What's going to doom us is not the continued decline in U.S. manufacturing. What is more likely to doom us is that we're willing to reduce teacher salaries and to lay-off teachers as if educating our kids is a luxury that we can't afford.
Apple is not going to manufacture in the United States because it would probably double or triple the price of the products. I believe that the average Chinese manufacturing worker makes about $130 per month. The Federal minimum wage is $7.25. That's over $1200 a month without any benefits whatsoever. But that doesn't include the portion of social security and Medicare that the employer contributes, which would add about another 8%. And the problem with minimum wage is that no primary wage earner can have a middle-class life earning minimum wage. So even at minimum wage, U.S. wage rates are at least 10x Chinese wages.
So the question becomes "how much manufacturing labor is built into the cost of each Apple product?" I don't know the answer to that question, but my estimate is that it would at least double and possibly triple what we're paying today, even though most of the internal components would probably still be manufactured in China. (They really wouldn't be manufactured here -- they'd be assembled here.)
ISupply says Apple pays Foxconn $7.10 to assemble an iPhone. As of June 2010 the average worker's salary at Foxconn was $293/month. Apple limits the workweek at Foxconn to 60 hours. So wages are roughly $1-2/hr. With equipment costs, overhead, profit, etc. the amount of assembly labor is likely around 2 hours for each iPhone.
A smartphone is not a labor-intensive product, so labor is not the huge factor that you suggest. Apple is not growing rice - they are building the most sophisticated consumer technology product ever. I believe that manufacturing the iPhone components must be one of the most capital-intensive efforts in the history of manufacturing. It is a shame that all that capital is being spent in Asia. And BTW we can make components competitively in the USA (see Intel).
So I think that this remains a legitimate topic of discussion - why manufacture in Asia and not the US? And the lower labor cost is not the only, or possibly even the primary, explanation.
Apple has huge margins. It can afford to assemble things in the USA and earn a lesser profit to benefit the nation. If Apple is so glad to promote the greenness of its products, then it could also promote the Americanness of its products. It should do so to benefit the nation.
Apple says it makes great products that people want with the features people need. Well, they don't really make anything that people want with the features people need. They design the products and have Chinese people make the products that people want with the features that people need.
The largest segment of Apple employees is probably telephone support staff. What are they paid per hour?
According to iSuppli, AT&T's iPad 2 3G has about US$326.60 worth of parts, while the Verizon iPad 2 3G is slightly cheaper, at $323.35. Could Apple tack on two hours of American labor at the low rate of $12 per hour to the smallest iPad and still make a really big profit selling them at $499? Yes they can.
If anybody can forward this to Steve Jobs and get him to read it please do so.
So I think that this remains a legitimate topic of discussion - why manufacture in Asia and not the US? And the lower labor cost is not the only, or possibly even the primary, explanation.
iSupply's estimate is just that, an estimate. Foxconn is on record as saying that their current profits are low because assembly of iPhones and iPads is more difficult than they anticipated. Probably need to up that estimate a bit.
Now by your own estimate the iPhone is around 4 man-hours work. Now consider that Foxconn workers aren't low-paid by Chinese standards, they're relatively well paid. So the equivalent hourly rate in the US would be what, $10/hour? $20? The additional labour cost could easily be $100.
Then there's the other advantages of siting your manufacturing in Asia.
Short supply lines to your principal suppliers
Access to the Chinese market
Access to multiple existing contract manufacturers.
You can site a satellite assembly line off in Brazil for example, but it only makes sense to do it there because of their crippling tariffs - which damages their economy in other ways.
Comments
What's going to doom us is not the continued decline in U.S. manufacturing. What is more likely to doom us is that we're willing to reduce teacher salaries and to lay-off teachers as if educating our kids is a luxury that we can't afford.
Apple is not going to manufacture in the United States because it would probably double or triple the price of the products. I believe that the average Chinese manufacturing worker makes about $130 per month. The Federal minimum wage is $7.25. That's over $1200 a month without any benefits whatsoever. But that doesn't include the portion of social security and Medicare that the employer contributes, which would add about another 8%. And the problem with minimum wage is that no primary wage earner can have a middle-class life earning minimum wage. So even at minimum wage, U.S. wage rates are at least 10x Chinese wages.
So the question becomes "how much manufacturing labor is built into the cost of each Apple product?" I don't know the answer to that question, but my estimate is that it would at least double and possibly triple what we're paying today, even though most of the internal components would probably still be manufactured in China. (They really wouldn't be manufactured here -- they'd be assembled here.)
ISupply says Apple pays Foxconn $7.10 to assemble an iPhone. As of June 2010 the average worker's salary at Foxconn was $293/month. Apple limits the workweek at Foxconn to 60 hours. So wages are roughly $1-2/hr. With equipment costs, overhead, profit, etc. the amount of assembly labor is likely around 2 hours for each iPhone.
A smartphone is not a labor-intensive product, so labor is not the huge factor that you suggest. Apple is not growing rice - they are building the most sophisticated consumer technology product ever. I believe that manufacturing the iPhone components must be one of the most capital-intensive efforts in the history of manufacturing. It is a shame that all that capital is being spent in Asia. And BTW we can make components competitively in the USA (see Intel).
So I think that this remains a legitimate topic of discussion - why manufacture in Asia and not the US? And the lower labor cost is not the only, or possibly even the primary, explanation.
Apple says it makes great products that people want with the features people need. Well, they don't really make anything that people want with the features people need. They design the products and have Chinese people make the products that people want with the features that people need.
The largest segment of Apple employees is probably telephone support staff. What are they paid per hour?
According to iSuppli, AT&T's iPad 2 3G has about US$326.60 worth of parts, while the Verizon iPad 2 3G is slightly cheaper, at $323.35. Could Apple tack on two hours of American labor at the low rate of $12 per hour to the smallest iPad and still make a really big profit selling them at $499? Yes they can.
If anybody can forward this to Steve Jobs and get him to read it please do so.
So I think that this remains a legitimate topic of discussion - why manufacture in Asia and not the US? And the lower labor cost is not the only, or possibly even the primary, explanation.
iSupply's estimate is just that, an estimate. Foxconn is on record as saying that their current profits are low because assembly of iPhones and iPads is more difficult than they anticipated. Probably need to up that estimate a bit.
Now by your own estimate the iPhone is around 4 man-hours work. Now consider that Foxconn workers aren't low-paid by Chinese standards, they're relatively well paid. So the equivalent hourly rate in the US would be what, $10/hour? $20? The additional labour cost could easily be $100.
Then there's the other advantages of siting your manufacturing in Asia.
- Short supply lines to your principal suppliers
- Access to the Chinese market
- Access to multiple existing contract manufacturers.
You can site a satellite assembly line off in Brazil for example, but it only makes sense to do it there because of their crippling tariffs - which damages their economy in other ways.If anybody can forward this to Steve Jobs and get him to read it please do so.
You can email him yourself, his email address is famously [email protected]
Knock yourself out