This week the media has lit up over the announcement that Apple is already producing some Macs in the US, and that starting in 2013 Apple is investing $100 million in efforts that will bring entire product lines back from their current Chinese manufacturing sites. There are plenty of articles about this, some going so far as to proclaim that it is time for American workers to rejoice. But an article at the Atlantic looked at something similar happening at General Electric and came to different conclusions.
The article at Salon.com (thanks Doug!) takes the Atlantic article context and applied it to Apple in a few ways: (1) by saying that $100 million is enough to sound good, but that it means nothing to Apple; (2) that the amount of jobs won’t have any real impact on the economy; and (3) that it doesn’t necessarily signal an onslaught of US-based manufacturing.
The first two items from the Salon.com article are certainly true, but the last one might be questionable. SmartPlanet looked at the article on GE’s ‘Appliance Park’ at the Atlantic and came up with 6 reasons this all makes sense:
1.High transportation costs: “Oil prices are three times what they were in 2000, making cargo-ship fuel much more expensive now than it was then.”
2.Lower domestic energy costs: “The natural-gas boom in the U.S. has dramatically lowered the cost for running something as energy-intensive as a factory here at home,” Fishman relates, adding that “natural gas now costs four times as much in Asia as it does in the U.S.”
3.Offshore wages are rising: “In dollars, wages in China are some five times what they were in 2000—and they are expected to keep rising 18% a year.”
4.Labor relations are more cooperative: “Appliance Park’s union was so fractious in the ’70s and ’80s that the place was known as ‘Strike City,’” says Fishman.
5.Employee productivity is rising: “Labor costs have become a smaller and smaller proportion of the total cost of finished goods. You simply can’t save much money chasing wages anymore.”
6.Offshore factories can’t keep up with design and technology changes: “As products change, as technologies evolve, as years pass, as you change factories to chase lower labor costs, the gap between the people imagining the products and the people making them becomes as wide as the Pacific. Factories take a while to settle into a new product, a new design. They face a learning curve. But models that have a run of only a couple years become outdated just as the assembly line starts to hum. That makes using faraway factories challenging, even if they are cheap.”
The bottom line is that the economics of manufacturing are changing. I have been hearing more and more about how a knee-jerk reaction to off-shore manufacturing no longer makes sense. Transport is one aspect, manufacturing automation capabilities is another, and finally the short product life cycle means the need for closer contact between design, engineering and manufacturing.
Energy and transportation are key factors in why Apple is moving Macs to the US – the cost to transport an iMac is astronomically higher than an iPhone or even iPad based on weight and size, so don’t think that Apple is doing this purely as a PR move to appear altruistic or patriotic — it is about globalization and ensuring they have a flexible resource base for whatever the future holds.