Why Apple gadgets can't be made in the U.S.

Why Apple gadgets can't be made in the U.S.

Summary: President Obama asked Steve Jobs about bringing Apple jobs back to the U.S., but Jobs didn't think American workers were good enough.

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During Thursday night's debate in South Carolina CNN host and moderator John King asked the four remaining GOP candidates their opinions about Apple Inc., which "has 500,000 employees in China" and (obviously) much fewer in the United States.

A New York Times piece published Saturday discloses that President Obama also posed a similar question to Steve Jobs at a dinner with Silicon Valley power brokers less than eight months before his death.

"What would it take to make iPhones in the United States?"

The NYT piece by Charles Duhigg and Keith Bradsher is a must-read for anyone that carries an iPhone in their pocket or has an iPad in their bag. It's chock-full of insight into Apple's decision to move its manufacturing offshore, after making its products exclusively in the United States up until the Macintosh in 1984.

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.

The article is loaded with anecdotes and some of the most surprising tidbits are about contract manufacturer Foxconn Technology which makes most of Apple's hardware these days. It's referred to in the article as Foxconn City because it employees more than 230,000 -- many working six days a week, 12 hours per day, for less than $17 a day.

This is my current favorite:

The facility’s central kitchen cooks an average of three tons of pork and 13 tons of rice a day.

Wait, what?!

Read it, and then chime in in the TalkBack with your favorite anecdote.

Photo: The White House (via LA Times)

Topics: CXO, Apple, Enterprise Software, Outsourcing

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Talkback

178 comments
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  • RE: Why Apple gadgets can't be made in the U.S.

    I call BS. In the end it's all about the money. Apple could have hired domestic workers with the same "diligence and industrial skills" as the chinese ones - but it would have costed like 10-20x times more. And that's all what Apple - or any other company for that matter - cares. Produce for less, sell for more. Everything else is just PR and self-jusitifcation.

    Of course they let the chinese do the work - because it's cheaper. Period.
    ff2
    • How many iPods do you think theyd sell for $1000?

      or iPads or iPhones for $6000? Answer: not many.
      Johnny Vegas
      • Wrong, they could be produced domestically, with moderate

        @Johnny Vegas... impact on the profit margin. There was an article a while back, it was probably a year or so ago, that discussed this on the New York Times, sorry I don't have a link anymore, but the basis of the article was that all of the Apple products could be produced in the USA and sold at the current price, and still have a gross profit margin of 50%.

        Also eventually, and we are already seeing it, that cheap foreign labor is already beginning to organize and demanding better wages, better conditions, and environmental protections. So in a few years that $17 per day will become $50 then $100, and in a space of time less than most would think Chinese pay will be on par with that of the USA. Keep in mind that China is lifting the population of the USA out of poverty every two years, and their economy is growing at break neck speed at rate exceeding 8% growth.

        Bottom line just because the cost of labor is more here, doesn't translate into super high product prices, because it just isn't true. The assembly and production is just a small fraction of the total cost, after all there are plenty of manufacturing companies that keep their production in the USA, such as Siemens, Boeing, 3M, etc., and it wasn't long ago, in October that Siemens is committed to keeping their production here in the USA.
        Snooki_smoosh_smoosh
      • $6000??? the original article clearly states for about $65 more

        @Johnny Vegas
        Those with experience in this type of thing has said that at the most, it would be for 21% more.
        given Apple's rep, people would happily pay 35.00 moe the phone, spliting the difference with Apple, who makes well over $100 a phone.
        William Farrel
      • Profit matters

        @Snooki_smoosh_smoosh I disagree. In the US we do not have the capability to manufacture ipods, especially at the scale necessary. The cost involved would not be so much in labor but in the tooling up of manufacturing to be able to make them. However, labor is a significant part too.<br>Some may say that foreign manufacturers are moving here to manufacture (ie Toyota, Honda, BMW, etc). However, these are predominantly large items (transportation costs are high, damage costs are high, import fees are high) -- it makes sense to manufacture (or just assemble) them at the country of destination.<br>The fact that China is growing and their population is requesting reforms has nothing to do with the argument. This also happened in Mexico, but when Mexico's prices started to go up, manufacturers moved to China (that's why they call it the low cost provider). As China costs continues to increase, look for the movement to other countries.<br>Finally, it really doesn't matter because people want products at the lowest possible price point. If we tried to sell a "Made in USA" ipod for a modest increase, $250 vs $200 for import -- do you really think many people would pay the extra $50?
        joe.johnson@...
      • RE: Why Apple gadgets can't be made in the U.S.

