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Baizhu Chen on "The Real Reason the U.S. Doesn't Make iPhones: We Wouldn't Want To"

Baizhu Chen, a professor of clinical finance and business economics at USC Marshall School of Business, argues against implications that China took American manufacturing jobs.

January 25, 2012

In this article written for, Baizhu Chen clarifies his position on China and the notion that they take America’s manufacturing jobs. Chen points out that if a Foxconn facility exists in the United States, labor costs would wipe out Apple's $14 billion dollar profit. This profit is vital to paying design engineers that create and market cool technological products. Secondly, Chen points out that Apple’s top investors are mutual fund companies; the average American seeks high returns on these investments. Third, more than 80% of American workers are now associated with service industry jobs. A manufacturing base no longer exists with America. Chen concludes by comparing current America to its past. He argues that the day American's begin assembling iPhones is the day that China becomes the designer of these cool products.        

Chen's essay begins:

I recently wrote, in “Buying From China Is, in Fact, Buying American,” that manufacturing in China allows American companies such as Apple to hire high-paid workers in America. Several readers responded that if these American companies didn’t outsource production to China, America could have not only those high-paid jobs but also additional manufacturing ones. They implied that China took American jobs when these companies located production there. To me, that is absolute  nonsense. But I owe my readers an explanation.

I have been thinking a lot about this topic—and it was also raised in The New York Times and The Economist this past week. The central question is: Why don’t we make iPhones here in America?

As the Times article pointed out, that’s just what President Obama asked Steve Jobs when they met last February. Jobs answered bluntly: “Those jobs are not coming back.”

Foxconn is contracted by Apple to assemble iPhones in a southern Chinese city, Shenzhen, and Foxconn employs 230,000 workers. The Foxconn campus has banks, supermarkets, bookstores, fire brigades, a police station, a hospital, and many other facilities. It is sometimes referred to as “iPod City.” The total employment generated by Foxconn’s work on iProducts is well beyond those directly hired by Foxconn, due to the so-called “job multiplier.. Imagine what kind of job opportunities would come to America if an iPhone factory were located here and hired 230,000 American assembly workers.

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