Obama Calls on Tech Sector to Boost Economic Recovery

In his State of the Union address, the President referred to the technology sector many times in last night's speech, which included Steve Jobs' wife, Laurene Powell Jobs, as an invited guest, seated in First Lady Michelle Obama's box. As television cameras focused on Jobs' widow, President Obama described fostering a culture of talent, skill, and innovation in the U.S. similar to the one famously upheld by Apple's co-founder.

"An economy built to last is one where we encourage the talent and ingenuity of every person in this country... we should support everyone who's willing to work; and every risk-taker and entrepreneur who aspires to become the next Steve Jobs," he said.

At the same time President Obama praised Jobs' talent and work ethic, however, he criticized companies that shift jobs and financial assets offshore as a way to reduce their tax burden, and called for legislation that would put an end to the practice.

The President's remarks were not directed solely at Apple, since many U.S. corporations engage in offshore manufacturing and sales. However, Apple is one company that depends heavily on manufacturing products and generating profits overseas to avoid high taxes and keep its supply chain flowing smoothly.

Apple, Google, and Cisco are among several multinational companies currently pressing lawmakers for a tax break, on the grounds they will bring more than $1.3 trillion in profits earned overseas back to the U.S. if they are exempted from paying federal income taxes on the foreign earnings.

In yesterday's earnings report, Apple specifically mentioned it has more than $60 billion in cash offshore, perhaps sending a message to the Obama administration it is looking for an incentive to bring the funds back home.

In his address, Obama alluded to a plan to offer tax breaks to companies that bring jobs and revenue stateside, but he did not provide details of how the plan will work. Tax breaks could encourage Apple and other technology giants to repatriate money earned on sales in countries such as China, potentially strengthening the U.S. economy.

The Fair Labor Association is also scrutinizing conditions in Apple's manufacturing business in China. Audits last year revealed repeat offenses of substandard working conditions and poor treatment of workers at the company's Foxconn factory, which reportedly led to a string of suicides in 2010.

However, Obama recognized the factors that hold companies back from hiring in the U.S. He mentioned the many open technology-sector jobs, and the lack of talented, skilled workers to fill them, despite large numbers of people looking for work. He stressed the need for partnerships between technology companies and higher education, ensuring a skilled American workforce to meet tomorrow's needs that will reduce companies' dependence on foreign labor.

In addition to being Apple's manufacturing base, China represents the company's fastest-growing market. Earlier this month, police called off the opening of Apple's Beijing retail store after crowds waiting for the 4S launch grew so large they threatened public safety. As the U.S. technology market grows more crowded and competitive, Apple and its rivals increasingly look to foreign countries as a source of profits.

Apple's operations in China are key to its supply chain and revenues, and the company isn't likely to bring its entire operation back to the U.S., despite Obama's urgings. However, if the policy changes the President is calling for become reality before his term ends, Apple and other companies could be facing big changes in how they do business.