        @Johnny Vegas: Where do you draw the line between buying something cheap and supporting communism. That is what every manufacturer doing business with China to import goods to the USA is doing. Supporting a regime that doesn't believe in individuals rights. Just a glorified dictatorship for the few at the top.

        Keep a close eye on it and see if it's happening here. "Corporations are people."
        fldbryan@...
      • RE: Why Apple gadgets can't be made in the U.S.

        @Johnny Vegas Where are you getting your figures?
        athynz
      • RE: Why Apple gadgets can't be made in the U.S.

        @joe.johnson... Keep in mind, that Foxconn is a supplier to Apple, so it isn't as if Apple would have a plant to set up to manufacture these devices. So in essence if you are tooling a manufacturing plant you are going to do so not to support the assembly of a single client, but several.

        Look, I am not going to argue about whether or not Apple should or shouldn't produce their products domestically, because honestly in my world view it doesn't matter, as we are operating in a global economy, and have been for the last decade or so, longer depending on the measure, and that in the long run Cheap foreign labor will soon become equivalent to domestic labor, and the savings will be to produce the product closer to where it is being sold. So eventually a manufacturer will have a plant to service American Customers, an Asian plant to service Asia etc. These profits from cheap labor are short run only. I know that isn't much comfort to domestic labor right now, but that is the way it is.

        People need to either be adapting their skills so they stay competitive, or move to where-ever there job is moving to. A recent article shows that many American Teachers are moving to China for better job opportunities. The skills of the 21st century economy are changing and the need to be not only technically apt to do the job, but also have the language skills to operate in a global economy, in this case learning Chinese, Thia, Japanese are probably good things to work on to separate yourself from the herd.
        Snooki_smoosh_smoosh
      • RE: Why Apple gadgets can't be made in the U.S.

        @Johnny Vegas
        They could probably make a tidy profit and employ 1000's of people in their home country instead of making some investors rich. There's obviously a fundamental problem with the way business is conducted in this day and age.
        kstap
      • RE: Why Apple gadgets can't be made in the U.S.

        @Johnny Vegas
        And if would have ended up costing $6K, then would not sell until businesses would manage to contain cost while operating without exploitation. Or are do you mean to say that you're fine with justifying exploitation of other human beings? Apparently you (and anyone thinking along those lines), wouldn't care about those fellow humans since you see no problem with not giving them the same rights US/EU workers have.
        Then you ar OK with the de-facto slavery those "skilled workers" are forced into, you are OK with environmental disasters caused by a manufacturing industry where environment is on the backburner. Looks like you're ready to justify that and more as long as you can continue to get those electronic toys and other items made in complete disregard to worker rights and safety not to mention the rest of conditions. Many of which one can do without. Foxconn is just one of the many example... it's not just Apple who has offshored most of its production and there are more products that are sold in US and EU and turning profits by exploitation

        US workers are being penalized because we have workers' rights, because fairness of compensation and contribution toward retirement, healthcare and all the several other regulations that aim to treat workers as a human being trying to preserve those workers rights and dignity, preventing that it all becomes about making money no matter what's that costs.
        In US we have rules (much line in EU and other civilized countries) that would not allow the exploitation that turns workers into slaves treated worse than machines, in those countries where today most of the jobs have been allowed to be outsourced, with the complete disregard and lack of accountability to those laws that have been passed in US to protect the productive part of society that has been killed today in the name of uncontrolled and unregulated corporate greed that commits the most despicable crimes without having to answer for it.

