How Obama or Romney Should Have Answered the iPad Question

By: Arik Hesseldahl, All Things D

Toward the end of last night’s presidential debate between President Barack Obama and Gov. Mitt Romney, the moderator, CNN’s Candy Crowley, asked a perfectly legitimate question, one that Obama himself is once reported to have asked a group of tech executives that included the late Apple CEO Steve Jobs. Essentially it was this: Why can’t iPhones and iPads be manufactured in the U.S.?

Here’s her question:

Crowley: Mr. President, we have a really short time for a quick discussion here. IPad, the Macs, the iPhones, they are all manufactured in China, and one of the major reasons is labor is so much cheaper [there]. How do you convince a great American company to bring that manufacturing back here?

The correct answer is that, under current conditions, which are highly unlikely to change no matter who is president, the job of assembling iPhones and iPads and other consumer electronics is now done mostly in China by companies that specialize in manufacturing, and will never come back to the U.S. And that’s okay.

Sadly, both Obama and Romney flubbed their answers, and educated voters not at all.

Romney made his response about how China is a currency manipulator and steals American intellectual property. Obama got started down the right path, correctly admitting that certain low-skilled jobs aren’t coming back, and mentioned “high-wage, high-skilled jobs.” But he failed to close the deal on his point. He then got off track talking about investing in research and training engineers. In part because the time was so short, neither delivered a clear correct answer about an issue that is widely and fundamentally misunderstood by most voters.

Here’s what one of them — either one, I don’t care which, and assuming no time limit — should have said in response:

“Candy, I understand how some people might get frustrated when they see Chinese workers assembling iPhones. It’s easy to think that those jobs rightly belong in America. The reality is a little more complex, but when you understand it, there’s a surprising amount of good news for American workers.

“The fact is, assembling iPhones and iPads is the final step of a complex process, and is really a low-skill, low-cost kind of job. China has spent decades building much of its economy around these low-skill jobs, in part because it has such a large labor force and plenty of workers who are willing to do the work. And, frankly, here in America you wouldn’t want to try to support a family on the kind of wages a job like that would pay. I know it sounds harsh, but it’s true. So I know this may sound odd when I say it, but I ask you to hear me out: I’m perfectly comfortable letting those kinds of jobs go to China or somewhere else.

“In fact, some researchers at the University of California at Berkley found that for every iPad or iPhone manufactured, Chinese workers add $10 or less to the value of an iPad or iPhone. On an iPad, they found that American workers add $162 worth of value, and on an iPhone it was more than twice as much.

“In America, when we talk about manufacturing, we should be talking about advanced manufacturing jobs for highly skilled workers that require a solid education and pay wages on which you can support a family. And the fact is, there’s a lot of American work that goes into an iPad or an iPhone or a Mac.

“For one thing, there’s our semiconductor companies, like Intel, an American company that makes the most advanced and complex device ever created — the microprocessor — and that does it better than any other company in the world. It makes the primary brain that goes inside the Mac, most of the world’s personal computers and most of the servers that power the Internet. And most of those chips are made right here in California and Arizona and Oregon. Some are made in Israel, too. But most are made here in the U.S.A.

“And the microprocessors that go inside the iPad and the iPhone are made right here in America, too. Apple doesn’t make its own chips, and when it went looking for another company to help it do that, it picked a Korean company called Samsung. And where did Samsung decide to build these chips? Some place in Korea? No. The answer will surprise you: Texas. That’s right. Samsung operates one of its very biggest chip factories in Austin.

“Then there’s the shatter-resistant glass that you touch every time you use an iPhone or iPad. It was invented in America. And it’s made in America, too, by American workers at a company called Corning, in Kentucky and New York.

“And that’s just one piece of it. There are a lot of other great jobs held by American workers. Apple has a lot of smart designers who sweated over every little detail of how the iPad and iPhone look, and how they feel in your hand, and how the button works. Teams of software developers slowly, painstakingly designed and built and tweaked and refined the software that makes it so fun and useful.

“And we’re not done there. If you have an iPhone or an iPad, you have a favorite app. Right now, my favorite app is the one created by my campaign staff. And when I take a break on the campaign bus, my wife and I like to relax for a few minutes playing Words With Friends. She beats me every time. And how many apps are there? A million? A zillion? But that’s an example of another American company, Zynga, creating jobs for the people who create game software. And there are lots more Zyngas, some of them really small companies with just a few people, and some a lot bigger. Apple once counted, and said that there were more than 200,000 people working at jobs just making apps.

“And let’s not forget that just a little more than five years ago, this branch of the technology industry didn’t exist at all. Apple brought out the first iPhone in 2007, and the first apps started coming to the marketplace in 2008. And don’t get me started about Google and its Android phones and tablets, and the chips and software that go into those. Or Facebook, and all the interesting things it’s doing.

“So, to answer your question, Candy, I’m not terribly worried that American workers aren’t assembling iPhones and iPads in America. They’re busy doing more important jobs, and earning good wages doing it right here in America. And as president, I’ll do everything in my power to help encourage the creation of more jobs right here in America, and to encourage entrepreneurs to start new companies so they can create the next Apple or Google or Intel or Facebook.

“It’s something we in America do better than anyone else. And we can argue about the details of how we should go about doing that. My opponent and I have some strong differences of opinion on some of those things we might do, and you should learn about those differences and think long and hard about them, because they’re important. But, over the long term, when I look at the iPhone and the iPad, I see something that could only have happened in America. And I feel pretty good about the role the American worker plays in it. And so should you.

“Next question.”

Update: A few people have pointed out that President Obama in his response to Crowley’s question got off to a better start than I initially gave him credit for. However, I don’t think he quite closed the deal on the argument. Then, owing I think in part to the tight time constraints, he got off track. Either way, I’ve adjusted that lead-in paragraph above to reflect this.

For the sake of discussion I’ve added the text of the full exchange below.

CROWLEY: Mr. President, we have a really short time for a quick discussion here.
IPad, the Macs, the iPhones, they are all manufactured in China, and one of the major reasons is labor is so much cheaper [there]. How do you convince a great American company to bring that manufacturing back here?

ROMNEY: The answer is very straightforward. We can compete with anyone in the world as long as the playing field is level. China’s been cheating over the years, one, by holding down the value of their currency, number two, by stealing our intellectual property, our designs, our patents, our technology. There’s even an Apple store in China that’s a counterfeit Apple store selling counterfeit goods. They hack into our computers. We will have to have people play on a fair basis. That’s number one.

Number two, we have to make America the most attractive place for entrepreneurs, for people who want to expand a business. That’s what brings jobs in. The president’s characterization of my tax plan …

OBAMA: How much time you got, Candy?

ROMNEY: …. is completely … is completely false.

CROWLEY: Let me go to the president here, because we really are running out of time. And the question is can we ever get — we can’t get wages like that. It can’t be sustained here.

OBAMA: Candy, there are some jobs that are not going to come back, because they’re low-wage, low-skill jobs. I want high-wage, high-skill jobs. That’s why we have to emphasize manufacturing. That’s why we have to invest in advanced manufacturing. That’s why we’ve got to make sure that we’ve got the best science and research in the world.

And when we talk about deficits, if we’re adding to our deficit for tax cuts for folks who don’t need them and we’re cutting investments in research and science that will create the next Apple, create the next new innovation that will sell products around the world, we will lose that race. If we’re not training engineers to make sure that they are equipped here in this country, then companies won’t come here. Those investments are what’s going to help to make sure that we continue to lead this world economy not just next year, but 10 years from now, 50 years from now, a hundred years from now.

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