Made in America: Apple's supply chain increasing US production

Posted:
in General Discussion edited January 2014
Over the last year, some of Apple's key component suppliers have begun increasing their U.S.-based production, which could be a sign that more of the iPhone is already made in America than one might think.

When Apple Chief Executive Tim Cook was recently asked at the D10 conference about the possibility of his company building products in America, he noted that some crucial parts for the iPhone and iPad are already manufactured stateside. Specifically, he identified the ARM processors built by Samsung in Austin, Texas, or the Corning Gorilla Glass made in Kentucky.

But the iPhone and iPad — Apple's two most popular products — are made up of much more than the CPU and glass that Cook highlighted. These complex mobile machines include power controllers, proximity sensors, cellular radios, Wi-Fi chips, audio and video chips, accelerometers and more — and a number of those parts come from American companies.

Of course, there's no guarantee that any of the parts found in Apple's products are, with absolute certainty, made in America, even if they're sold by a U.S. company. Many chipmakers build their products at a number factories located around the world. And ever-secretive Apple doesn't even disclose who makes many of the parts found in its products, leaving enthusiasts to tear the company's devices apart and hunt for clues, sometimes to no avail.

But over the last year, some of the more prominent chipmakers that Apple does business with, including Texas Instruments and Avago Technologies, have begun to increase their stateside production of components.

One industry contact who spoke with AppleInsider said that many of these companies are expanding their U.S. production in part because of orders received from "a large personal electronics manufacturer" that continues to see record breaking sales. Afraid to identify Apple by name, some in the industry are said to jokingly refer to growing orders from a mysterious "fruit vendor."

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Expanding production

One Apple supplier, Avago Technologies, is currently expanding its manufacturing processes in Fort Collins, Colo., and is planning to buy as much as $130 million worth of manufacturing equipment. Avago is responsible for making a custom part for Apple's iPhone 4S that allows one handset model to connect to multiple forms of wireless networks around the world, according to IHS iSuppli.

AppleInsider inquired with Avago about its U.S.-based chip fabrication, as well as its assumed partnership with Apple, but the company declined to comment.

Texas Instruments, another key Apple partner, is also currently ramping up production at its Texas chip fabrication factories. While the chipmaker is closing factories in Japan and Houston, one person familiar with the company's operations said those moves have come as the company turns its focus to products seeing increased demand.

In particular, Texas Instruments is said to have seen orders grow considerably for its power management chips for mobile devices like smartphones. Texas Instruments already supplies a number of components to Apple, including the touchscreen controller in the iPhone 4S, as well as power management chips and a control device found in the new third-generation iPad. The company was also rumored in March to have begun manufacturing new power management chips for Apple's next iPhone.

A person familiar with operations at Texas Instruments said its power control chip business, which is said to receive a significant number of orders from Apple, has generated "thousands of jobs" in the U.S. Many of those jobs are said to be high-paying technical jobs that require employees with engineering degrees, particularly at its Richardson, Tex., facility, known internally as "RFAB."

Texas Instruments
The Texas Instruments fabrication facility in Richardson, Tex., opened in 2009.


A spokesperson for Texas Instruments told AppleInsider their company doesn't comment on matters related to "potential customers," and declined to discuss the company's general chip fabrication business.

Fairchild Semiconductor, which is believed to supply power supply chips for Apple's iOS devices, is also said to be producing over capacity at its American facilities. The San Jose-based company, which has been around in various forms since 1957, saw record quarterly sales for mobile products in the first quarter of 2012, and is in the process of adding more equipment in the U.S.

An individual familiar with Fairchild's business indicated to AppleInsider that the company's 200-millimeter wafer fabrication plant in South Portland, Maine, is currently at full capacity, as is its 150-millimeter facility in West Jordan, Utah. This person said Apple-ordered components built by Fairchild will primarily come from its Maine plant in the second half of 2012.

Fairchild
Fairchild Semicondutor plant in South Portland, Maine, via Maine Ahead.


AppleInsider reached out to representatives from Fairchild Semiconductor multiple times over the last week and a half, but the company failed to respond to any inquiries.

There are also rumors in the industry that Maxim Integrated Products, a semiconductor manufacturer based in San Jose, has secured orders from Apple. The company has plants in San Antonio and Dallas, as well as Beaverton, Ore., and San Jose, Calif.

AppleInsider reached out to Maxim to comment on rumors that it has received orders from Apple, but the chipmaker declined to comment on that particular topic.

However, Vivek Jain, senior vice president of Manufacturing Operations at Maxim, did discuss his company's general chip production business, and revealed that about 50 percent of its wafer fabrication production is based in the U.S.

