iPhone and the Economy In 2012, a team of writers came together and wrote a series of articles entitled, The iEconomy. The purpose of the series was to observe the trials that are created as technological industries spread their influence across the world. The series won a Pulitzer Prize earlier this year, for explanatory reporting. The first article in the series discusses why Apple chose to take their manufacturing plants overseas, as opposed to keeping them in the U.S. In February of 2012 President Obama met in California with some of Silicon Valley’s finest. The guests were to have a question prepared for the President Obama. However, as the founder of Apple, Steve Jobs, was giving a speech, Obama asked him what it would take to make iPhones in the United States? The reason he asked this is because Apple at one time had its manufacturing plants in the U.S. One of the other dinner guests quoted Jobs as replying, “Those jobs aren’t coming back” (Duhigg, Bradsher, 2012, p.1). Apple has outsourced the production of the iPhone for many reasons, one of course being cheaper labor. Another reason is because the number of overseas factories is far greater than that of the U.S. Also, the foreign laborers themselves have seemed to surpass those in the U.S. in terms of flexibility, persistence and manufacturing abilities. The thing about Apple that confounded the President, alongside economists and policy makers, is that Apple does not seem to be concerned with creating jobs for Americans. This is the complete opposite of what other major companies, such as GM AND GE, have done in the past. Apple has 43,000 American employees, and 20,000 foreign employees. The contractors of Apple employee approximately 700,000 workers to produce Apple products, however only a small fraction work in the U.S.
(Bradsher, Duhigg, 2012) According to an article in The Wall Street Journal, Apple Inc. is negotiating a deal to ship a new, more affordable iPhone to the Chinese mobile carrier China Mobile Ltd. China Mobile has a customer base of approximately 700 million, making it the largest smartphone market in the world. The proposition to offer the new low cost iPhone to the Chinese market comes at a no more crucial time. Apple is seeing iPhone sales begin to drop, due to some of its rivals, such as Samsung and HTC. Apple saw a 14% decrease in third quarter sales, ending June 29, as opposed to this time last year. In June, Apple suffered a drop in the ranks in the Chinese market, to five percent. Its competitor Samsung enjoyed 18% of the Chinese market, making it the market leader for current time. To combat with its loss of the Chinese market, Apple has vowed to double the number of stores it has in China from 11 to 22, in fewer than two years. This decision is vital for Apple, because according to the research company Canalys, this year alone, Chinese smartphone shipments will increase dramatically to 352 million units. This number is over twice that of the U.S., and it is forecast to rise even further by 2015, to 421 million units.
(Wakabayashi, Luk, Sherr & Mozur, 2013) Apple has come out with a new program that allows customers to trade in their old version of the iPhone for a new one. This may sound like a great deal, however there are a few caveats. In order to receive a new iPhone, the old one has to be able to power on and be in working condition. The second condition stated in “fine print”, is that customers also have to sign a new contract in order to take advantage of this “deal”. The airtime suppliers can afford to simply give customers a new iPhone for their old one because they profit in the long run from the customers’ payments on their new contracts. The retail stores themselves receive a commission from the wireless carriers, since they are not receiving actual payment when someone trades in an old phone for a new one. Ultimately, Apple is seeking to capture its share of the