Building Apple Gear in the USA — Maybe!

July 28th, 2017

Let’s put this in perspective: When I bought my first Mac in 1989 (I had been using them at the office till then), it was a IIcx that was assembled in the U.S. Apple also built gear in Cork, Ireland as I recall. But I never really paid much attention to where the gear was put together. Apple was the quintessential American company, founded in a garage — well, marketing VP Philip Schiller once told me a kitchen — and eventually growing into a tech powerhouse.

When Tim Cook joined the company to manage operations in 1998, he overhauled the supply chain to build products as inexpensively and efficiently as possible yet still meet the company’s quality standards. Over the years, this meant setting up sophisticated offshore manufacturing facilities using such contract companies as China’s Foxconn.

To put that in perspective, Foxconn, was founded in 1974 by Terry Gou, who remains its leader. As of 2015, it had 1.3 million employees, most  engaged in assembling tech gear not just for Apple, but other companies. The list includes such recognizable names as Acer, Amazon, Cisco, Dell, Google, HP, Intel Microsoft, Nintendo, Nokia, Sony and VIZIO.

Despite the wide range of customers for its manufacturing facilities, Foxconn and Apple are almost synonymous, even though Apple does assemble parts elsewhere. In fact, A-series processors and the scratch-resistant Gorilla Glass are both manufactured in the U.S. and shipped across the planet to Foxconn and other assemblers for inclusion in your favorite tech gear.

In the wake of a New York Times story about dreadful working conditions at Foxconn, Apple agreed to work with them to provide improved working conditions and higher salaries. Then as now, Apple is often identified as the only customer for such facilities, when that is just not so.

In recent years, Foxconn has promised to expand its U.S. operations. In 2013, Gou announced that his company planned on constructing a plant in Pennsylvania, anbutd it never happened. Further unfulfilled promises were made in 2014 of upcoming American facilities.

So talk is cheap!

Well there are now reports about an expansion of Foxconn into the U.S., and this one may just be real, or at least it’s getting support from the Trump administration.

So recently, President Trump claimed that Apple would build “three big plants, beautiful plants” in the U.S., but that has yet to be confirmed.

What appears to be confirmed is Foxconn’s plan to invest $10 billion to build an LCD display factory in Wisconsin. But this announcement is being greeted with skepticism, not just because Gou’s overwrought pronouncements may not be believed, but because of the company’s poor record in worker safety that would run afoul of even the most lax of state regulations. Foxconn has also been working hard to replace humans with robots, so even if the promise of up to 13,000 new jobs is borne out, it may only be a temporary situation.

At the start, the new plant in Wisconsin will reportedly have 3,000 employees, and the 13,000 figure represents a potential, not a reality. Promised for 2020, published reports speculate that many of those employees will spend their workdays watching robots build LCD panels for use in TV sets. They will not be working the production lines, which ought to limit the total number of people who actually will be employed at the new plant.

You see, Foxconn has been engaged in a massive effort to switch to robots at other plants. But at least robots don’t worry about poor working conditions, or commit suicide, as some have done.

But Wisconsin is one of those so-called “right to work” states, where unions have very little power to organize workers and demand decent salaries and safe facilities.

In exchange for the commitment to build that plant, Wisconsin is reportedly offering up to $3 billion in incentives. Such practices are not unusual when a company wants to set up a large facility in a state, as governors and other executives vie for the opportunity to host such factories.

Once again, even if the new Foxconn plant is ready to begin operations by 2020, and it is building LCD panels, it’s not at all certain if Apple will benefit. Right now, it appears that these components will be earmarked for TV sets, and that’s a business Apple isn’t entering.

But what about those three big, beautiful Apple plants? Is that a long-range plan, or something that Apple expects to accomplish in the near future?

While there have been ongoing demands that Apple build iPhones, iPads and other gear in the U.S., as a practical matter it’s very difficult. Foxconn and its partners have established sophisticated assembly and supply chain facilities in Asia, to ensure efficient and cheap manufacturing. There are no such facilities in the U.S., meaning they would have to be built from scratch. There’s the cost of setting up these plants, though I suppose if robots will do more and more actual production work, so, the need for employees will be reduced. Maybe it would be possible to build an Apple gadget in this country at a competitive price. The Mac Pro is assembled in Austin, but, of course, it’s expensive enough to absorb higher production costs.

In the meantime, it’s possible Foxconn will fulfill their promises. It’s equally possible that the 2020 date will slip and the promise will never be realized.

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One Response to “Building Apple Gear in the USA — Maybe!”

  1. dfs says:

    Let me be sure I understand this. Foxconn principally makes display screens, right? So they make these in Wisconsin, right? Then, presumably, they will have to ship them to China where Apple’s finished products get assembled, riight? Then the finished products will be shipped back to the US for sales here, right?

    This might inspire me td buy shares in the lucky air freight company that will be tapped to move all this stuff as it yo-yos iits way back and forth between Eu Claire and Shanghai. Other than, although I can see an upside for Trump and for the State of Wisconsin and its local Republicans, I don’t really see an upside for Apple. And I can see the price of the affected Apple products being driven sharplyi upwards. especially because the average Wisconsin factory worker is going to expect to be paid a whole lot more than his Chinese counterpar t. Now I can begin to understand why the next iPhone may cost northwards of a grand.

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