To the question in general: watch American Factory on Netflix for a good documentary on the efforts of spinning up a US based factory. Basically this company found that American workers were more expensive, had higher safety standards, and quality control was a struggle. In the end the company started to invest in industrial robots for automation.
To this specific case: it's probably to avoid the 22% import duty that India places on products not assembled locally. I suppose the US could pass a similar law.
Really? The message I got from American Factory was that there are stark cultural divides between Chinese and American manufacturing. It's been a while since I saw it, but they made a point to emphasize some of the poor financial decisions the Chinese bosses made during refurbishing (I think an overly expensive stage was built).
Yes, there's no one thing in that documentary but a collection of things which you could chalk up to "differing cultures":
* The scene where the plant operators from China dump a bunch of waste improperly
* The scene where the plant owner is worried about unionization (though the film contrasts this with the presence of unions in their Chinese plant)
* The scene where the plant operators are complaining that the american workers output with higher defect rate and lower speed
* The scene where the operators are complaining about the strict safety regulations and the fact that Americans like to take time off on weekends
That the plant owner spent tens of thousands of dollars to redo the factory layout is just one example, but it's not more than a few minutes of airtime compared to the quality control and union stories. If these can be put under the umbrella of "cultural differences" then I agree with your assessment.
I have just begun exploring this question in depth, I'll share my half-baked understanding here. Please provide corrections, new insights and alternate explanations - it'll help me learn.
A question that's asked very early when thinking about a new product is the average selling price for the product (ASP). I believe that there are teams who specialize in generating various permutations of brand, product name, feature sets and price. This is fed to a study group and the choices made by the study group can be analyzed to make accurate predictions like "We can sell 12% more units if we drop the ASP from 899 to 849".
Because the ASP constrained to a very narrow range early in the product development process, all other costs are also constrained to a very narrow range even before real development begins. Important to my answer are BOM (bill of materials) and assembly costs.
The assembly costs are easy to understand: because of minimum wage requirements, healthcare costs and all that (can someone please link me to a full list of costs?), American labor is several times more expensive than competing labor in China or India. However, in the context of assembling a phone, improved training/skills/language abilities in America does not make American labor that much more productive. American labor's productivity can also not benefit from better tooling/automation - China can easily replicate similar tooling/automation improvements and cancel out American labor's advantages.
The BOM costs are a little more interesting. A single factory in China is probably manufacturing products for several American firms simultaneously. Imagine a factory manufacturing various types of phone chargers. They all likely source the same components (screws, capacitors, glue, packaging materials) from the same vendors - so a screw manufacturer (for example) who has a factory 2 miles away can send a shipment of screws to this assembly plant every day, and the screws will get used by all the American brand products being manufactured in that factory. Chinese factories have built up an incredible network of such suppliers around them. Often, if you are manufacturing a product, you can go ask the Chinese factory who will assemble your product for advice on which suppliers/vendors to use to save on BOM costs. They are happy to help.
If Apple were to make iPhones in America, the first and second challenges they will face will be the cost of labor and having to build up a deep supply chain that will feed into their American factories.
At such high costs, apple (or anyone) will conclude that they can not meet their profit margins at the desired ASP and scrap the entire product.
One problem with using ASP and margin as the criteria for making decisions on manufacturing is that such a viewpoint gives an advantage to places with fewer worker protections.
A friend of mine made the point to me the other day, correctly I think, that it's very difficult to compete on price when your competitor is using slave labor. If I own a company that makes 5 products, and 1 of those 5 involves slave labor, I'm getting free work that I can amortize across all 5 products. So, even if a particular product does not involve slave labor, I can still sell it for cheaper if slave labor expands my margins somewhere else.
In a world where ASP and margins are the only criteria, forced labor camps like those found in Xinjiang make business sense. This suggests to me that maybe the "it's just business" mentality is neither ethical nor long-term sustainable, and can incentivize unlawful behavior.
