What Apple’s Supply Chain Says About US Manufacturing and Middle-Skill Training
31st March 2012
Perhaps you thought the main reason was labor costs; Apple would have to pay American workers much more than the estimated $17 a day (or less) many Chinese workers at Foxconn make. That’s part of it, but “an enormously small part,” Duhigg told Glass.
Duhigg explained that, in terms of labor costs, producing the iPhone domestically would cost Apple an additional $10 (on the low end) to $65 (on the high end) more per phone. “Since Apple’s profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward,” he wrote in the NYT piece.
Instead, what matters is Apple’s intricate Chinese supply chain.
In other words, even if Apple wanted to move manufacturing back to the U.S., they couldn’t get what they need.
Labor is almost insignificant. What is really important are supply chains and flexibility of factories. You want to be able to be located right next to the plant that makes the screws so that when you need a small change to that screw factory, you can go next door and say, “Give it to me in six hours,” and they can say, “Here you go.” Because if that factory was in another state or on another continent, it would take two weeks. It’s the flexibility within the Chinese manufacturing system, that’s what you can do in Asia that you can’t do in the United States.
You can’t make iPhones with gender-studies and communications majors.
March 31st, 2012 at 20:56
In the area around Boeing’s plant in Federal Way (or was it Tukwila?), Washington are remains of the same infrastructure: abandoned foundries, workshops, and the like, all which were small shops that instantly supplied and modified precision parts for planes. Almost all gone now, moved, outsourced, closed.