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  • A Made in the U.S.A. iPad?

    November 9th, 2012

    When asked why Apple’s iconic gear isn’t assembled in the U.S., Tim Cook has pointed out that some of the components are actually built in America. In his recent interview at the AllThingsD Conference, Cook explained that “The glass on your iPhone is made in a plant in Kentucky.” He also said that “the engine [processor] for the iPad and iPhone are built in the U.S. in Austin.”

    Today, however, such parts are shipped to Asia, where they are assembled in sprawling factories run by such companies as Foxconn. The assembled gear is then shipped around the world to Apple Stores, dealers and distributors. But things may be changing, particularly in China, where working conditions for factory workers are reportedly being improved, and salaries are regularly boosted. There could come a time when the cost of labor, added to the cost of shipping the merchandise around the world, may make it more sensible to build your next iPhone, iPad or new Mac in the U.S. or another country closer to the point of sale.

    Even after you consider the cost of labor, there is also the question about assembling the tool and die facilities to allow a factory to support the complicated machining process of Apple’s products. Cook has also said that, what they can do in China in a few weeks, may take months to accomplish here. In that respect, the Asian factories appear to have an edge over the U.S. alternative, at least for now.

    But there’s also a published report that Foxconn is actually scouting potential sites for manufacturing facilities in the U.S. They are supposedly looking at locations in Detroit and Los Angeles. Unfortunately, that story is based on a published report in DigiTimes, which is not known for reliability or consistency. So it may just be yet another unfounded rumor.

    If true, however, it doesn’t mean your next iPhone will have a “Made in U.S.A.” label on it. That’s because Foxconn would evidently focus on building LCD television sets first, which are evidently far easier to manufacture and don’t require exotic machining facilities. I suppose there’s always the hope that such move will pave the way for more complex gear to be assembled later on.

    But this wouldn’t be the first time Foxconn has moved beyond Asia. They have a plant in Brazil that assembles iPads, predominately for the home market. Foxconn also has plants in Europe, India, Japan, Malaysia and Mexico.

    Besides, even if Apple did assemble products in America, that doesn’t mean all the parts were also made in this country. With a worldwide supply chain, individual components are sourced from a variety of locations. And that’s nothing new or unusual either. The traditional American-made auto — and those made in this country by foreign manufacturers, such as Honda, Hyundai and Toyota — generally have, at best, roughly 80% domestic content. The rest of the parts are built somewhere else.

    It may also be that Apple is feeding this story because of the ongoing criticism about their decision to move all their production offshore, which actually started in the late 1990s, after Steve Jobs became CEO and hired Tim Cook to manage operations. Apple is not alone in seeking cheap labor around the world to keep prices competitive, and profit margins as high as possible.

    As much as Apple gets attacked over building product in Asia, Foxconn also assembles gear for loads of companies, from PC makers, to TV set manufacturers. These include Amazon’s Kindle, the PlayStation 3, Xbox 360, and loads of other well-known products. So it’s hardly fair to blame Apple for a practice that their competitors are following with equal dedication. Except for the fact that, when there were reports about poor working conditions, suicides and other issues at Foxconn, Apple bore the brunt of the blame. Why not blame HP, or Dell, or even Microsoft, since they are no less guilty of using the same factories for their own products?

    More to the point, as much as Americans may prefer that Apple and other tech companies keep all or most of their production in the U.S., how much extra do you want to pay for the privilege? Would you expect these companies to reduce profit margins in order to expand American production? That clearly isn’t going to happen.

    But as the people of China become more prosperous, as the traditional middle class grows, there will continue to be demands for higher pay. That means the cost of building gear in factories run by Foxconn and other companies will increase. I suppose they can compensate by adding more automated production methods, more robotic assembly systems. This way, they get extra bang for the buck and remain competitive.

    For now, though, even though I realize some of you don’t like Apple’s manufacturing decisions, it’s not as if you can go elsewhere. Very likely pretty much all of the potential competing products on your shopping list will also be assembled in the very same plant, or a similar one in Asia.



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