07 December 2012

Apple moves some manufacturing back to America: Separating the hype from the reality

This looks like good marketing with a positive message but with limited real impact on American jobs.

App announced in early-December 2012 that they will be manufacturing some Macs in the United States, pulling manufacturing slowly out of China. It is not clear if this is a marketing ploy or a real effort by Apple to create local American jobs. If you dig a bit deeper the exact meaning of this announcement becomes intriguing.

It looks like marketing to me but good marketing with a positive message

This looks like good marketing with a positive message but with limited real impact on American jobs.  The world's coolest, richest, most-talked-about company is stamping it  claim on the "Made in America movement". CEO Tim Cook used the announcement to communicate the message that Apple has a responsibility to create jobs. It is a feel-good story that gives Americans the feeling that their new computer could be made down the street, instead of in a far away place, like China.

I remember when I bought a Mac and it was manufactured in the USA. My original Apple IIe was made in America and I was a bit disappointed when I first saw my Mac was made in China. I pre-ordered by MacBook Air and it was shipped directly from China, through Anchorage, Alaska. I tracked the package every day because I was so excited to get my hands on the new super-sleek Mac. When I received it, I had hardware issues for years and it left a bad taste in my mouth about the quality of my China-made Mac. Prior to that, my Mac's worked flawlessly. However, anyone can buy a lemon, especially when it is one of the first 5,000 to come off the production line.

This is part of Apple's relentless campaign to deflect criticism that it has created hundreds of thousands of jobs in China that could be created in the United States. The new sound bite is: "Apple has directly and indirectly created 600,000 U.S. jobs".

Apple Aligns Itself with the Trend Towards Renewed American Manufacturing

Manufacturing is undergoing a renaissance in the United States as wages in China rise and factory automation removes humans from the equation. The Boston Consulting Group recently predicted that by 2020 as many as 600,000 manufacturing jobs will return to the United States from China.

Apple has been talking about doing more manufacturing in the United States for years.  When Apple says it wants to do something, they do it. And this is only the beginning.

Beyond the Marketing to the Reaality

In reality Apple is moving only a small portion of it's manufacturing to the United States, which might already be highly automated. The difference in labor cost is going to be negligible. The growth of American jobs may also be minimal because of heavy automation.

Regardless, the move is symbolic and will eventually gather momentum. When jobs are created locally there is a tendency towards a snowball effect because expertise is available locally to expand farther, with Apple fully in control of that evolution.

This is a good message to bring to the American people and to the world. America is beginning to show signs of reclaiming itself by becoming less dependent on other nations. There is talk of America being energy independent in the years ahead, and they are on target.

Details Are Thin

The marketing message is strong but the specific details are as vapid as thin air. Apple has provided no real details of the plan. It is all hype with no details.

Cook spoke with NBC and Bloomberg and said Apple would spend $100 million in 2013 to bring production of a Mac model to the United States. He didn't say which model, how many Macs would be built, to what extent the components would be produced domestically, where in the United States the machines would be made, how many people would be employed or even why Apple was making the move.

Putting It In Perspective

$100 million is peanuts when Apple has $121 billion in cash in the bank. If you put the announcement in perspective it is embarrassingly miniscule. Apple spent $10 billion in capital expenditures in 2012. $100 million is 1 percent.

Mac's don't account for massive amounts of Apple's revenue. In 2012 Apple sold 125 million iPhones; 58.3 million iPads; 18 million Macs. The announcement is a small fraction of a small fraction of Apple's revenue.

All the components inside a Mac are not manufactured in America so these new Macs will be American-assembled product full of non-American components.

This announcement is not earth shattering, but it marks a beginning. Apple may be testing the waters without risking too much. This is certainly a low risk approach with a very small number of America jobs being created.

Speculations About New Manufacturing Methods

Apple is not going to sacrifice profit to make Macs in the United States. Apple has already figured out how to do the same work with fewer people and the manufacturing will be highly automated.

Analysts are speculating that Apple has made a manufacturing breakthrough that will make it cheaper to bring manufacturing back to America while generating more profits. Speculation is that this could be Apple's first step in the process of rolling out a new manufacturing process.

Cook: Apple to Invest in Manufacturing Macs in U.S.
Macs in the USA--Apple to Cut China Production