So you’ve registered for small business as a new potential contractor in SAM.GOV, and received SBA…
As one of Silicon Valley’s sweetest successes, you may be surprised to find out that the majority of Apple’s manufacturing actually takes place in China and other parts of the world, not the United States. Apple is a design firm and a software engineering house. The manufacturing portion of the equation is contracted out to contract manufacturers such as Foxconn. As a multi-trillion dollar, American-founded company, not manufacturing its goods and services in the United States is a major miss for the country in terms of jobs, GDP, and the trickle-down effect that a company of Apple’s size and caliber would have on small businesses and communities across the country.
Although on paper, it appears as if Apple’s U.S. manufacturing operations doubled between 2020 and 2021, the reality is that the majority of Apple’s U.S. production is done for testing purposes.
Why Did Apple Stop Manufacturing in the United States?
As recently as 2002, most of Apple’s products were made in the USA. Why Did Apple Stop Manufacturing in the United States?
The simple answer is economics. Labor is significantly cheaper overseas, and according to Apple executives, the scale of overseas factories and the flexibility, diligence, and industrial skills of foreign workers have outpaced their American counterparts. China spent $1.5B to bring Apple production offshore. In addition, Zhengzhou eliminated both corporate taxes and value-added taxes for the first five years of production in iPhone City, then halved them for another half-decade. The city also lowered Foxconn’s payments to workers by roughly $100 million per year.
Where Does Apple Manufacture its Products?
The majority of Apple’s products are made in the People’s Republic of China (PRC), with India coming in at a close second. Vietnam also sees a lot of production, and the only Apple product with final assembly on American soil is the MacBook Pro.
How Can We Get Apple to Manufacture in the United States?
Some ideas for drawing Apple manufacturing back to the United States include:
- Bringing back the IRS Section 936 Corporate Tax incentives: Section 936, passed in 1976, exempted U.S.-based companies from paying federal income taxes on the production of their subsidiaries. This tax break would surely offset some of the costs of doing business in the United States and could help draw Apple manufacturing back to the USA.
- 20-year tax holidays for manufacturing in the USA: Offering Apple a 20-year tax holiday would be instrumental in allowing the tech giant to cover the costs of moving its production back to the United States without having to worry about being hit with major tax bills for at least two decades.
- Set up shop in HUB Zones or Economic Opportunity Zones (EOZs) in the USA and its territories: Opportunity Zones are economically distressed communities where new investments may be eligible for tax benefits. Currently, there are8,764 Opportunity Zones spread throughout the 50 states, the District of Columbia, and five U.S. territories. This would give Apple tons of room for expansion and to build factories for American production while also allowing it to tax advantage of tax benefits and breaks.
- Tax credits for hiring military veterans and spouses: Another tax benefit that Apple could lean into to bring production back to the U.S. are tax breaks forhiring military veterans and their spouses. Two examples of common tax credits for hiring military veterans in the United States include The Returning Heroes Tax Credit, which now provides incentives of up to $5,600 for hiring unemployed veterans, and the Wounded Warriors Tax Credit, which doubles the existing Work Opportunity Tax Credit for long-term unemployed veterans with service-connected disabilities, to up to $9,600.Military spouses are an untapped resource and could provide a wealth of eager and skilled laborers to work part-time and full-time jobs to supplement their spouses’ income.
- Microchip incentives: Amid a global chip shortage, the CHIPS Act proposes $52.7 billion for manufacturing incentives to boost microchip production in the United States. The worldwide supply chain crisis has led to calls for restoring chip manufacturing in the United States, and companies like Intel and Samsung have unveiled plans for new U.S. fabrication plants. Apple should join this trend to seek relief from the global chip shortage while also bringing back production and jobs to its home country, the United States.
Rafael Marrero & Company Can Help
We’re proud to work with small American businesses to help win federal contracts with the U.S. government. We can also help you open shop in a designated HUBZone. To learn more about our services and why we’re proud to connect our clients with the U.S. government, contact us today.