Establishing US assembly lines would be 'highly difficult' for Apple

Posted:
in General Discussion edited January 2014
Though Apple Chief Executive Tim Cook said this week he'd like his company's products to be made in the U.S., a new report suggests the roadblocks might be too great for Apple to overcome, at least in the short term.

Unnamed sources in Apple's upstream supply chain indicated to DigiTimes that moving production lines of Apple products to the U.S. would be a "highly difficult" task for the company in the near future. Almost all of Apple's products are currently assembled in Asia before they are shipped to the rest of the world.

Even if Apple did decide to conduct assembly in America, the cost to transport components would likely be too high for Apple to bear, the report said. And higher wage rates in the U.S. would also increase costs for Apple.

"Since moving a supply chain from one place to another takes time, while enterprises are mainly concerned about costs, if there is no profitability in moving, the related upstream component makers are unlikely to follow Apple in moving to the U.S.," the report said.

Almost all of the components Apple utilizes in its products are built in China, proximity to those component suppliers provides more than just cost savings. The New York Times noted in a profile on Apple's supply chain in January that there are a plethora of highly skilled workers, which offers "breathtaking" speed and flexibility that could not be matched by an American plant.

Cook was asked about the prospect of building Apple products in America during an interview at the D10 conference earlier this week, where AppleInsider was in attendance. Cook said he would like for Apple to begin building products in America as it once did.

Tim Cook at Foxconn
Apple CEO Tim Cook tours an iPhone production line at a Foxconn plant in Zhengzhou, China, in March.


Cook did note that the custom-made ARM processors for the iPhone and iPad are built in the U.S., in Austin Texas, while Corning's Gorilla Glass used on the iPhone is made in Kentucky.

"There's an intense focus on the final assembly. Could that be done in the U.S.? I sure hope so," Cook said. "But look, how many tool-and-die makers do you know in America? I could ask them, nationwide, to come here tonight and we couldn't fill [a few hundred seats in] this room."

While most of Apple's assembly remains in Asia, a limited number of devices have been produced by the company through its manufacturing partner, Foxconn, in Brazil. The Brazilian government granted Foxconn a series of tax breaks to incentivize production of devices like the iPhone and iPad in their country. So far, devices built in Brazil have only been sold by Apple in that country.
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Comments

  • Reply 1 of 70
    jd_in_sbjd_in_sb Posts: 1,483member
    The U.S. needs to create an industrial zone exempt from minimum wage laws and anti-business bureaucracy. That would bring manufacturers back.
  • Reply 2 of 70
    tallest skiltallest skil Posts: 43,399member

    Quote:


    Establishing US assembly lines would be 'highly difficult' for any company, regardless of industry




     


    … Right?


     


    I don't see Apple doing US assembly until it can be done completely by robots with humans simply loading and unloading completed products and components, respectively. Hire humans to oversee the lines and repair the robots. Plant powered by solar and biogas.




    But that's multiple decades off. So far off that it's impossible to actually envision.




    Quote:

    Originally Posted by jd_in_sb View Post

    The U.S. needs to create an industrial zone exempt from minimum wage laws…


     



    Not sure I like that. Not sure that seems right.

  • Reply 3 of 70
    jragostajragosta Posts: 10,473member
    … Right?

    I don't see Apple doing US assembly until it can be done completely by robots with humans simply loading and unloading completed products and components, respectively. Hire humans to oversee the lines and repair the robots. Plant powered by solar and biogas.


    As has been explained previously, that only addresses a very small part of the problem. That does absolutely nothing about tax laws, environmental, health and safety laws, infrastructure, etc.
  • Reply 4 of 70
    tjwaltjwal Posts: 404member


    I'm sure he could find more than enough unemployed tool and die makers to fill the room.  It is a dieing trade though as the US labor costs are way higher than those in developing countries.

  • Reply 5 of 70
    paulmjohnsonpaulmjohnson Posts: 1,380member

    Quote:

    Originally Posted by AppleInsider View Post



    Cook did note that the custom-made ARM processors for the iPhone and iPad are built in the U.S., in Austin Texas, while Corning's Gorilla Glass used on the iPhone is made in Kentucky.

