Apple to Reel In Some Manufacturing Jobs
Apple has arguably been dealt more than its fair share of criticism for outsourcing most of its manufacturing -- most consumer electronics come from China and other bastions of cheap labor, after all. However, Apple is doing something of an about-face, returning some production to the U.S. Among the many possible reasons for the move is the fact that those "cheap labor" costs are rising.
12/07/12 5:00 AM PT
The push to create jobs and return manufacturing to the U.S. has had an effect on Apple. The company's CEO Tim Cook said publicly in interviews this week with NBC's "Rock Center" and with Bloomberg Businessweek that Apple will invest US$100 million in 2013 to move production of a line of its Mac products from China to the U.S.
Cook was not specific as to which models Apple intends to produce in the U.S, but it is reported to be the iMac line, which already has limited production in North America.
"Presumably they will not be doing it themselves," Charles King, principal analyst at Pund-IT told MacNewsWorld. "Assuming he's talking about the manufacturing process, Apple is going to outsource the manufacturing of the iMac to a company in the U.S."
Apple currently works with a company in Texas to produce iPhone processors and another in Kentucky to produce glass for some of its products. It is not known where in the U.S. Apple will contract to build its iMac line.
"It raises some questions about what manufacturing company in the U.S. has the resources to take on a manufacturing project like this," said King.
To what degree the move could be driven by public relations is a matter of debate. Apple has taken heat for the labor practices of the Taiwan-based company Foxconn, the manufacturer that produces a number of Apple products.
In separate news this week, Foxconn said it was expanding its operations in North America as demand for products made in the United States increases. It is not known whether Apple will work with Foxconn or another company to build its iMac line.
Cheap Labor Less Abundant
Cheaper labor costs used to make outsourcing of manufacturing to China and parts of Asia attractive. However, that is changing.
"The reason why all this production was shipped overseas more than a decade ago is that labor was incredibly cheap," Thomas Dinges, senior principal analyst at IHS iSuppli, told MacNewsWorld. "You don't have that labor advantage that you used to have. That's the economics behind it -- the fact that labor isn't so overwhelmingly cheap anymore."
In addition to an evening out of labor costs, production in the U.S. will greatly reduce shipping costs.
"That's going to be another driver," said Jeffrey Wu, senior analyst at HIS iSuppli.
"With shipping costs and rising labor costs, it's starting to make more sense to move some work here in the U.S.," he told MacNewsWorld.
What the retail cost of an iMac made in the United States will be is a good question.
Although it is possible for Apple to move the production of its iMac line to the United States, moving production of other product lines, such as the iPhone and iPad, would be more difficult.
"That would require a much more significant rework because of how they are assembled," said Dinges. "There are a lot of tasks done manually instead of automated."
Production of the iMac line in the United States will earn Apple a certain amount of goodwill.
"I think it's a feel good story for the end of the year and a very good move for Apple," said King. "It wouldn't surprise me to see more companies making announcements like this in one form or another."