Why you can’t make a Trump phone in the US (yet)

A frisson of Trump-related news fizzled out in the last week. No, not a temporary outbreak of peace in the Middle East, but news of a smartphone originally announced as being made in America. Except, since making that claim, the Trump organization has changed to somewhat more ambiguous claims.

Which raises the question, why can’t you make a mass market phone in the US?

To get into this, it’s important to think about what is required when making a phone.

First, you need a design; secondly, you need components; third, you need an operating system; fourth, you require highly skilled labor to build the devices; and finally, you need a factory and distribution network big enough to handle manufacturing, logistics, and supply. Assembling the logistics of smartphone supply takes a lot of time and a lot of money. Pulling all these pieces together is a lot more complex than making a pencil — and that’s complicated enough, as the classic text by Leonard E. Read explains. 

To be honest, it’s complicated

That’s not to say it’s completely impossible. There is one device — Purism’s Liberty smartphone — that claims to be made in the US. The hangup is that the device costs $2,000, has limited specifications, and can only be produced in small quantities. It’s not completely made in the USA, either, since many of its components are made outside the US. 

That’s unlikely to change without major investment in component manufacturing plants, the cost of which could be prohibitive when you look at the fast pace with which those components might need to be upgraded or replaced as technology advances.

This is even before you consider the risk of entering markets already populated by incumbents and the low margins shared by those already-established manufacturers. It means that the entities most likely to bring component manufacturing in the US are probably going to be the same people who already make those components. And as they have the economy of scale behind them, it’s going to be next to impossible for US firms to compete. 

That makes that part of the supply chain a huge risk, which means it makes a lot more sense for US manufacturers and the US government to think about what components mobile devices will need in the future and begin to invest in the patents, raw materials, and manufacturing capabilities to make those things. But that’s going to take time, require long-term investment, and has its own set of risks — as everyone who invested in Betamax found out when VHS won the video format wars.

To some extent, this inherent risk is part of what US firms have outsourced internationally in the past, because lower-cost economies meant that the cost of building factories for components that never shipped was lower, which also reduced the risk. The US got the benefit of other people’s risk and didn’t pay the consequences when risks went wrong.

Mysterious materials

Of course, components are made of something, and that raises the other reason it’s pretty difficult to make a smartphone entirely in the US: raw materials. So many of the raw materials used in various components packed inside smartphones are incredibly rare and found only in specific geographies. 

This alone makes it inevitable that at least some raw material will need to be imported. But the cost of the materials and the cost of importing them sometimes makes it cheaper to manufacture components closer to the raw material source of supply. After all, if you use one ton of rare materials to manufacture 10 pounds of considerably more valuable components then it makes sense (because it is cheaper) to ship the component, not the material.

So now we have an inevitability in which at least some key smartphone components are unlikely ever to be made in the US. Perhaps those technologies can be replaced down the road, but that is limited by the laws of physics — which is to say it isn’t guaranteed. And to develop new things, you also need access to trained staff.

The alternative is to make smartphones that use components harvested from recycled devices, though doing so immediately means the devices might be dated, not as powerful, and potentially exposed to component-based security risks.

Magical people

Scientists, engineers, researchers, electronics experts, metallurgists, all of these skills are essential to the smartphone value chain. America just doesn’t have enough trained people to occupy all these roles. Sure, it’s possible you could replace some of the lower value skills with robots (made where?), but meeting that skill shortage is going to take a big commitment to education and training, or a focused approach to immigration, or both. And it will take years. 

That’s going to cost, and because there is presently a shortage of these skills, you’ll find that salaries will be far higher in the US than elsewhere. The cost increases the magnitude of risk for manufacturers/suppliers, meaning they will raise prices for the components or assembly services they provide. I’m not sure, but I imagine that these costs, including assembly costs, are why the Liberty phone costs $2,000.

Magical places

Once you have raw materials and components logistics sorted, and you’ve hired enough good staff to make the devices, you’re hit the next problem — location. Where will you put the factories? If you choose to centralize production in a low-cost, perhaps less-popular part of the US, you might have difficulty recruiting staff who won’t want to abandon their existing lives to move. That means for a serious manufacturing deployment you’ll put your factories in places where people with the skills you need might actually want to live.

This further increases costs, but also means access to factory space becomes another competitive challenge. It’s one you can solve with money, of course, but that’s yet another level of risk and investment that needs to be met in order to make phones in the good old US of A.

Then, once you’ve got the materials, components, people, and factories — you need to bring it all together. Even assuming it has become possible through some triumph of magical thinking to make most of the components in the US, it is unlikely all these parts will be made in the same place, or even the same state. 

Being where?

That means you’ll need to spend time putting together an effective and affordable logistics system for just-in-time delivery of components sourced from wherever they come from to the central assembly location. There are problems to this, but the impact once those are resolved is likely to be more traffic on local roads, more housing demands in local communities, and more demand for water, energy, and other infrastructure. 

What this usually means is that local property prices increase, usually at a rate that exceeds local wages. In most other places, what happens then is that people born and brought up in those areas can no longer afford to continue to live there and are priced out of the property market, increasing resentment, frustration, and poverty.

All of these changes damage local cohesion, even as local authorities need to somehow find the money to invest in roads, airports and all the other infrastructure the new people and factories are suddenly making much more excessive use of.

Think of the scale here.

iPhone factories in China and India employ tens of thousands of people — whole cities are dedicated to the task. And while it is somehow a little tempting to imagine the creation of an “iPhone City” somewhere in America, achieving that already looks a lot harder than first thought. 

The future will be better tomorrow

Fundamentally, what I’m saying is that shifting manufacturing ecosystems is a vastly complex task that demands huge investments of time and money — and even if the will is there, (and the US did actually vote for this), it makes more sense to invest gradually than to expect change overnight. Those investments have not yet been made, which is why the iPhone, Trump phone, or any other phone, is really not likely to be made in mass market quantities in the US before 2030 at the earliest, and probably not until later than that, if at all.

Will we even need smartphones by then? Who knows?

Think about the complexity of the above and it’s hard not to think that it makes more sense to focus investment on the big technologies the world will need tomorrow, rather than reinventing supply chains for the things we already have today. Because future tech innovation is where the money — and the jobs — will be.

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