When President-elect Donald Trump commented on the campaign trail that he would get Apple(AAPL) - Get Report to build its "damn computers and things" in the U.S. instead of overseas, it was widely regarded as a joke.
However, prospects of an American-made iPhone are now being taken a bit more seriously.
Apple has reportedly asked iPhone assemblers Foxconn Technology (FXCOF) and Pegatron Corp. to explore manufacturing the smartphones in the U.S., according to sources who spoke to the Nikkei Asian Review.
Foxconn and Pegatron produce more than 200 million iPhones annually out of their Chinese facilities. Apple is Foxconn's largest customer, accounting for more than 50% of its sales.
While Foxconn is believed to be investigating the possibility of establishing U.S. production facilities, its Chairman Terry Gou remained wary about the rise in production costs, the Nikkei reports.
There are numerous arguments for why the iPhone shouldn't be made on U.S. shores. Critics argue that a transition would be more difficult than expected and that production costs would skyrocket, causing iPhones to become unaffordable.
The total cost of manufacturing the iPhone 7 with 32GB of memory is about $225, which then is sold at retail for about $649, according to research firm IHS Markit. If iPhone production were moved to the U.S., the retail price could potentially more than double, resulting in a major case of sticker shock for U.S. consumers, said Frost & Sullivan analyst Brent Iadarola.
"Labor costs alone would contribute to a price point that would shock consumers and put Apple in an adverse competitive position," Iadarola said in an email. "...So despite the rhetoric, the 'end-to-end' iPhone will never be manufactured exclusively in the U.S."
Moreover, Recon Analytics Analyst Roger Entner said a move like this wouldn't bring back the high-paying jobs to America that Trump may be looking for. Those jobs are more likely to be found in software and design positions, which are already based in the U.S., Entner added.
A production shift would not only have a significant impact on Apple's economics, but would ripple throughout all the industries and companies that rely on the mobile Internet, said Drexel Hamilton analyst Brian White. In particular, White said all the apps and services that depend on affordable smartphones would see their livelihood threatened.
"If the smartphone and its components were not affordable, would we ever have Uber, Snapchat or Instagram? How about the 140 billion apps downloaded from Apple's App Store with over 2 million apps?," White said in an email.
Finding the workers with the willingness and skill set to assemble an iPhone in the U.S. at the volume levels required by Apple would prove to be an "insurmountable task," White added. Workers in China are typically young, live in a dorm on the manufacturing site and work "very long hours," he said.
Additionally, a manufacturing shift would have wider implications beyond just labor and manufacturing costs -- it's also intertwined in ongoing discussions about a possible trade war with China.
"The broader threat of shifting manufacturing facilities from China to the U.S. is likely to be used as leverage in renegotiated trade arrangements anticipated by the Trump administration," Iadarola said.
China's state-backed newspaper Global Times on Sunday published an editorial warning that sales at Apple, Boeing (BA) - Get Report and top U.S. automakers could take a hit if Trump follows through on his promise to impose a 45% tariff on Chinese imports. Approximately 22% of Apple's fiscal 2016 sales came from the Greater China region.
The Global Times said iPhone sales could "suffer a setback" if such measures were taken.
If Apple moves forward with relocating manufacturing to the U.S., it would only add fuel to the fire surrounding the nation's trade relations with China.