Maxim recently began a multi-year investment in its American facilities, upgrading and expanding capacity at all of its U.S. fabrication plants. Jain said the investment will allow Maxim to improve product quality and upgrade its equipment while assimilating production from recently acquired companies. Maxim's 380,000-square-foot semiconductor fab in San Antonio was purchased from Philips Semiconductors Inc. in 2003.

Jain said the companies Maxim partners with have not specifically asked the chipmaker to build more products in the U.S. But Maxim has focused on its American operations regardless, because the company feels it gives them a competitive advantage.

"We have a very talented pool of resources in Silicon Valley and across (the) U.S. to develop new process technologies and do cost effective manufacturing, while protecting critical intellectual property," Jain said.

Maxim
Maxim Integrated Products is spending $65 million to expand its chip fab facility in San Antonio, Tex.


Maxim has 9,300 employees worldwide, and about 1,000 of those are manufacturing cleanroom workers at its four U.S. fabs, which produce integrated circuits for smartphones, tablets and more.

Combined, Maxim's plants in San Antonio and Beaverton employ nearly 1,100 manufacturing and engineering staff. Even more high-end workers are expected to be added as the company continues its $200 million in upgrades aimed at expanding its U.S. semiconductor manufacturing facilities.

Breaking down the iPhone's parts

It's impossible to tell exactly how much of Apple's products are truly built in the U.S. As evidence of this, Andrew Rassweiler, senior principal analyst at research firm IHS iSuppli, put together a breakdown of components found in the iPhone 4S, and 52.6 percent of the parts were considered "unknown."

iSuppli's research did find that Samsung Semiconductor, which builds Apple's custom ARM processors in Texas, plays the biggest role in the iPhone 4S. They estimate that Samsung's components represent 12.4 percent of the smartphone's identifiable bill of materials.

Avago Technologies is estimated to account for 1 percent of the bill of materials in the iPhone 4S, while Texas Instruments is pegged at 0.6 percent, Maxim is estimated to account for 0.5 percent, and Fairchild Semiconductor has 0.1 percent.

Corning's Gorilla Glass, which serves as the scratch-resistant surface for the iPhone 4S touchscreen and is publicly acknowledged to be made in America, is estimated by iSuppli to represent another 0.6 percent of the smartphone's total bill of materials.

Other noteworthy iPhone component makers on iSuppli's list are:
  • Qualcomm, based on San Diego, Calif., and estimated to account for 8 percent of the bill of materials
  • Amperex Technology, with 3.2 percent and headquartered in Brooklyn, New York
  • TriQuint Semiconductor, of Beaverton, Oregon, with 1.1 percent of the iPhone 4S cost
  • Cirrus Logic, from Austin, Tex., is estimated by iSuppli to take 0.6 percent.
  • Skyworks Solutions is headquartered in Woburn, Mass., and accounts for 0.5 percent of the iPhone 4S cost
  • AKM Semiconductor is a subsidiary of Japan's Asahi Kasei Microdevices, but it is headquartered in San Jose, Calif., and represents 0.3 percent of the bill of materials
  • Peregrine Semiconductor, of San Diego, is estimated at 0.3 percent
  • RF Micro Devices accounts for an estimated 0.2 percent of the iPhone cost, and is based out of Greensboro, N.C.
  • ON Semiconductor, of Phoenix, Ariz., accounts for the smallest identifiable share of the iPhone 4S, with less than 0.1 percent
iSuppli


Domestic assembly less likely

While a number of parts found in the iPhone, iPad and other Apple products come from American companies and are made in the U.S., those parts are still shipped to China where Apple's assembly partner, Foxconn, puts together the final product. Cook noted at D10 that much of the media scrutiny regarding Apple's overseas partnerships comes from an "intense focus on the final assembly."

"Could that (assembly) 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 this room."

It's also worthwhile to consider that assembly jobs with companies like Foxconn tend to be low paying positions, which is in part why so many Chinese workers take on large amounts of overtime for extra pay. In contrast, the engineering jobs required for chip fabrication at companies like TI, Avago, Fairchild and Maxim are highly skilled, more desirable positions.

"We do as many of these things [in America] as we can do," Cook said at D10. "And you can bet that we'll use the whole of our influence to do this."
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Comments

  • Reply 1 of 37


    It is good to see AI do some original research an to publish an original story.

  • Reply 2 of 37


    First of all, very cool article.


     


    Getting to the "assembled by Foxconn in China" part. I remember Cook talking about how the current iPhones were/are designed to be put together by human hands. This is purposely done so that it can be put together by cheap labor (in China). Saying that, wouldn't it be possible to redesign the phone (and other gear) to be assembled by more advanced methods (aka robots)? We've pretty much have done this with cars, appliances, etc and it has both kept those companies in business and (more importantly) profitable. Granted with cars there's still a lot of physical labor involved, but it's shocking how much of it is automated! I watch too much "How it's made" haha Just a thought...

