Student who worked in Chinese iPhone factory explains why manufacturing jobs aren't coming back to the U.S

Todd Haselton

This NYU grad student went undercover at an Apple factory in China  Friday, 28 Apr 2017 | 3:34 PM ET | 05:08

It's going to take a lot more than concrete and machines to manufacture iPhones in the U.S.

CNBC recently spoke with Dejian Zeng, a graduate student at NYU's Wagner School of Public Service, who spent last summer working undercover building iPhones at Pegatron, one of Apple's manufacturing partners.

CNBC: TJ Fabian

After returning from the trip, which was organized by NYU and China's Labor Watch, Zeng said he's convinced that U.S. workers aren't going to be shuffling into factories to build iPhones any time soon.

How exactly does a student at a prestigious U.S. university end up in China, sitting quietly on a stool, inserting parts into iPhones, one by one? 

Zeng walked CNBC through his decision to spend six weeks in a factory working 12 hours shifts Monday through Saturday, mostly during the night, and what he discovered along the way.

Dejian Zeng

"I just showed up"

It turns out getting into an iPhone factory isn't that hard.

"They just gave me the address of the factory and I just went. I just showed up. When I was there I saw people holding luggage waiting in a long line, so I just stood in the line," Zeng told CNBC in an interview.

"When it was my turn they asked for my ID, asked to see my hand and asked me to recite the English alphabet. I got in after that. It took less than 30 seconds. You don't have to apply or have any skills."

Dejian Zeng

Zeng told CNBC he went to the factory because China Labor Watch was expecting a strike, and it wanted boots on the ground in case a strike occurred to understand how it happened.

Zeng said China Labor Watch had done research and had noticed that, while wages weren't terrible, Pegatron's factory was cutting down the subsidies it offered workers on things like food, which ultimately meant workers were getting paid less. As he phrased it, Pegatron was using a bit of a loophole to save money while also meeting wage labor requirements. Zeng also claims he saw several violations, such as mandatory overtime, which he addressed in an open letter to Apple in March.

Dejian Zeng

Why it can't happen here

Now that he's seen how a Chinese iPhone factory operates, Zeng doesn't believe that Apple or other companies will be able to build competitive factories in the U.S., no matter what politicians want them to do.

"The first thing I can think of from a labor perspective is that the wages are unacceptable for American workers. So, in the factories, I was getting paid about 3100 yuan, or $450, per month. I don't think American workers can accept those kind of wages based on living conditions and prices here," Zeng said.

"Even if they relocate factories to the U.S. they'd replace workers with robots," Zeng said. He said Pegatron already uses robots to apply cameras to iPhones, and to drop batteries into the devices. Robots, Zeng said, are more precise than human workers, and precision is particularly important for those two components.

Dejian Zeng

The only reason human labor is still used, he believes, is because it's cheaper in some cases. 

"We are using labor in China instead of a machine because labor is cheaper than maintaining machines. If you relocate factories to the States you need to think of how to manage the workers," Zeng explained.

Zeng never saw the strike he was there to monitor, but he believes that sort of strike could easily happen in the U.S. "We don't have labor unions in China. Unions are strong organizations in the States, and that could cause a lot of trouble with management."

He added that high turnover and lack of labor leadership makes strikes unlikely in China.

"The turnover rate is extremely high, people leave after 2 weeks or a month. For ordinary workers, it's very hard to have a thought that, 'hey I don't like this, we need to organize.' It needs to be middle management, a line manager, someone who holds meetings with you every day and who gives demands, and if they said during a meeting 'we need to strike tomorrow and we need to fight for wages,' I could see that. But that's not happening."

Dejian Zeng

Even China is getting too expensive

Meanwhile, Zeng also said that factories are starting to appear in other countries where human labor costs are even cheaper than in China.

"China is developing. Prices for food and housing are increasing, so you have to increase wages accordingly. The government set minimum wages, and wages are going up, so [the] cost for labor is going up. Other places like Bangladesh, the wages are really low. They're shutting down factories in China and moving to where labor costs are lower. Factories used to be in America, then they moved to China, and now they're moving over to Vietnam and Bangladesh."

If President Trump wants iPhones manufactured in the U.S., Apple will need to front the cost to pay the much higher wages required in the U.S., which means that consumers will have to be willing to pay more. Either that, or it will have to rely a lot more on machines, which won't create jobs, and might end up taking them.