NEW YORK – At the beginning of this year, we launched a series called "Rebuilding America" in which we attempted to explore the prospects for reviving U.S. manufacturing. We acknowledged at that time that we could be accused of beating a dead horse since many in the electronics industry favor the outsourcing of manufacturing to Asia as a way to reduce costs.
Beyond that is the reality of globalization and what has been called the global "fragmentation of production." Still, we argued, the engineering importance of "making stuff" as a way of understanding the product design process can't be underestimated.
With that in mind, you have no doubt heard about Apple’s plan to spend more than $100 million to bring back “some production of Mac” to the U.S. from China. If you’re like me, you probably rolled your eyes and said, “Yeah, right!”
A healthy dose of skepticism is in order here.
First, what’s Apple’s business case? Setting aside the goodwill Apple has already gained from media coverage, we need to ask whether it actually makes sense to manufacture Macs at home.
We need to see a cost analysis. What’s the labor cost? What’s the shipping cost for finished products? Do we still have a supply-chain infrastructure capable of bringing all the components necessary to make Macs here and deliver them on time? What’s Apple's operating margin for this product line? How much will it cost to operate a U.S. factory?
We need to know the cost structure for moving in-shoring "some" production. Corporations frequently use cost as the alibi to ship jobs overseas. If some manufacturing jobs are returning, we must understand the business case for such a move.
Apple CEO Tim Cook, in interviews with Bloomberg Businessweek and NBC's Brian Williams disclosed none of these details. Cook never revealed the actual products Apple will be making in the U.S. or how many Apple expects to make.
Cook vaguely suggested producing some Mac computers here "beyond the assembly work" it already does stateside. Cook’s statements implied that Apple will have "partners.". For instance, he told Bloomberg Businessweek that the plan “doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.”
Again, what “people”?
So far, all we’re looking at is a symbolic gesture by Apple -- just in time for the holidays.
In my opinion, it's pretty clear that Apple's decision to build some computers in the U.S. is aimed at nabbing a little good will. Google got lots of props when it strategically revealed that it's Nexus Q is made in the U.S.
In my opinion, there is a business case to be made for setting up shop close to customers. But it takes a back seat to the economic arguments associated with building stuff in China and other places.
That said, regardless of the reason, we should applaud this small gesture. Those of us who want manufacturing to revive in the U.S. should take any momentum we can get.
Companies don't deal in macroeceonomic arguments. That's governments' job. Companies worry about the bottom line. Whether it makes sense to manufacture close to the customers or not is entirely a question of cost tradeoffs. It might make sense or it might not. For tiny products like cell phones, I have my doubts.
I was surprised to read this in the paper on my way to work this morning. If I remember correctly, Steve Jobs, in a conversation with the US administration about bringing manufacturing back to the US, said something like "Not only no, but hell no."
So I found this surprising. Maybe the change in management?
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