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  • The Apple Building Gear in the U.S.A. Report

    November 6th, 2013

    Apple is very invested in California, witness the choice of Mavericks, a popular surfing location in that state, as the name of the tenth reference release of OS X. And the phrase, “Designed by Apple in California,” adorns the products. But designing is only a part of the equation. At one time, a lot of Apple’s products were assembled in the U.S., but not anymore.

    As with most tech companies, Apple gear is assembled in Asia, using parts sourced from around the world. So, for example, the A7 processor used in the iPhone 5s, the iPad Air and the iPad mini is built at a Samsung plant in Texas. Well, for now, as Apple is reportedly planning to move the A7’s successors to other assemblers.

    Now Apple has been the source of much criticism about the decision to use cheap overseas labor. When the working conditions at the contract manufacturers Apple uses, particularly Foxconn, were attacked by The New York Times and others for being unfavorable and unsafe, CEO Tim Cook promised to do better.

    You can certainly feel Cook’s defensiveness whenever he is asked to explain why Apple isn’t building stuff in the U.S. He refers to the number of workers at an Apple Store, and the hundreds of thousands of people who have been building iOS and Mac apps as examples of bringing more employment to this country. The fact that such parts as processors and Gorilla Glass are domestically sourced is a plus.

    And then there’s the new Mac Pro, which will be assembled in Texas. So at least it’s a start. There is also the published report that Apple is funding a new plant in Mesa, AZ for GT Advanced Technology to produce sapphire material for future Apple gear. Sapphire is currently used for iPhone camera lenses, and the Touch ID fingerprint sensor.

    This deal, confirmed by Apple, will result in 2,000 new jobs the first year, which includes 1,300 construction workers and an estimated 700 who will actually work at the plant. Some Macs, by the way, use Intel chips fabricated in Chandler, AZ, so this isn’t the first time Apple has relied on that state for parts.

    Right now, all this stuff is shipped to Asia for final assembly. But as wages and benefits for factory workers increase, at what point does it become more feasible to build products closer to home? When you factor in shipping and other expenses, the price advantage isn’t necessarily that high, and the figure is apt to decrease over time.

    Of course, Apple is also striving to sell more and more gear to the population in China and other countries, so assembling close to home is no different than what car makers do when establishing factories around the world. So even if Apple brought more production to the U.S., that doesn’t necessarily mean it would make sense to build everything here.

    Now I suppose it doesn’t matter so much that a multinational corporation builds products in different locations around the world. But since Apple touts its origins as a great American success story, and particularly the California connection, it’s fair to wonder why there isn’t more domestic manufacturing. But you could also ask the same question of other American success stories, such as Dell and HP, who use some of the same contract factories as Apple for many of their products. If Apple is at fault, what about the rest of the tech industry that made the very same decision for the very same reasons, to keep prices as low as possible and to remain competitive?

    But when those complaints were publicized about unfair working conditions, you didn’t hear attacks against Dell, HP or the others for doing the very same thing. It was all about Apple, as if it was Apple was to blame for all the problems. When Apple executives promised to urge their Asian partners to improve working conditions, and pay higher salaries, what about the rest of the industry? Once again, it was all about Apple.

    Now I’m not about to complain that Apple isn’t getting a fair break. I’m just reporting the facts. So we still have curious the situation where Apple’s profits, although lower than last year, still exceed those of competitors, and sometimes several competitors combined. But that’s not a negative, so it doesn’t get reported as much as it should.

    It’s also true that most of the sales of smartphones and tablets reported by Apple’s competitors are concentrated at the low end of the market. I’ve seen reviews of some of this cheap junk, and to say a fair amount of that gear is hardly usable is an understatement. But it explains why Apple’s share isn’t as high as the critics want it to be. Apple will be criticized for not selling enough cheap gear, and they will be criticized when profits aren’t good enough. But you can’t have it both ways.

    On the other hand, it does look as if Apple is going to make a more aggressive push to transfer more production to U.S.-based plants over the next few years. Nothing wrong with that, except for people who don’t live in the U.S. and hope for something closer to home.



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