Obama’s State of the Union speech in February, 2013 was about the need for American jobs. During the speech he commended Intel and Apple for focusing on bringing their factory production into the United States.
“Our first priority is making America a magnet for new jobs and manufacturing. After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the past three,” Obama said in his speech. “Caterpillar is bringing jobs back from Japan. Ford is bringing jobs back from Mexico. After locating plants in other countries like China, Intel is opening its most advanced plant right here at home. And this year, Apple will start making Macs in America again.”
Although Tim Cook announced that Apple would spend $100 million to bring Mac production to the United States in December, the results weren’t perfect. Look at these iMacs for example:
Late-December 2012 27″ iMac which wasn’t built in the US.
Late-December 2012 21.5″ iMac built in the US.
Regardless, Apple is still bent on producing Mac computers in the US. They don’t want to just put together the final product in the US, but they want to manufacture entire components in Arizona, Texas, Illinois, Florida and Kentucky. The only question left to answer now is “Why?”
Previous Attempts at Manufacturing In the US
This isn’t the first time Apple is trying to bring it’s manufacturing plants to the United States. In 1984 they spent $20 million on a Mac manufacturing plant in Fremont, California. The plant was designed so that automation was the driving force of the production instead of manual labor (which is expensive in the US). However the overheads of domestic manufacturing were too high, and the plant was shut down in 1992.
In the 1990’s Steve Jobs tried his hand at domestic manufacturing once again. This time he spent $10 million on a NeXT manufacturing plant (which was built once again in Fremont). The NeXT factory and company both failed within a couple of years.
So if Apple knows that domestic manufacturing is difficult and expensive, then why are they so interested in investing $100 million in moving their operations to the United States? Could it be because of the criticism they have been getting over their Chinese factories? Apple certainly doesn’t want people associating their products with factories that mimic sweatshop conditions, strikes, and worker suicides.
A solution that would ease consumers’ minds is putting a “Made in USA” label on products. It’s fairly easy to earn this label. Apple would simply have to ship all the manufactured components from China, and then put them together in the USA. However that doesn’t fully solve the problem. Shipping all of these products overseas and then distributing them to US factories is really expensive.
That’s why it would make more sense to bring the production of components into the USA. Apple is willing to risk $100 million to try fully manufacturing Mac products in the USA.
Does Apple Have Other Motives?
Over the last decade the United States lost 28% of technology manufacturing jobs. It’s lead in science and technology is also starting to slip. Whether the technology loss is being experienced in education, research, or manufacturing, it’s really effecting the American nation.
When technology, education, research, and manufacturing start to slow down, then so does the technology interest of consumers. Consider Hitler’s Volkswagen campaign during World War II. He ordered Ferdinand Porsche to develop the Volkswagen (which literally means “people’s car” in German). Hitler even used the Volkswagen as a selling point for his war efforts: he claimed that all citizens of the Reich would be given this car and that they could all afford its luxuries.
So here you have a German car being manufactured by German people. It’s only logical that the vehicle will excel and so will its popularity. Adults that work in the manufacturing plants are more likely to buy a Volkswagen, parents are more likely to influence their children to buy one, and so forth.
Building Apple products in the United States would have the same effect as building the Volkswagen did in WWII. On one side the US Air Force is investing in iPads and the Pentagon is approving iOS for government use, and on the other side Americans are building Apple products. This is the perfect plan for Apple so that it doesn’t lose it’s roots.
Steve Jobs and Steve Wozniak built the first Apple computer in their American garage. They marketed it in America, as an American product. Even iTunes is most successful in America.
So today, when American products are being manufactured via China’s cheap labor, and CNN writes articles like this: Apple may finally realize it’s time to bring its operations back home. Instead of putting American money in China’s economy, why not put it into the American economy? After all, Apple can’t be successful if its country isn’t.
Article written by Octavian Ristea.
I’m beginning to suspect that Apple Inc.’s move of bringing manufacturing operations back to the U.S. may be the result of some type of subsidy from the U.S. government in attempt to bring more jobs back to America. I used to work in the automotive industry so I know how much money can be saved by outsourcing components to China. As for product quality and such, that’s something you can control using international quality standards and by dispatching a few high-level managers from Apple to form the core management over at China, so I don’t believe this to be the major reason behind Apple’s decision. With so much competition from other companies that manufacture tablets and smart devices, not to mention competition from idevice knockoffs which are so much cheaper, product pricing becomes an important issue to the consumer. Moving manufacturing operations back to the U.S. will mean higher manufacturing costs, and these costs will have to come out of somewhere. Either Apple ends up making less profit, or those costs translate into a higher selling price, or Apple cuts back on expenses (hire fewer people etc.) – none of which would make much sense (no company in its right mind would want to make less profit; a higher selling price would deem Apple to be less competitive; it’s difficult to cut back on expenses while maintaining the same product quality). This is why I’m suspecting that Apple may be getting some financial help from the U.S. government.
Yet another possibility: I’ve just read your other article about how the Pentagon has just cleared Apple devices for the use of government officials:
https://www.itouchapps.net/the-iphone-is-picking-up-popularity-with-the-u-s-government/
Is it a coincidence that Apple’s decision to move operations back to the U.S. and the clearance of Apple devices by the Pentagon happened at around the same time? Maybe…maybe not…
Another factor that Apple’s decision to move shop may be what you mentioned in yet another of your articles:
https://www.itouchapps.net/apple-in-deep-tax-troubles-asks-for-a-break/
As you pointed out, “it also seems like [Time Cook] will be using recent plans to manufacture Mac products in the U.S. as a way of sucking up to the government”.
All in all, there are two things I’m certain about:
1)Apple did not decide to move manufacturing back home just because they’re patriotic (unless all their major shareholders are willing to make less money in the name of patriotism), and
2)They didn’t do it to save on manufacturing costs.
I’ve been keeping up with this issue and its certainly interesting http://arstechnica.com/apple/2013/05/tim-cook-tells-congress-why-apple-wont-move-100-billion-back-home/
It also turns out that corporations don’t pay 35% taxes. After all the tax breaks they get, they pay around 12%. So I’m curious as to why Apple has an issue with that.
Maybe the Ireland’s 2% deal that they struck with them in 1990 is more promising…
“Apple struck a deal with Ireland in the 1980s that made sure its corporate tax rate there would never be above 2 percent. ”
That’s interesting… A big company “striking a deal” with a country. Hmmm…..
I definitely agree with you on both points that you made. They didn’t decide to make less money for the sake of being American, and they didn’t do it to save on manufacturing or shipping costs.
Either way I just bought an iPhone 5 and I could care less about Apple to be honest with you. But what I’m really worried is the problems that Apple can cause for the U.S. economy: as well as the bad examples they are setting. Everyone will be thinking “Heck… If Apple can do it, why can’t I?”