Apple partner Pegatron could boost US manufacturing capacity by 3-5x, if pressed
The chairman of Apple supplier Pegatron has revealed that his company could expand its operations in the U.S. by three to five times, should it be necessary -- but even that won't make much of a dent in Apple's iPhone and Mac production needs.
According to a Chinese-langauge Economic Daily News report, Pegatron chairman TH Tung said at his company's year-end banquet that its plants in California and Indiana could be expanded to meet the needs of purchasers. It would likely have little impact on the U.S. workforce, as any increase would be accommodated by automation, and not by growing the employment rolls significantly.
The U.S. facilities are primarily used for repair part manufacture for some electronics companies, and very small runs of them, at that.
AppleInsider has learned that neither U.S. facility assembles goods for Apple at this time. Primary customers are HP and Dell. The companies also provide on-site service for some products in the areas that they serve.
While three to five times expansion volume is significant, AppleInsider has also learned it is a "far cry less" than what Apple would need in even a slow Mac sales quarter, let alone the iPhone. Additional capacity would be required from another company, should Pegatron be tapped for this service in the U.S.
When then-Presidential candidate Donald Trump threatened various countermeasures against companies building products overseas, and importing them, rather than relying on U.S.-based manufacture, Apple requested an impact statement from both Foxconn and Pegatron should a move be required. Foxconn developed a plan, and Pegatron reportedly did not, citing costs of the effort.
Trump's campaign promised a 35 percent tariff levied against products like the iPhone manufactured overseas. The plan, published in June, presumably will give companies a significant economic incentive to bring manufacturing jobs back to the U.S. if passed.
"To make iPhones, there will need to be a cluster of suppliers in the same place, which the U.S. does not have at the moment," Apple Chief Executive Tim Cook said in an Dec. 2015 interview about a possible shift. "Even if Trump imposes a 45 percent tariff, it is still possible that manufacturers will decide to continue production overseas as long as the costs together with the tariffs are lower than the amount they need to spend on building and running production lines in the U.S."
According to a Chinese-langauge Economic Daily News report, Pegatron chairman TH Tung said at his company's year-end banquet that its plants in California and Indiana could be expanded to meet the needs of purchasers. It would likely have little impact on the U.S. workforce, as any increase would be accommodated by automation, and not by growing the employment rolls significantly.
The U.S. facilities are primarily used for repair part manufacture for some electronics companies, and very small runs of them, at that.
AppleInsider has learned that neither U.S. facility assembles goods for Apple at this time. Primary customers are HP and Dell. The companies also provide on-site service for some products in the areas that they serve.
While three to five times expansion volume is significant, AppleInsider has also learned it is a "far cry less" than what Apple would need in even a slow Mac sales quarter, let alone the iPhone. Additional capacity would be required from another company, should Pegatron be tapped for this service in the U.S.
When then-Presidential candidate Donald Trump threatened various countermeasures against companies building products overseas, and importing them, rather than relying on U.S.-based manufacture, Apple requested an impact statement from both Foxconn and Pegatron should a move be required. Foxconn developed a plan, and Pegatron reportedly did not, citing costs of the effort.
Trump's campaign promised a 35 percent tariff levied against products like the iPhone manufactured overseas. The plan, published in June, presumably will give companies a significant economic incentive to bring manufacturing jobs back to the U.S. if passed.
"To make iPhones, there will need to be a cluster of suppliers in the same place, which the U.S. does not have at the moment," Apple Chief Executive Tim Cook said in an Dec. 2015 interview about a possible shift. "Even if Trump imposes a 45 percent tariff, it is still possible that manufacturers will decide to continue production overseas as long as the costs together with the tariffs are lower than the amount they need to spend on building and running production lines in the U.S."
Comments
Tim Cook understates the problem a bit. He says "a cluster of suppliers in the same place." What really is in Taiwan, Korea, Japan, mainland China and elsewhere in Asia is an entire industrial system that's been building for 50 years, making consumer electronics and the fine mechanisms that go with it. The US has never had this capacity, and it's stupid to think the culture of engineering that supports it exists or could exist in the US.
The US's countervailing strategic strength lies in the knowledge industry, including software, and the free thinking that supports it. Thus Apple, "designed [and programmed] in California."
Meanwhile, the real US businesses of the future, like personal, wearable computing, artificial intelligence, environmental sciences, renewable energy, all the stuff that Apple is heading toward, haven't made a blip in Trump's awareness.
He just hung himself on the ropes again in his interview with The Times of London and Der Bild.
But here's a short piece in Forbes (not a leftie outlet) about how out of touch Trump is on the real world of global business:
http://www.forbes.com/sites/bertelschmitt/2017/01/16/blasting-bmw-trump-shows-scary-naivete/#424853a04304
He wants to see Chevrolets in Germany. As if Germans don't know about American vs. German engineering. This is an example of how the US has thrown away its industrial competence during decades of negligence and devotion to planned obsolescence. The Germans and Japanese took over the world auto industry while GM and Ford were building Escalades and Navigators, and never learning to build smaller cars suitable for export.
There may be more manufacturing plants here, but those plants don't automatically translate into long-term low-skilled jobs. The majority of that work will be done with robots who can sit and do that job day-in and day-out, 24 hours a day, 365 days a year, and at about $3-4/hour to boot. Holidays included, and no health insurance or other benefits required.
The days where your parents and mine could sit at an assembly line and stick part A into slot B for $25/hour are long gone, and they're not coming back. And it's not just manufacturing. Transportation, food service, warehousing, health care... everything is going to be impacted.
Bottom-line accounting is what drove the off-shoring exodus and those same hard numbers are going to be what drives automation. Automation and robotics and AI can do the same work for less money, and lowering costs and increasing profits is the only thing corporate America cares about.
This isn't negativism, this is reality. And the sooner you understand that fact is the sooner you'll understand that Trump making vague promises about bringing back the glories of a previous generation are just that: vague promises, not even worth the hot air it took to produce them.
It's not going to happen.
Being an outsider to US politics I can say that Trump comes over as a fool. Whether it's true or not, I can't say but he does himself few favours every time he opens his mouth.
Reminds me of that old W.A.S.P song, The Neutron Bomber, about Reagan ('oh no, no, here comes Ronnie') only this time it's 'oh no, no, here comes Donny'.
Trying to force companies into the US will backfire and start a tit for tat sequence of events that will do more harm than good.