Reshoring
Apparently, We Can...
No company has been under more pressure than Apple to bring back jobs that were shipped overseas.
A couple of months ago, my blog post here asked “Why not Make Phones and iPods Here?” I followed up a week later with a second blog, imaginatively titled “Why not Make Phones and iPods Here? Part 2.” Now we have an answer: “We can and will.”
Apple has just announced that it will spend $100 million next year to make things closely related to iPhones and iPads. The things are computers. Specifically, iMacs. And iMacs are basically the big brothers of iPhones and iPads.
The details are still skimpy, but here’s what Apple President Tim Cook told Bloomberg BusinessWeek:
“Bloomberg: You were instrumental in getting Apple out of the manufacturing business. What would it take to get Apple back to building things and, specifically, back to building things in the U.S.?
“Cook: It’s not known well that the engine for the iPhone and iPad is made in the U.S., and many of these are also exported—the engine, the processor. The glass is made in Kentucky. And next year we are going to bring some production to the U.S. on the Mac. We’ve been working on this for a long time, and we were getting closer to it. It will happen in 2013. We’re really proud of it. We could have quickly maybe done just assembly, but it’s broader because we wanted to do something more substantial. So we’ll literally invest over $100 million. This doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.”
My immediate reaction is “public pressure works.” No company has been under more pressure than Apple to bring back jobs that were shipped overseas in the past 20 years. In one sense, singling Apple out wasn’t fair; most of the better-known consumer electronics companies source from Asian plants, so none are truly innocent when it comes to outsourcing. But, in several other important respects, Apple deserved condemnation.
Apple wasn’t first to shut down American production plants, but it did so with more gusto than similar companies. Cook himself led the move to China and, in smaller measures, countries near China. Steve Jobs was a product idea guy; Cook was the manufacturing leader.
Above all, Apple makes a very large target because of the way it presents itself. Apple sells image. More than any other company, Apple pushes cool. It even calls store people “geniuses,” which may be true in a few cases, but is certainly not applicable to the entire collective. And it marketed its leader, Jobs, to a greater degree (or, at least, more successfully) than its competitors managed. How many people know the name of HP’s current leader? Not many. (Meg Whitman, if you want to know. But can anyone name the previous CEO? Or the one that went before? Nope.)
There is at least one serious qualification to the “something more substantial” that Cook claimed. It seems that Apple won’t be returning to manufacturing itself. The best bet is a factory or two built and run by Foxconn Technology, Apple’s primary supplier in Asia. And Apple’s investment is, in Apple terms, insignificant—$100 million is less than 0.1 percent of Apple’s reserves.
iMacs do not account for much of Apple’s revenue. Less than 15 percent of Apple’s revenue comes from sales of computers including both desktops and laptops. iPads bring in about 20 percent of total revenue and iPhones account for more than 50 percent.
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So, Apple’s rediscovery of American workers won’t transform our manufacturing sector. But it is a start, which makes the decision better than nothing.
And it is a tiny triumph for public opinion. My hunch is that Apple is coming back entirely because Cook is tired of being portrayed as an economic Benedict Arnold. (The photograph of Cook on the Bloomberg Businessweek cover has all the warmth of a Teutonic movie villain in very bad temper. It won’t burnish Cook’s public image.) My concern is that this one small gesture will take the heat off Apple and the entire electronics manufacturing industry.
I welcome the Apple news, but only moderately. I reserve final judgment until we see exactly what Cook has in mind.
What do you think? Am I being too hard on Apple? Is this a token gesture or something more meaningful? Should public opinion have any bearing on where and how a company manufactures its products? Share your thoughts!
Editor’s note: Before “Shipulski on Design,” “Leading Lean,” and “Uncommon Sense,” there was ASSEMBLY magazine’s longest running and most controversial back-of-the-book column, “Unconventional Wisdom” by Jim Smith. A nationally known expert on electronics assembly, Smith never hesitates to question the sacred cows of manufacturing and economics. You can read more from him at his “Science of Soldering” blog.