Apple to move some production back to US. Gimmick?

[Buehler445]

Is it a gimmick or a sound business decision?

'Made in USA' not just Apple

Apple's announcement that it will shift some of its production back to the United States hopefully will encourage other companies to follow suit, manufacturing industry insiders said -- even if Apple's move is mostly a symbolic step.

"Anything that Apple does, from design to manufacturing, is hugely influential," said Chris Anderson, the former editor of Wired magazine and now CEO of San Diego-based 3D Robotics. "Other companies could look at this and say, "If Apple can do it, so can I.' "

Apple (AAPL, Fortune 500) CEO Tim Cook said in recent interviews confirmed by CNN that his company, which currently does most of its production in China, would invest $100 million to bring some of its Macintosh manufacturing back to the U.S. next year.

Apple's move isn't surprising. It follows a continuing pattern of American companies bringing manufacturing back home due to rising labor, supply and production costs in China.

"China isn't cheap anymore. And you also worry about the political risks and the environmental cost of doing business there," said Anderson, whose firm creates consumer drone technology. He moved his company's production out of China two years ago, setting up manufacturing facilities in San Diego and Tijuana.

Anderson said making his products closer to his customers has actually turned out to be cheaper. Instead of manufacturing in bulk as he did in China, he ramps up production as orders come in. He also saves on shipping and other distribution costs.

"Coming back to the U.S. has been a huge win for us," he said.
Related story: Tim Cook tells NBC Apple will be building Macs in the U.S.
Mitch Free, founder and CEO of Atlanta-based MFG.com, an online directory that helps companies find American manufacturers, agreed that making goods in the U.S. offers some distinct advantages.

"Your production time is shorter and you carry less inventory," said Free. "By being closer to headquarters, you can speed up design and innovation and protect your intellectual property," he said.

It can also breed goodwill and positive PR. "Supporting Made in America makes you a good corporate citizen," Free said. "Apple is such an innovator and you hope that other companies will follow its lead."

Apple's move may not generate many more new factory jobs, though, since tech manufacturing today is so automated, he said. "It's not like you need workers sitting on workbenches to assemble computers," Free said.
Plus, since so much of the country's manufacturing base has eroded over the years, finding American workers with the skills to immediately start on the factory floor can be a challenge, he said.

The easiest way for Apple to jumpstart production here would be to contract with its existing Chinese manufacturer Foxconn Technology Group -- which already has two production facilities in the U.S. -- and build another facility to assemble Macs, said Free. The approach could be similar to what Japanese automakers have done when they've come to the U.S., bringing in Japanese management and high-skilled Japanese workers to train American workers.
Indeed, on the heels of Apple's announcement, Foxconn said Friday that it was considering an expansion of its operations in the United States.
But, "Apple may get some negative publicity if it does contract with Foxconn in the U.S." said Free. "You'll have people saying that even though it's bringing some production back home, Apple is still using a Chinese company and maybe also Chinese workers in the U.S."

Related story: Throwing cold water on Apple's Made-in-the-U.S.A. Mac
For its part, the trade group Alliance for American Manufacturing said Thursday it was "pleased to see Apple among the growing list of major manufacturers that see the United States as an attractive location for manufacturing."

Still, Apple's $100 million commitment to U.S. manufacturing is just a small fraction of its revenues and market valuation, said Scott Paul, the group's executive director.

If Apple wants to avoid being labeled a "red, white and blue-washer," that's making just a token effort to support U.S. manufacturing, Paul said the company must show that its move is part of a larger trend, he said.
"[Apple] can do better, but this is an important step in the right direction," said Paul. "The 'Made in America' label is a valuable commodity, and we're happy Apple has discovered this."

[Buehler445]

I say gimmick.

[Baby Lee]

Hopefully, they won't have to erect nets to capture the suicidal robots.

[KC native]

Mostly gimmick, but with the state of IP protections in China, you'll see more companies doing this.

Labor costs are rising in China. Counterfeiting and outright IP theft happen on a massive scale in China. Companies are finding that as labor costs go up and shrinkage continues unabated that China isn't the deal it once was.

[cosmo20002]

Be sure to thank Obama for the jobs.

[Buehler445]

Originally Posted by KC native

Mostly gimmick, but with the state of IP protections in China, you'll see more companies doing this.

Labor costs are rising in China. Counterfeiting and outright IP theft happen on a massive scale in China. Companies are finding that as labor costs go up and shrinkage continues unabated that China isn't the deal it once was.

That's true, but the article talks about subcontracting to a Chinese firm in the US. That doesn't limit their exposure much.