  • Reply 3 of 37
    ochymingochyming Posts: 474member


    I am not an USA citizen, but this is good news.


     


    I despise the Microsoft and Google bizStrategy, it is for lazy firms like DELL and HP …


    Any company can take on Apple, now with Microsoft and Google bizStrategy, going for more market share with licensing-spree it is difficult to create an Apple or Microsoft or Google-like firm from scratch.

  • Reply 4 of 37
    vorsosvorsos Posts: 302member


    I would just like to reduce the double standard of Apple receiving nearly all media scrutiny for its overseas production, whereas other US-based tech companies have the same or worse practices, and show no inclination to change them.


     


    Surprising to see Texas Instruments on this list. Are they still making the same models of graphing calculators, for the same retail price, since 1994?


    of course they are.

  • Reply 5 of 37
    al_bundyal_bundy Posts: 1,525member


    if you ship iphones direct from China, then i guess it makes sense to ship parts back to china from the US to make new iphones. otherwise the 747's are flying back empty or with a lot of empty space


     


    and did oblama pass some new tax break allowing manufacturing in the US?

  • Reply 6 of 37
    philboogiephilboogie Posts: 7,671member
    Great article AI! Thanks for the good read! As much as I complain about the forum software, credit is due for this article.
  • Reply 7 of 37
    mac_dogmac_dog Posts: 909member

    Quote:

    Originally Posted by Vorsos View Post


    I would just like to reduce the double standard of Apple receiving nearly all media scrutiny for its overseas production, whereas other US-based tech companies have the same or worse practices, and show no inclination to change them.


     


    Surprising to see Texas Instruments on this list. Are they still making the same models of graphing calculators, for the same retail price, since 1994?


    of course they are.




    especially given that, prior to apple, corporations never even considered worker rights overseas. apple implemented the first-ever policy for worker rights in factories. but apple is the one that gets the flack for either not taking care of everyone or outsourcing jobs.


     


    hell, i won't be surprised if there are some people who will say it's not good enough.


     


    apparently, all society's woes can be attributed to apple.

  • Reply 8 of 37
    ochymingochyming Posts: 474member

    Quote:

    Originally Posted by al_bundy View Post


    if you ship iphones direct from China, then i guess it makes sense to ship parts back to china from the US to make new iphones. otherwise the 747's are flying back empty or with a lot of empty space


     


    and did oblama pass some new tax break allowing manufacturing in the US?



     


     


    There is no need.


    Loot at Ireland, low tax but High unemployment.

  • Reply 9 of 37

    Quote:

    Originally Posted by Ochyming View Post


     


     


    There is no need.


    Loot at Ireland, low tax but High unemployment.



     


    And well educated. I'm surprised more companies aren't pouring into Ireland, to the chagrin of the Brits next door who complain about the taxes they're not getting (NOT the JOBS!).

  • Reply 10 of 37
    solipsismxsolipsismx Posts: 19,566member
    I hope this article cues people in on how extremely unlikely it will ever be to get all parts of any CE to be completely made and assembled in the US.
  • Reply 11 of 37

    Quote:

    Originally Posted by UltraSPARC View Post


    First of all, very cool article.


     


    Getting to the "assembled by Foxconn in China" part. I remember Cook talking about how the current iPhones were/are designed to be put together by human hands. This is purposely done so that it can be put together by cheap labor (in China). Saying that, wouldn't it be possible to redesign the phone (and other gear) to be assembled by more advanced methods (aka robots)? We've pretty much have done this with cars, appliances, etc and it has both kept those companies in business and (more importantly) profitable. Granted with cars there's still a lot of physical labor involved, but it's shocking how much of it is automated! I watch too much "How it's made" haha Just a thought...



     I'm only guessing but I think it might actually be cheaper to use human assembly compared to robotic assembly. It makes sense in the car/appliance industry where one model will have a multi-year production run, but not for a product you only plan to make for one year or less. Retooling an entire facility with custom machinery is quite costly and has little to no flexibility. With Apple's current Foxconn set up, the workers could work on iPhone assembly one day and the next work on iPads. It's a very organic structure that can react very quickly to changing supply/demand constraints. If Apple only had a set number of custom built automated fab machines, they could only do one thing at the same pace regardless of supply/demand constraints.


     


    And that's all before considering the moral element of those 100,000+ assembly workers and where they would presumably go? Back to the rural farms they came from making less than nothing.

  • Reply 12 of 37
    maestro64maestro64 Posts: 5,005member


    This is the part which most people fail to understand and have failed to understand for years as this article has shown. There is lots of things still made in the US. But everyone wants to focus on the labor part which went over seas, Do we want to be a country of low paying labor or High salary tech jobs and services. And those who are complaining about these labor jobs going over seas are unwilling to sit at a bench 8+ hours a day doing the same thing over and over again at any price. You could offer to pay these people $20/hr and they still will not do it.

