Tuesday, January 24, 2012

How do you like them Apples?

On my desk, literally within arm's length, I have six Apple products. There's a nearly three-and-a-half-year old MacBook Pro, a 2.5-year-old iMac, a two-year-old iPod Shuffle, a one-and-a-half-year-old iPhone 4, an iPad 2 that I won last month from the Orange County Register, and the navy-colored leather Smart Cover that I got for Christmas for the iPad 2.

What do these things have in common? All of them say, "Designed by Apple in California; Assembled in China," on the back.

Don't think I'm the only one who has noticed this. In fact, it's probably a sore point with a lot of people who are tired of going to Target, Walmart, the Apple Store, etc., and not only failing to see "Made in USA" on anything, but also seeing "Made in China" every frickin' where.

And it was apparently a sore point with President Obama, who, according to the New York Times, took Mr Jobs to task for failing to churn more American jobs out of Apple's success. Mr Jobs's answer was revealing:
Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
Despite that ominous description, it's not a complete disaster. The NYT says that over two-thirds of the people whom Apple employs (43,000 of 63,000) are in the United States. But the US is still missing out on a lot of manufacturing jobs at a time when the manufacturing base seems to be eroding.

And it's not just China that benefits. One reason I thought this story was relevant to this Korea-oriented blog is that Korean companies — Samsung in particular — are major beneficiaries of Jobs's global supply chain.

And why he chose this approach is itself revealing, since it's not just about cheap labor:
For over two years, the company had been working on a project — code-named Purple 2 — that presented the same questions at every turn: how do you completely reimagine the cellphone? And how do you design it at the highest quality — with an unscratchable screen, for instance — while also ensuring that millions can be manufactured quickly and inexpensively enough to earn a significant profit?

The answers, almost every time, were found outside the United States. Though components differ between versions, all iPhones contain hundreds of parts, an estimated 90 percent of which are manufactured abroad. Advanced semiconductors have come from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chipsets from Europe and rare metals from Africa and Asia. And all of it is put together in China.

In its early days, Apple usually didn’t look beyond its own backyard for manufacturing solutions. A few years after Apple began building the Macintosh in 1983, for instance, Mr. Jobs bragged that it was “a machine that is made in America.” In 1990, while Mr. Jobs was running NeXT, which was eventually bought by Apple, the executive told a reporter that “I’m as proud of the factory as I am of the computer.” As late as 2002, top Apple executives occasionally drove two hours northeast of their headquarters to visit the company’s iMac plant in Elk Grove, Calif.

But by 2004, Apple had largely turned to foreign manufacturing. Guiding that decision was Apple’s operations expert, Timothy D. Cook, who replaced Mr. Jobs as chief executive last August, six weeks before Mr. Jobs’s death. Most other American electronics companies had already gone abroad, and Apple, which at the time was struggling, felt it had to grasp every advantage.

In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.

For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.
An efficient supply chain is key. I was talking with a Hyundai Motors executive recently who was talking up his company's recent success at selling high-quality cars at low prices. It wasn't cheaper labor, he insisted, but an efficient supply chain and transportation network that is effectively controlled and managed by the company itself, instead of being a loose connection of subcontractors.

Theirs, too, is a global phenomenon, and maybe it's time we recognize that this is the future and try to look at the bright side: perhaps it's not a problem that, say, those 63,000 jobs are not all American jobs, but rather there is an upside that the 20,000 that are not American allow for the existence of the 43,000 that are.



  1. Beat you! I have 7: MacBook Pro, Macbook Air, iPad, iPhone, iPod Touch, Keyboard, and a trackpad!....what annoys me is I can't find my iPod Nano!!!

    1. hem, that was within arm's length. If I add up everything in my 14'x14' dorm room or in the adjoining storage, I would have to include the following three:

      (a) my iPod Nano (circa 2006);
      (b) the aluminum bluetooth keyboard that came with my Mom's iMac but which I traded for my bulkier old-school Korean-language Mac bluetooth keyboard (she wanted the bigger keys and I wanted something smaller I could easily shove in my backpack and use with my iPad — a win-win for both); and
      (c) my iPhone 3G, purchased in 2008, which is no longer on the 3G network but still acts as my backup device when I'm in a wi-fi hotspot.

      There may be others.

      By the way, if your iPod Nano is from 2005 or 2006, you may be able to get a brand-new replacement. I know I'm going to do that: I still use it when I swim, since it fits the H2Audio underwater casing I bought for it.


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