Apple’s Big Manufacturing News: Much Bigger Possibilities
By Mark Devlin
December 13, 2012
As if Apple hasn’t been in the news enough lately, it just became known late last week that the company’s planning on spending $100 million on a new, U.S.-based manufacturing effort.
Besides that which has been hyped about NBC’s talk with Apple CEO Tim Cook, there’s a wonderful interview with Cook over at Bloomberg Businessweek. It doesn’t matter whether you’re an Apple hater or fan (I’m both, depending upon the product and/or content.), worker bee/middle manger/exec, Apple shareholder, or someone who really doesn’t give yesterday’s bottom-of-the-birdcage paper about Apple—the interview is a must-read, especially for those in (or interested in) technology.
Here’s what Cook said about bring Apple manufacturing back to America....
“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.”
Bringing back? Yes. Here’s a snippet from a related LA Times piece…
Apple had manufactured its products in the U.S. until the late 1990s. When Steve Jobs, after returning to the company for his second stint, hired Cook in 1998. Cook's mission was to overhaul Apple's supply chain and manufacturing. A big part of his strategy was to move most of that manufacturing overseas, particularly to China.
Apple has a lot to gain by again pursuing manufacturing in the U.S.
Granted, the company runs bigger margins than most others in the technology space. Considering at least a hundred different factors, manufacturing here will likely be more expensive (though at least one source, as discussed here on IEN, doesn’t think that there are great cost advantages to manufacturing in China.)—and reduce those margins. Will doing so be worth it? Sure. Here’s why, in stream-of-consciousness form…
* The company won’t lose money with their U.S. effort. They’re certainly not going to give anything away—or pull a Gillette (as have other companies such as Amazon, for instance, who’s running slim-to-none margins on their hardware just to get people to buy their other products). You can bet the effort will work; how well? That remains to be seen.
* The company’s announced $100 million U.S. manufacturing investment is a lot of money by any manufacturing standard—except Apple’s. With a market cap of over $500 billion, $100 million is pocket change. That pocket change that will go a long, long way, and work wonders to calm ever-present concerns over Foxconn labor. (While Apple’s taken most of the Foxconn-related heat, remember: they’re just the biggest target. Foxconn manufactures products for a lot of big-name U.S. companies, including Microsoft, Amazon, and Nintendo, for example.)
* Companies for decades have setup small pilot programs to make sure that a given product can be manufactured at all, or to ever-tightening specs and ever-increasing profitability goals. Think of this as a really expensive (to us, not to Apple) pilot program. IF, for whatever reason, the U.S. effort fails, the company can afford to dust itself off and quietly walk away.
* They’re committing only to ‘one of the exiting Mac lines.’ Why not the iPhone or other popular products? Check this out from Gizmodo…
Apple says it "shouldn't be criticized for using Chinese workers" because "the U.S. has stopped producing people with the skills we need." There just aren't enough skilled workers in the U.S. that have that in-between degree of high school and college. That's what Apple wants in its factory workers and that's what China gives 'em.
I’m not so sure about that, but Foxconn workers are certainly highly trained (at very specific, mind-numbing tasks—think 1960’s U.S. automotive assembly line workers) once on the job. If Foxconn’s workers can do it, I’ll bet heartily and confidently that U.S. workers can do it—and do it better—if Apple handles the manufacturing part properly including inordinately impressive management at all levels. There’s always the problem of the U.S. simply not having a couple hundred thousand workers to mobilize and house in work camps at a given moment—as does Foxconn—to meet the tight deadlines of making a product for mass market launch.
* ‘Made in the USA’ will undoubtedly carry a lot of cachet when it comes to marketing those U.S.-minted notebooks. If all goes well, you can bet that ‘Manufactured Proudly in the United States’ will become a part of the remarkable unboxing experience that only Apple (and maybe Tiffany & Co.) provides. That phrase, or one like it, will be smoothed over, stylized, glorified—and marketed. It will become noticed. Respected. It will make buyers think, more than ever, “Wow. This was worth the extra money that I spent for this Apple product.”
* With some folks predicting Apple’s (Humpty Dumpty’s) great fall post-Steve Jobs, $100 million and worlds of positive PR will pretty much act as a padded safety harness stretched around The Big Egg.
Perhaps even more importantly than Apple itself, consider just a few, peripheral, bigger-picture positive things that come to mind.
*’Made in the USA,’ thanks to Apple’s manufacturing move, could very well mean something again—something that could very well nudge mass market perspectives, beliefs, and buying patterns far beyond today’s extremely damaging approach of “Yeah, it’s made in the U.S. and it’s nice, but it’s too expensive. Let’s go to Walmart.”
* Apple’s sending a very strong signal not only to the U.S.—and its citizens—but the world. By making this one move, the $500+ per share tech company is telling everyone that it’s okay to bring manufacturing back to the U.S. Apple’s move sends a strong message to other companies, both U.S.-based and otherwise. That message will make CEOs and manufacturing execs—again—say to themselves “You know, if Apple can do it and do it, so can we.”
* If all goes well, you can bet that some variation of Made in the USA will make it to Apple’s advertising. You can bet that it will become patriotic. You can also bet—and this is the big one—that the public will respond positively because it’s Apple. There will certainly be trickle-down patriotism, too—for any company that currently—or again—manufactures at home.
* Apple’s obsession with fit-and-finish—intimately connected with the demand for (and increasing expectation of/obsession with) it—will also trickle down to other U.S. manufacturing entities. Again, CEOs and manufacturing professionals will think, “Huh. If Apple can achieve such stunning fit-and-finish, so can we.” Hopefully, however, others won’t adopt Apple’s ‘send it back to the factory because we’re the only ones good enough to handle a repair’ approach. If that happens, watch out. You may have to send your new Corvette back to GM in Bowling Green for a replacement battery. (The upside? It might only cost you $99.)
Hopefully, Apple doesn’t see this as one, relatively small U.S. effort. Their singular move—if played right by Apple, other big U.S. manufacturers, and perhaps even government and civic leaders—could signal a new, better, and unexpectedly great era of U.S. manufacturing.
Man, that’s a delicious cake—and there’s scrumptious icing on it, too: Foxconn has also announced manufacturing expansion into the U.S. ‘as clients seek Made in U.S.A.’
The next couple of years in U.S. manufacturing will be really, really interesting.