At Apple Inc. (NASDAQ:AAPL)‘s Worldwide Developers Conference, the company confirmed longstanding rumors about a new product. Later this year, Cupertino will release a radically redesigned version of its premium Mac Pro desktop computer, which currently starts in the low $2,000s. The high-end PC lacks a monitor, but is Apple Inc. (NASDAQ:AAPL)’s most powerful machine, although recent versions were less than cutting-edge.
The new Mac Pro is anything but behind the curve. It’s a beautiful machine with advanced components, but it also includes a special feature that Apple hasn’t used in a long time: it will be assembled in the U.S. And Apple Inc. (NASDAQ:AAPL) is not the only company taking an interest in American manufacturing. Google Inc (NASDAQ:GOOG)‘s Motorola Mobility subsidiary will be assembling the new flagship Moto X phone in Texas. And Google Inc (NASDAQ:GOOG) already built its failed Nexus Q living room box in America, so the trend isn’t new.
So what does this trend mean for traders? Does being made in the USA equal higher profits, or lower margins?
There’s one serious hangup with building your products in the United States: cost. Foxconn, a major electronics manufacturer that builds the iPhone, pays its workers below $5 an hour — and that’s overtime pay. The standard per-hour pay is $2.50. A comparable worker in the United States would make five to eight times that amount, so you can see why companies like Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) like to make things overseas.
But cost isn’t the only thing; in fact, it might not be the most important factor. Remember that, while Foxconn workers assemble the devices, they do it using components manufactured mostly in China. These parts are built in huge factory complexes where hundreds of thousands of laborers live and work. You can move the assembly to the United States, but the rest of the supply chain will still be in China.
There’s a legendary story about how Steve Jobs decided, weeks before the release of the iPhone, that it needed a glass screen instead of a plastic one. His executives could not have turned to America to build 10,000 redesigned phones a day in less than a month. Only China has the workforce, supply chain, and labor laws to facilitate that kind of grueling schedule.
But there are also plenty of positives in building products in the United States. Apple Inc. (NASDAQ:AAPL) hinted for months before the unveiling of the new Mac Pro that the company was going to be building something in America. And Google Inc (NASDAQ:GOOG) is hyping up a storm about the Moto X being the “only smartphone made in the United States.” It’s a publicity coup to build your product in the United States these days, especially if your product is electronic. Such a pedigree is usually reserved for high-end, luxury devices that are out of the reach of the average consumer.