Under Trump's Gun, Apple Makes a Great Move

Donald Trump is wasting time trying to restore America’s old industrial glory: Apple’s $1 billion investment in smart manufacturing is the future

Apple CEO Tim Cook waves as he arrives on stage to deliver his keynote address at the Worldwide Developers Conference in San Francisco, California, U.S. June 8, 2015
Robert Galbraith, Reuters

Donald Trump’s head seems to be filled with visions of millions of Joe and Jill (but no Juan) Lunch Pails busy at work on factory floors across America, assembling things and banging metal bits into shape. 

During last year’s campaign he said he would bring back American manufacturing jobs from China and Mexico. He even pistol-whipped a few companies like Carrier and Ford into keeping at home jobs they planned to move abroad. 

Apple was one of the biggest companies in Trump’s crosshairs. “We’re going to get Apple to build their damn computers and things in this country instead of other countries,” Trump vowed early in the campaign.

No surprise here Apple employs 80,000 people in the United States, but all engaged in R&D, design and marketing – none of them actually make anything. It does its manufacturing elsewhere.

And it's feeling the pressure: Apple has so far asked its two biggest iPhone subcontractors, both foreign companies, to explore moving some production to the U.S. One turned the company down flat. The other is looking into it.

Now Apple CEO Tim Cook is apparently looking for other ways to alleviate the pressure: On Wednesday he announced the company had set up a $1 billion fund to invest in what’s known as advanced manufacturing, which is highly automated production, in the U.S.

But look carefully.

First, Apple hasn't committed to moving any more of its manufacturing to the U.S. beyond the paltry amount it already does via subcontractors. What it will be doing is putting money into other companies.

By some estimates, a Made in the U.S.A. iPhone would cost it $100 more to make than it does in China.

Second, $1 billion sounds like a lot of money and a lot of commitment, but  Apple was sitting on $257 billion at the end of March. It’s chump change for the company. In fact, the fund is a kind of speculative investment the company often makes, like the $1 billion pledge it made to Softbank’s giant technology fund in January and the $1 billion it put into Chinese ride-sharing service Didi Chuxing a year ago.

Apple has a fined-tuned business, involving hundreds of suppliers globally and hundreds of thousands of Chinese workers, that’s designed to turn out iPhones at the lowest possible cost and without any disruptions. It’s not going to upset that system unless Trump’s threats grow a lot more serious.

But forgetting Apple for a minute, does America really need more industrial jobs?

coal miners listen to U.S. Environmental Protection Agency Administrator Scott Pruitt during his visit to Consol Pennsylvania Coal Company's Harvey Mine in Sycamore, Pennsylvania, April 13, 2017.
Gene J. Puskar, AP

Bad solutions for nonexistent problems

The need to create jobs generally is the supposed logic for Trump’s tax cuts and the plans (on hold for now) to tear up NAFTA, build a wall to keep out Mexicans and get down on China.

But the U.S. unemployment rate is now at a decade low. It can’t shrink much more before it begins to feed into inflation.

That’s the problem with policy based on crowd-pleasing campaign speeches and ideas gleaned from reading Breitbart News, rather than on actual facts: You spend your time devising solutions for problems that don’t exist.

Still, the idea of restoring America’s industrial might is not as silly as it seems.  

The kind of assembly jobs done in China that Trump wants to lure back home pay miserably: the average industrial wage in China is less than $5 an hour, less than half of what an American teenager would get for babysitting.

But there is room to create the kind of advanced manufacturing jobs Apple says it wants to promote with its new fund.

The kind of factories it would build are heavily reliant on robotics, which means they won’t need the legions of workers Trump fanaticizes about. But these kinds of factories can create a lot of added value. They also need relatively high-skilled workers, which means the people they do employ should get paid well and perform rewarding work.

For the 60% of Americans with no college education, that presents a far better opportunity than the kind of employment  they usually can choose between, like flipping burgers, acting as nurses’ aides or manning call centers.

Advanced manufacturing, therefore, doesn’t so much fill an economic need as it does a social need -- dignified and lucrative employment to a big swathe of the American population that correctly feels it has been shortchanged by the way the U.S. economy has evolved over the last two decades. By itself it’s not a solution, but it could be a critical component of one.

Israel could benefit from advanced manufacturing even more than America. Our economy has been creating jobs at a rapid pace in recent years, but too many of them require minimal skills and pay poorly.

That’s a worrying trend for a country that wants to ensure rising standards of living and reduce its distressingly high levels of poverty. Startup Nation should be bringing its tech prowess to the factory floor. With our tiny labor force, relative to America’s, it really could make a difference.