste. I also hope(d) that I didn’t have to explain 2nd week of Econ 101 but apparently, I do. (argh)

      Thanks for the comment!

  14. Functional Crapsolesence and refrigerators. Salesman tells me manufacturers are buying compressor from several different manufactures, warranty is 1 year. 3 year warranty costs $250.00 I would find it hard to believe that a refrigerator cannot be US produced for $300.00 more and included with the purchase a 5 year warranty. With a life span of 20 years.

    Remember the Maytag testimonials? The display showing their bearings being 3x the size of the competitors. Now instead of 20 years, life is about 6-7. You can’t buy a quality product anymore.

    Wrenches spread rather than turn the nut, sockets crack and phillips screwdrivers are turned into awls.

    In the early ninety’s, as these products started to be outsourced. The difference in price of US made compared to import was minimal.

  15. I would pay $100 more.

    First. Building it here would create middle class
    jobs, which create spendable income, which buys
    ipads. Secondly, shipping would cost less, and
    marketing is already what it is.
    More to the point, since when is a 54% profit margin
    reasonable. Corporations have gotten used to highly
    inflated margins by paying dirt cheap wages and
    offshoring jobs. That doesn’t mean these margins
    are right or even necessary.
    A 15.75% margin is still excellent.
    Imagine what our corporately grown food, already
    skyrocketing in price, would cost at a 54% profit
    margin. Agribusiness at least has the common sense
    to accept a lower margin so that their customers
    don’t starve. Let’s hope they continue to have
    that sense.
    People in business have to ask themselves how much
    money is enough. Would CEO salaries be astronomical
    if profit margins were more reasonable. CEO salaries
    versus workers wages are beyond farsical. And it’s
    because there is so much profit sloshing around.
    There is a lot wrong with capitalism as practiced by
    US and foreign corporations in the “global” economy.
    “Global” is the code word for lowest possible wage.
    Predatory capitalism, as practiced now, unfettered
    by regulation, is the author of excess and busts.
    It is a sickness. Capitalsim isn’t a bad thing in
    and of itself….but as currently practiced, it’s
    a cancer.

  16. it is the idea that American companies must make 50% to 60% profits that is the root cause. If they were able to live with less than multi millions in annual corporate bonus, we would still have a middle class instead we have both Goverment and Corporate leaders wanting more for themselves and less for the average individual. Why wouldn’t 15% to 20% be enought? Until the greed factor is addressed our middle class will continue to shrink.If the average citizen purchased only made in America Product we could force the fat cats to rethink the ” lets outsource all that we can and drive up our personal bank accounts. F^#k the little guy!

    • kurt – you’re confused. Apple’s gross margin of 54% doesn’t go into Steve Jobs pocket – that money funds the R&D and operations of a huge company with many thousands of employees. Without making the 50% to 60% profit you cannot run a successful small company.

      Do a thought experiment: You want to have a business selling potatoes. You buy your potatoes from northern growers at $0.05/pound and they cost $0.50/pound to ship them to your cleaning/packaging location. How much did your washing machinery cost? How much does the workspace cost for the bag packers. Who will sort out the damaged potatoes and how much will it cost to comply with government regulations to dispose of that waste?

      Will you have machinery to hope your baggers or will they have to put spuds in bags with their hands? How will the bags get weighed and corrected so they’re not under or over (yes, gov’t won’t allow you to sell a 10lb bad that actually has 11 lbs in it).

      How much do you pay for bags? Are they paper? Lined with plastic? Are they burlap, maybe made of hemp? Maybe plastic or woven nylon bag. There are environmental cost benefit decisions to be made there.

      Your business has 30 people, bookkeepers, laborers, baggers, packers, purchasing agents, salesmen, administrative support, IT support if you use computers heavily. What about the cost of the computes and the specialized software you’re going to need? How much is that?

      What about your hardworking staff of 30. Do you want to offer them a health plan that covers drugs, dental, vision? How much of the premium will you pay vs asking the staff to contribute. What about allowing them to accrue sick time or vacation time. That costs you money. Their salaries cost money, then you also have to pay 7.5% of their salary into SS and another percentage into Medicare.

      Don’t forget OSHA compliance because you’ll be working with mechanical washers and forklifts and probably mechanical baggers. Don’t forget the cost of USDA inspections. Better buy liability insurance in case your potatoes cause an illness outbreak.

      So, at the beginning of the day you have 2 tons of potatoes at a raw starting cost of $2,200. Wash them, bag them, get them inspected, two of your workers are out sick – pay their salaries and pay for two temp replacements, make the installment payments on the automated washer, automated bagger, payments on leased forklift, buy the pallets, load them onto your leased truck and take them to the store. Pay your workers for the day and then make sure there’s enough left over to research whether you’d like to see other kinds of potatoes or maybe a different vegetable. Now you have R&D costs.

      How much do you have to sell your 5 lb bag of potatoes for (pre-input cost of $2.75 before being washed, bagged, packed) in order to keep your operation going – an operation were 30 people count on YOU for their livelihood every day. You’d need MORE than 50% profit just to remain afloat. You could never expand your business at that level.

  17. The same thing applies to cars, computers, name your toy. I lose I’m the biggest patriot until you want me to dip deeper in my wallet. For example, simply refuse to pay 40 grand plus for a made in the USA auto. A sense of reality here people – come on.