        If a company was to use child labor it'd be an outrage in the "regulated world" (won't use the term civilized as that would be grossly incorrect) and the same would be true in cases of exploitation, profiling, and all the other laws and regulations, including that about fair compensation, that in the end dictate the cost of production (it's not just taxes to increase it). How can anyone compete with lawlessness?

        That's another case of blood diamond and fair trade. Our government should ban the sale and import of those items produced abusing fellow human being... and the fact that a Chinese worker has no alternative is no justification for anyone to allow such immoral corporate conduct to continue. Free market and profit is great, but success has to be accomplished within the legality and in full respect of the very same law that are applied in all regulated countries. Why is that we have come to accept so easily the suffering and oppressions of others as long as it's done outside of our countries? Have we become so numb to humanity, fairness and justice and so addicted to useless garbage that hurts more people than it will ever be worth and that is slowly poisoning the environment and abusing precious resources? What has happened to out species!

        It's embarrassing to hear the President be so unaware about the whole situation to the point of asking of Steve Jobs what it would take to bring those jobs back to US. How completely clueless and naive! No wonder he is incapable to address the issues related to the mass offshoring of US manufacturing and other jobs. This country was built industries so much so that they have been slowly fine tuning in all aspects including that of preserving the health of workers, not just increasing profits. People once were proud to work in US factories, from automotive to appliance many other sectors. Sadly greed and lack of enforcement abroad of the same rules we have to respect at home has brought us to the point that now unless a concerted effort is made, we'll never bring back US to a productive and competitive state... it may even be too late since now not only skilled workers are in shortage, but we have brains who have left the country en masse already.

        We allow our country to apply to standards... eyes are closed shut when it comes to getting minerals like "coltan" and other key raw materials from the mines in Congo where child labor is an accepted reality... many die because of the precarious conditions in which the mines are operated, there is no safety and no means of rescue in case of accidents, the conditions of the workers can't even be defined as medieval and they are closer to that of a forced labor camp that that of a slave plantation where there at least there was an interest to preserve the life of the slaves owned (if that can even be seen as something positive!)... But hey if that gives us electronic toys that we can change every 3 to 6 months, well that's all good... beside it's not like its any of us working in those mines right? It's just some unlucky Congolese child. We'll just use our new shiny table to send a donation to save the children which will be enough for us to get rid of the sense of guilt.
        freakqnc
      • Apple doesn't have 500,000 employees in China... WTF???

        Foxconn may have those employees, but Foxconn employees are not Apple employees... Some people need to get a friggin clue. According to Apple's lase SEC filing... <br><a href="http://www.sec.gov/Archives/edgar/data/320193/000119312511282113/d220209d10k.htm" target="_blank" rel="nofollow">http://www.sec.gov/Archives/edgar/data/320193/000119312511282113/d220209d10k.htm</a><br>Employees... As of September 24, 2011, Apple had approximately 60,400 full-time equivalent employees and an additional 2,900 full-time equivalent temporary employees and contractors.<br><br>500,000 might be the number of rocks smoked by John King and the four remaining GOP candidates... But it is not the number of Apple employees...
        i8thecat4
    • RE: Why Apple gadgets can't be made in the U.S.

      @ff2
      Well I think there's also the fact that no-one in the Western world would let themselves be treated in the same way as the Foxconn workforce. It's like the dark days of the industrial revolution, and really quite shameful.
      Is it any different for the manufacturing processes of any other US computer company? Are any of them more ethical than Apple? (I don't know the answer to either of those questions)
      Grumpy Bob
      • RE: Why Apple gadgets can't be made in the U.S.

        @Grumpy Bob None of them are any better than Apple, when it comes to the ethics, but they aren't the ones making huge profit margins on those goods - also, most of the computer manufacturers these days aren't even American, there is Dell and HP, but most of the rest of the top 10 are Asian anyway.

        On MacBreak, they were saying that the price difference would be more in the region of 20-30%, not 10 to 20 times, to manufacture in America.