  • Reply 13 of 37
    solipsismx wrote: »
    I hope this article cues people in on how extremely unlikely it will ever be to get all parts of any CE to be completely made and assembled in the US.

    The engineering and chip fab jobs are higher skilled, higher paying than final assembly, no?
  • Reply 14 of 37
    shaminoshamino Posts: 480member

    Quote:

    Originally Posted by AppleInsider View Post



    One industry contact who spoke with AppleInsider said that many of these companies are expanding their U.S. production in part because of orders received from "a large personal electronics manufacturer" that continues to see record breaking sales. Afraid to identify Apple by name, some in the industry are said to jokingly refer to growing orders from a mysterious "fruit vendor."


     


    Who knew Dole needed to purchase massive quantities of semiconductors?


     


    Quote:

    Originally Posted by al_bundy View Post


    if you ship iphones direct from China, then i guess it makes sense to ship parts back to china from the US to make new iphones. otherwise the 747's are flying back empty or with a lot of empty space



     


    Apple doesn't own the cargo planes.  I'm sure FedEx ships plenty of stuff into China as well as out.

  • Reply 15 of 37

    Quote:

    Originally Posted by SolipsismX View Post



    I hope this article cues people in on how extremely unlikely it will ever be to get all parts of any CE to be completely made and assembled in the US.


    This is the key point.


     


    Btw, terrific article, AI! Nice research. And, stuff like this has no interest whatsoever for our resident trolls.

  • Reply 16 of 37

    Quote:

    Originally Posted by Suddenly Newton View Post





    The engineering and chip fab jobs are higher skilled, higher paying than final assembly, no?


    True, but I don't think he's talking about assembly. I think his point is broader: there is no way that the many other higher value added parts in the component supply chain required to make the iPhone -- and other similar CE products -- ever be replicated in the US. There'll be a few, here and there, but the overall contribution to the product's value added (other than for Apple's own internal value added) will likely be low.

  • Reply 17 of 37
    shaminoshamino Posts: 480member

    Quote:

    Originally Posted by Maestro64 View Post


    This is the part which most people fail to understand and have failed to understand for years as this article has shown. There is lots of things still made in the US. But everyone wants to focus on the labor part which went over seas, Do we want to be a country of low paying labor or High salary tech jobs and services. And those who are complaining about these labor jobs going over seas are unwilling to sit at a bench 8+ hours a day doing the same thing over and over again at any price. You could offer to pay these people $20/hr and they still will not do it.



     


    We need both, skilled and unskilled jobs.  While it might be nice if everybody could have a high-paying high-tech job, the fact is that large amounts of the population either can't or don't want that kind of job.  It would be better for these people to have factories to work in than for them to be unemployed.


     


    I don't believe the myth of jobs Americans won't take.  If the pay is fair, there are plenty of people who will take the job.


     


    I was recently in Phoenix, AZ, where they have recently imposed very strict laws to ensure that illegals don't work.  You know what happened?  The work is still getting done, but now English speaking Americans (including plenty of Hispanics - who are in the US legally) are doing the work.  Maybe the employers have had to start paying better wages than what they were paying the illegals, but that's not a bad thing.

  • Reply 18 of 37
    ssquirrelssquirrel Posts: 1,196member


    "It's impossible to tell exactly how much of Apple's products are truly built in the U.S. As evidence of this, Andrew Rassweiler, senior principal analyst at research firm IHS iSuppli, put together a breakdown of components found in the iPhone 4S, and 52.6 percent of the parts were considered "unknown."



    iSuppli's research did find that Samsung Semiconductor, which builds Apple's custom ARM processors in Texas, plays the biggest role in the iPhone 4S. They estimate that Samsung's components represent 12.4 percent of the smartphone's identifiable bill of materials."


     


     


    Sorry this is a math fail for this wording.  They are 12.4% of the total, but the known portion is only 47.4%, so Samsung makes up 26.16% of the known components.  It should either say that Samsung's components represent 12.4% of the iPhone's bill of materials or mention the 52.6% unknown and add that Samsung makes up 26.16% of what is known.



     

  • Reply 19 of 37
    tjwaltjwal Posts: 404member

    Quote:

    Originally Posted by lukevaxhacker View Post


     


    And well educated. I'm surprised more companies aren't pouring into Ireland, to the chagrin of the Brits next door who complain about the taxes they're not getting (NOT the JOBS!).



    About 15 years ago many high tech companies were moving into Ireland.  I don't know what has happened since then.  Maybe they discovered that they really don't speak english LOL.

  • Reply 20 of 37
    mdriftmeyermdriftmeyer Posts: 7,502member


    GlobalFoundries and IBM have invested > $4.5 Billion in Upstate New York for the Malta Fab. Kind of dwarfs these announcements.

     

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