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What's Causing All the Tension between Apple and Its Suppliers?

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Part 19
What's Causing All the Tension between Apple and Its Suppliers? PART 19 OF 21

How Apple Is Supporting Trump’s America First Agenda

Apple’s efforts to boost domestic manufacturing 

Apple (AAPL) is having trouble with some suppliers for its iPhone 8. The increasing demand will likely create a supply shortage of some components, which could delay the launch of the iPhone 8 OLED (Organic Light Emitting Diode) model. Amid these concerns, Apple is looking to promote domestic manufacturing to support President Trump’s America First agenda.

How Apple Is Supporting Trump’s America First Agenda

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Apple already manufactures its Mac Pro in the United States and is trying to bring more production into the country. It has thus created a $1.0 billion Advanced Manufacturing Fund. The first beneficiary of this fund is its glass supplier, Corning (GLW). Apple will invest $200.0 million in Corning’s research and development and capital equipment needs. Corning’s chief executive officer Wendell Weeks highlighted that over the last ten years, Corning has created about 1,000 US jobs in partnership with Apple.

In addition to the manufacturing fund, Apple plans to invest $1.0 billion in Softbank’s $100.0 billion Vision Fund, which will invest $50.0 billion in the United States. Apple will also increase its own employee headcount and teach people to code, creating jobs in its mobile app (application) development.

Apple supports US jobs

Apple has updated its website with a detailed breakdown of the jobs it has created in the United States. According to the website, the company created more than 2.0 million jobs in the United States, of which 80,000 jobs were created directly, 450,000 jobs were created through third-party suppliers, and 1.5 million jobs were created in the App Store ecosystem.

According to Fox Business, Apple spent more than $50.0 billion on its 9,000 domestic suppliers and manufacturers in 2016. Apple was joined by Amazon (AMZN), which has promised to create 100,000 US jobs over the next two years, and Intel (INTC), which plans to build a $7.0 billion fabrication facility in Arizona.

Overseas companies have also committed some investments in the United States. According to a Nikkei report, Apple’s assembly partner Foxconn plans to build a $7.1 billion LCD (liquid crystal display) panel plant in the United States.

Correlation between Apple’s US job creation and the Trump administration

Apple’s increasing emphasis on US job creation has a hidden motive. In an interview with CNBC, Apple’s chief executive officer Tim Cook stated that the manufacturing fund is a tactic to negotiate terms with the Trump administration and get a tax break for repatriating overseas cash. Apple has $239.0 billion of cash overseas, but it had to raise $100.0 billion of debt to fund shareholder returns since it can’t access that cash because of the high repatriation tax.

Do these domestic manufacturing efforts indicate that Apple may shift its manufacturing base from China to the United States? Let’s answer that question in the next part of the series.

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