  18. I don’t know how much ant American should be prepared to pay for “Made in the US of A” but I can tell you this , unequivocally, if they don’t start paying something ‘extra’ to get ‘Made in America’ then their level of living is going to deteriorate drastically very soon.

  19. As I understand it, many manufacturers complain much more about the US corporate tax structure than the cost of wages. Over regulation is right behind that and wages is a distant third. Operating overseas gives the large, multi-national corporations huge advantages both tax wise, regulation wise and, at the momemt, through the fact of earning money in more stable currencies. The US is the only really powerful country that has an actual constitutional structure that would allow it to potentially stand up for real freedom for the individual without having to riot in the streets. It is important that this exists in the world and when companies like Apple bring their business focus back on-shore, that will be a signal that we have begun to turn this around. There is a lot of political idiocy to be overcome before this happens, but it needs to happen. The manufacturing move to China is just a symptom of the political and financial raping of the once greatest and most free country in the world. It is understandable why those who want power push for more control of free enterprise, but what isn’t so clear is why anyone who has freedom from interference in their lives would be willing to give it away.
    The problem isn’t so much with the wage earners but rather the forcing of real wealth out of our country by our own politicians and financial policy. If that were fixed, the wages here wouldn’t be a problem and that would fix itself. Even if the Chinese assembled the Ipads, we would have plenty of good paying jobs because the money would be here. History has always shown this to be the case when free enterprise is allowed to function for everyone. The talented rise quickly and they hire everyone in sight. The key is that anyone can rise up and prosper, not just those already in power.

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

  21. Okay … so COMMUNIST China requires their ‘workers’ (not human beings in their minds) to work 6 days a week for up to 18 hours daily! The Apple ‘workers’ put in 26 days per month & at 12 hours daily, that equals 312 hours per month … which equals 59 cents / hour.

    The working conditions at Foxconn are so horrible that young people in their 30′s REGULARLY commit suicide! And Steve Jobs is happy to roll out this new cool toy knowing it was assmbeled by modern-day slaves! OMG … why aren’t we all outraged??

    The USA can absolutely build these things … and if people won’t pay $350 more for it, who cares?? Every Apple purchase supports this terrible Chinese slave-based state.

    • China Slaves jump out windows for many products, not just Apple’s. Apples may have tighter timelines than jeans, but I bet not by much.

      The USA CANNOT “absolutely build these things”, because there is such a thing as ICs in them, and many are only made one or two places. Specifically Taiwan and Japan. Remember during the Japan earthquake that some products that were not even built in the area could not be produced, because the ICs could not be sourced from having plants destroyed?

      We can all talk big here like we would or are paying more for MIUSA. But the VAST majority of US shoppers are going to pay what gets the job done and costs LEAST. And it’s the majority that matters. It’s too late to even care whether this manufacturing can be pulled back to the US. The bottom line is: either the WORLD will be pulled UP to what will amount to equity with the US (at the time that this all normalizes, say Dec 2012), OR the US will be pulled down to average WORLD wealth standards. Now, that later seems much more realistic to me, because the WORLD is a much larger entity to change than the US.

      • Sadly, I don’t see any way to avoid average wage deflation here in the U.S as we mean-revert lower, while developing country wages rise, and we meet somewhere in between.

  22. As mentioned in the comments, there are a multitude of factors that affect the decision to move business/mfg functions offshore.

    Another, which I didn’t see mentioned here, is corporate tax rate. As mentioned several times by the author, the duty of a business is to maximize profits for it’s owners (usually the shareholders).

    There’s a groundswell voice in the US shouting “tax big business” & “tax the rich” louder & louder, but at 30+% it’s already high compared to other many other nations. (Canada’s, by way of example, is about 16%, with a further scheduled reduction expected in the next 12 – 18 months.)

    Point is, it’s another factor that’s been at least partly responsible for the amount of business/industry that’s got up & left the US of A.

    Anyway, it’ll take a little more than just Chinese wage increases to create a solid case for businesses to “bring it back home” to the US.

  23. If corporations like Apple, keep focusing only in the short term gain for its shareholders, I have to wonder what this companies will do when, because of the unemployment, the American population buying power gets further reduced to levels that just a few can afford those gadgets?
    Where is the social responsibility this corporations and their shareholders should be practicing at the moment?
    And I am not talking about socialism, I am talking about moderation. It is this country that has provided the platform for them to become successful in the first place. Why not feed the cow before it runs dry?
    Hardcore capitalism is killing the greatest society known to humankind.

    • I will present you with a challenge, then: Go to Walmart or ANY STORE, including your local mall, and find more than 5% of the stuffed animal toys that are NOT made in China. NOTHING we could make here can compete with China, save movies, music and software.

      And the reason Apple can’t make a difference? Suppose Apple’s products did go up in price, say 30% across the board. Acer, Tangent, in fact ALL other computer products, in competing lines, would now take over the market share, and Apple would die. You would have to get ALL the manufacturers on a level playing field, or market evolution would eat them alive. THAT is a larger challenge than changing a few million Americans to Buy USA.

      The fact is, with our corporatocracy, laws, regulations and taxes, nothing