To me it smells like an ad campaign.

[Saulbadguy]

They shouldn't worry about cost control. They can charge whatever the **** they want for their products and still sell a shitload of them. It makes sense to move manufacturing back to the USA.

[DaveNull]

Because Apple really needs a gimmick to sell more computers.

Tim Cook is a suppy chain wizard, and if they say its cheaper to build the Mac Pro in the US then it probably is.

[ekf028]

Good PR

[AustinChief]

Originally Posted by DaveNull

Because Apple really needs a gimmick to sell more computers.

Tim Cook is a supply chain wizard, and if they say its cheaper to build the Mac Pro in the US then it probably is.

This is kinda funny since Apple has relied on "gimmicks" for years just to maintain a 15% share. (15.1% if you lump in smartphones, tablets and PCs)

I do agree that the PR of this is secondary and it probably simply makes sense economically. Manufacturers in China are moving to more and more automation (robots FTW!) which negates the major advantage (labor cost) that they previously held. It's a smart move but is predicated upon our currently weak economy and hopefully isn't a sign that they know we will continue to remain relatively weak for the foreseeable future.

[AustinChief]

Originally Posted by KC native

Mostly gimmick, but with the state of IP protections in China, you'll see more companies doing this.

Labor costs are rising in China. Counterfeiting and outright IP theft happen on a massive scale in China. Companies are finding that as labor costs go up and shrinkage continues unabated that China isn't the deal it once was.

The IP issue is a nonstarter in this context. It doesn't make a lick of difference where Apple devices are manufactured, Chinese companies will rip them off regardless.

It's all about the labor cost deficit shrinking. As Chinese labor cost rises and America's stays depressed... it opens up more possibilities depending on the overall structure of the supply chain. My guess would be that they would start with Mac Minis or Mac Pros since there is no display involved and both sell relatively small numbers.

Either way, the reports I have seen claim this would only be a 200 job operation... so pretty damn small to start.

[DaveNull]

Originally Posted by AustinChief

This is kinda funny since Apple has relied on "gimmicks" for years just to maintain a 15% share.

Such as?

[AustinChief]

Originally Posted by DaveNull

Such as?

It was mostly a joke dude, but if you look at form over function as a "gimmick" than that is Apple in a nutshell. If you disregard my snarky comment, your comment was still wrong since you seem to assume that Apple sells as many computers as they want to and dominate the market. That's not the case when they are at 15.1% and dropping... they are going to need a new "gimmick" soon if they want to avoid what happened to them in the 90s.

[DaveNull]

Originally Posted by AustinChief

It was mostly a joke dude

Ah...fair enough.

but if you look at form over function as a "gimmick" than that is Apple in a nutshell.

I'd disagree with that point. Design is part of how something functions. If it wasn't, then we'd all be driving el-caminos and living in perfectly square block buildings.

If you disregard my snarky comment, your comment was still wrong since you seem to assume that Apple sells as many computers as they want to and dominate the market. That's not the case when they are at 15.1% and dropping...

This is a slippery debate, especially depending on how you define what the goalpost is. Sheer numbers? Sure, they don't sell as many traditional computer units as all the other PC manufacturers, but considering the overall PC market appears to be shrinking while sales of traditional Apple computers is going up, I don't think they're in that bad of a position. Here's the first citation to support that I could find. If you talk in terms of overall profitability or market cap though, they're cleaning everyone's clocks. Hell, before the institutional investors started to see growth opportunities elsewhere recently and started selling off their AAPL shares they were worth more than Exxon.

they are going to need a new "gimmick" soon if they want to avoid what happened to them in the 90s.

They have much more going for them now then they did during the 90s. They've got an obscene amount of cash, better products and much better leadership than that bunch of clowns that was there before Steve came back from NeXT. Then there are these numbers, courtesy of an otherwise ridiculous article

In 2011, the average amount U.S. households spent on Apple products was $444, according to Morgan Stanley analyst Katy Huberty.

That figure has been rising smartly every year. In 2010 it was $295. Back in 2007, it was only $150.

[AustinChief]

Originally Posted by DaveNull

They have much more going for them now then they did during the 90s. They've got an obscene amount of cash, better products and much better leadership than that bunch of clowns that was there before Steve came back from NeXT.

This is true and I really don't see them slipping below 10% any time in the near to intermediate future. I do however think that phones and tablets will continue to drop (percentage-wise) and Apple will need to find something new (possibly another big push into Apple TV type of stuff) if they expect to maintain current profit margins.