     


     


    Sadly, even that isn't 100% true.  Like Intel, who make the majority of their high end silicon in fabs in the US, the finished wafers are shipped off to Asia for sawing, bonding and packaging, so the first time there is a completely finished chip, it's in Asia.


     


    I just can't see this happening at any point.  Transportation of all the stuff they need to the US would be incredibly expensive.

  • Reply 6 of 70
    haarhaar Posts: 563member
    no way that this will happen for reason stated in the Article and that IMO a 10 Billion dollar investment would be required... with no payback on the Horizon...
    while American's are "patriotic" they also want to "live free" not as in freedom, but as in free and cheap products...
    thus there are very few americans outside of those that are in the military, that would pay an extra 100 dollars for an iPhone. (if you want to gauge how many people would be buying the iPhone look up the number of people that bought it at full price when it was first introduced, the first generation iPhone, meaning no subsidies!..). and even if they were made in the US they would still be made in China, thus people would import from China for cheaper iPhone.

    also (unions, gov) they could block the components being shipped to the US they could cause a strike at the Apple plants ; leakage of secret information All these things would prevent the phone from being sold in the US.

    the late Steve Jobs was correct when he said " those jobs are gone and never coming back "

    instead of Apple making the first American made phone why don't we have Google or Motorola or Nokia or Samsung make the first American made phone and let them pave the way to see if Americans will actually buy an American phone over the Chinese made phone.

    TL;DR...if everybody wants an American-made phone ...then lets get the other phone companies making an American phone and if it takes off...then Apple will follow suit and make their own manufacturing plant in the US... it is a Win-Win situation for america!...
  • Reply 7 of 70
    macinthe408macinthe408 Posts: 1,050member


    Does anyone know the rule regarding which location gets used in 'Made in xxxx'? Is there a certain percentage of assembly/production that needs to occur in a certain location? I wonder if simply applying the back panel (thus, final assembly), for example, here in California would allow Apple to print 'Designed and Made in California' on the back? 


     


    There'd definitely be a certain cachet in that. Maybe a 'California' line with palm trees on the back panel and arugula in the box. 

  • Reply 8 of 70
    john.bjohn.b Posts: 2,716member

    Quote:

    Originally Posted by jd_in_sb View Post



    The U.S. needs to create an industrial zone exempt from minimum wage laws and anti-business bureaucracy. That would bring manufacturers back.


     


    Are you volunteering to work for less than minimum wage?  Are you willing to take up the slack for the infrastructure demands that a low-wage workforce puts on its community?

  • Reply 9 of 70
    object-xobject-x Posts: 42member


    How do you delete a thread?

  • Reply 10 of 70
    quinneyquinney Posts: 2,521member

    Quote:

    Originally Posted by jd_in_sb View Post



    The U.S. needs to create an industrial zone exempt from minimum wage laws and anti-business bureaucracy. That would bring manufacturers back.


    A new state: Dickensia

  • Reply 11 of 70
    tundraboytundraboy Posts: 1,598member


    I wish you guys who keep dreaming about it, stop dreaming of the return of low value added, low wage, low tech assembly jobs to the U.S.  iPhone and iPad assembly, unless it is completely automated as one poster said, will never ever come back to the United States.  The productivity of a single worker in such an operation just is not going to be enough to justify paying him or her a living wage.  Anyone who seeks the return of those types of assembly jobs is in effect wishing that we become a third world country.


     


    This is not to say that we don't need more manufacturing jobs over here.  We do, but not mass component assembly.

  • Reply 12 of 70
    vandilvandil Posts: 187member


    If they did this in the US:


     


    1. They'd have to deal with unions.


    2. They'd have to pay much, much more per hour, plus benefits, and unemployment.


    3. Deal with some people that have a sense of self-entitlement.


    4. People unwilling to leave the concerns of their personal lives at home.


     


    The harsh conditions in China make for a very cheap, streamlined production environment.  People accustomed to those conditions work more efficiently.  Americans would not.

  • Reply 13 of 70
    rufworkrufwork Posts: 128member


    Didn't Jobs address this a little more directly, saying the time for the US to manufacture this stuff "has passed" or something similar, and that China's just too good at making quality stuff?