        Also, going back to the Article, Apple doesn't employ "over 500,000" people in China, they might have a few hundred, if you count up all of the stores they have. Foxconn and the other sub-contractors might have hundreds of thousands of employees, many of whom work on lines producing Apple kit under sub-contract, but that is very different to Apple actually employing them!

        We have the cases for our touch terminals made by 2 sub contractors, who have several hundred employees between them. That doesn't make the head count of our company any larger! Likewise, we buy in Intel mainboards and SSDs, memory from Crucial and ELO Touch screens, but that doesn't boost our headcount to several hundred thousand!

        Hyperbole aside, the relevant questions are:
        a) are there enough skilled people in America, who could work at a factory, assembling Apple kit?

        b) would they be willing to move to wherever the factory is? (Such a large factory, capable of churning out enough kit to meet demand would be gigantic and could not be serviced by any existing city - I doubt Los Angeles or New York have a few hundred thousand unemployed workers with the relevant skills and they wouldn't have the land for the factory or the population explosion, who would need additional housing.)

        c) What additional costs does working in America bring? Taxes, employee health contributions, minimum wage, more shifts, meaning yet more employees, union regulations etc.

        That is, assuming that the American workers work as hard and as long as their Asian counterparts - American workers get longer breaks, for example.

        The general thesis on MacBreak Weekly was having a BTO option on the Apple website for "Made in America", where the consumer can decide, if they want to pay the extra for having knowledge that the device was assembled in America - not manufactured, assembled; most of the components would probably still come from Samsung, LG etc. factories in Asia.
        wright_is
      • RE: Why Apple gadgets can't be made in the U.S.

        @Grumpy Bob
        Based on reports and photos out of China its more like the old coal mining towns. Where you are paid in company money not real money. you buy your food and everything else at the company store and rent for company housing.
        rparker009
      • RE: Why Apple gadgets can't be made in the U.S.

        Isn't it ironic that in the People's Republic of China, it's illegal to form a union.
        jnc01@...
    • RE: Why Apple gadgets can't be made in the U.S.

      @ff2

      AGREED! Slaves have always been cheaper than real employees.
      NoAxToGrind
      • Yep! America is on the come back trail; or not:

        @NoAxToGrind >

        Even with popular notions that America will become more competitive in the global economy by 2015 there is no way that Congress will be willing to do what the Chinese government has done to secure these contracts. fact is, it is the pinnacle of capitalism and the real estate bubble popping was the sign that the middle class could no longer afford to pay the expected prices of 2008.

        And as usual from the press, in the USA, the retro insertion of 50,000 GM workers in 1950 is completely irrelevant. the number of automobiles per model were in the millions without any foreign competition. (Blah-blah)

        Also, it is the structure of Corporate America, or capitalism as we know it, to hire CEO's that are willing to sell out their very companies to the highest bidder for the benefit of the share holder.

        So what; we end up becoming another Communist country rather than an Imperialist one, like China use to be. In the end, A GOP Republic for the People. It all sounds just like it has already played out so far for both China. And well Russia, they are still consolidating their own interest or have finished doing what we are doing now.
        Zurk_Orkin
      • RE: Why Apple gadgets can't be made in the U.S.

        @NoAxToGrind Slaves? Funny thing about that comment is that the Foxconn employees are free to find other work - the question is can they find something that pays better and has better benefits? In other words those Foxconn workers are no more a slave to their jobs as you are to yours.
        athynz
      • China is going through the growing pains

        @NoAxToGrind... we had just a couple of centuries ago. The people are already beginning to organize, the demand for better wages and better working conditions will come, this is an economic growing pain that any developing country is going to have to overcome.

        Besides your "slaves" comment doesn't apply given the cost of living there, and the rate of people being lifted out of poverty. The Chinese are seeing the opposite of what we have, where they have upward mobility, whereas kids here get to look forward to downward mobility.
        Snooki_smoosh_smoosh
      • RE: Why Apple gadgets can't be made in the U.S.

        Pete "athynz" Athens, So Foxconn is right and we must celebrate them hiring and abusing poor people?
        toutsaint2000@...