Question: What are the benefits to Apple of outsourcing the assembly of the iPhone to foreign countries, and particularly China? What are the potential costs and risks to Apple?

Expert answer

There are several reasons why Apple outsources the assembly of the iPhone to foreign countries, and China in particular. One reason is that labor costs are often lower in these countries than they are in developed nations like the United States. This can help Apple keep production costs down and increase its profits. Additionally, outsourcing can help Apple avoid environmental and safety regulations that might be more stringent in developed countries. By producing the iPhone in countries with fewer regulations, Apple can reduce its compliance costs and possibly increase its production efficiency.

However, there are also potential risks and costs associated with outsourcing iPhone production to China. One risk is that Chinese workers may not be as skilled or productive as workers in developed countries. This could lead to higher levels of defects and lower overall quality control. Additionally, China has a history of intellectual property theft, and there is a risk that Apple could have its technology and trade secrets stolen by Chinese companies. Finally, produce the iPhone in countries with fewer regulations, Apple may be subject to more public scrutiny and criticism for its labor and environmental practices. This could damage the company's reputation and lead to increased costs in the form of regulatory compliance.