How China built iPhone City, and the complexities of moving Apple manufacturing to the US

David Barboza, New York Times:

The state-of-the-art facility was built several years ago to serve a single global exporter: Apple, now the world’s most valuable company and one of China’s largest retailers.

The well-choreographed customs routine is part of a hidden bounty of perks, tax breaks and subsidies in China that supports the world’s biggest iPhone factory, according to confidential government records reviewed by The New York Times, as well as more than 100 interviews with factory workers, logistics handlers, truck drivers, tax specialists and current and former Apple executives. The package of sweeteners and incentives, worth billions of dollars, is central to the production of the iPhone, Apple’s best-selling and most profitable product.


It all centers on Zhengzhou, a city of six million people in an impoverished region of China. Running at full tilt, the factory here, owned and operated by Apple’s manufacturing partner Foxconn, can produce 500,000 iPhones a day. Locals now refer to Zhengzhou as “iPhone City.”

This is a terrific read, focusing on China’s financial incentives that help keep Foxconn’s costs low and, in turn, lower the cost of building the iPhone.

At the heart of the article is the question of Apple’s manufacturing future, given this:

President-elect Donald J. Trump has vowed to bring down the full force of the government on American companies that move jobs overseas, threatening punitive tariffs on the goods they sell back at home. Apple has been a frequent target of Mr. Trump, who said during the campaign that he would get the technology company to “build their damn computers and things in this country.”

Trump has repeatedly promised an Executive Order to put a 5% tariff on all imported goods, with the possibility of more tariffs specifically aimed at companies like Apple who do the vast majority of their manufacturing overseas.

Note that Foxconn is a Taiwanese company, headquartered in Taipei. Zhengzhou is in central China, near the Huang He (Yellow River). Taiwan’s relationship with China and the economic uncertainties of tariffs add great complexity to this equation.