     


    Here we go:


    http://www.catholic.org/technology/story.php?id=44500


     


    Quote:


    LOS ANGELES, CA (Catholic Online) - President Obama asked, "What would it take to make iPhones in the United States? Why can't that work come home?"



    According to another dinner guest, and Job's reply was blunt. "Those jobs aren't coming back."



     


    I greatly prefer Jobs' direct, no pipe dream assessment.

  • Reply 14 of 70


    I'll tell you right now the major reasons.  1.  The Green Loons won't permit it, period.  Scream all you want but it's the cold hard truth.  Manufacturing this stuff create pollution and requires ENERGY.  2.  Regulation and taxes  3.  Willing labor force and NO Unions.  Apple could handle the higher wages, component manufacturing could be brought on shore but every government weenie from the dog catcher on up would have their fingers in it.  Progress on building the facilities would be stopped because of some lizard.  Don't even mention Solar or those bird killing wind mills, ain't gonna happen and you darn well know it.  Yes they built a server farm with solar BUT they've got serious backup capabilities for when the sun don't shine.


     


    A poster said the unemployed tool & die machinists.  Well I happen to be one of them, thanks to the overregulation.

  • Reply 15 of 70
    apple ][apple ][ Posts: 8,360member


    Not gonna happen.


     


    And I also bet that the majority of the people who whine about wanting manufacturing in the USA wouldn't spend significantly more for any product made in the USA. Talk is cheap, but in the end, money talks, and these whiners are full of shit, not to mention extremely unrealistic and not very knowledgable about running a global corporation.

  • Reply 16 of 70
    paxmanpaxman Posts: 4,589member


    When most of the production and assembly of an iPad (or whatever) is an entirely automated process, then maybe. Kind of defeats the purpose but western (read middle class - world wide) consumers are hardly willing to pay enough for their products so that workers would get the kind of wages and benefits they would expect to earn themselves, no matter where those workers live and work. Sad but true. 

  • Reply 17 of 70
    jragostajragosta Posts: 10,473member
    Does anyone know the rule regarding which location gets used in 'Made in xxxx'? Is there a certain percentage of assembly/production that needs to occur in a certain location? I wonder if simply applying the back panel (thus, final assembly), for example, here in California would allow Apple to print 'Designed and Made in California' on the back? 

    It's based on percentage of value. At one time, the standard was 75%, but that no longer applies - the line is not very well defined.
    http://en.wikipedia.org/wiki/Made_in_the_USA
  • Reply 18 of 70
    kellya74ukellya74u Posts: 171member


    deleted

  • Reply 19 of 70
    dasanman69dasanman69 Posts: 12,972member
    tjwal wrote: »
    I'm sure he could find more than enough unemployed tool and die makers to fill the room.  It is a dieing trade though as the US labor costs are way higher than those in developing countries.

    Tool and die makers are a dieing trade but I think you meant it's a dying trade.
  • Reply 20 of 70
    aaarrrggghaaarrrgggh Posts: 1,568member
    Labor really isn't a meaningful part of the equation. Tax treatment for major capital investment is the initial sticking point (sales tax, depreciation, property taxes, etc), followed closely by time to market. Environmental regulations come in, but are generally addressable. The environmental side isn't dumping toxic chemicals into the river issues, it is things like standby diesel generator exhaust concerns, on-site pre-treatment of sewage before it is discharged into the municipal system, and a lot of the penalties involved for minor infractions.

    A simple example in California is the fact that CARB and AQMD are internally funded by fines and filing fees. These aren't small organizations and aside from their own operating costs they impose 10-50x the effort onto manufacturers, facility owners, and engineers.

    I've been in manufacturing facilities in Los Angeles that don't cater to defense, aerospace, or drugs; they generally employ very few people. One site that makes special castings went from 300 employees down to around 20 through improved process and automation, and this is generally where things are headed. They are apparently headed that way in China too.

    A more realistic goal is to increase the amount of finishing work done on things like the chips, and to marry displays and glass here, to create incremental improvements. The problem still remains that for a company like Apple, they want to pick best-of-breed suppliers for a given product, so you still have the logistic challenges of shipping products back and forth.
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