Apple's Cook Says More Macs Will Be Born in the U.S.A.
In his exclusive interview with Bloomberg Businessweek—on newsstands now—Apple Chief Executive Tim Cook announced that starting next year, Apple will be bringing some of the production of its Mac computers back to the U.S. “We’re really proud of it,” he said. “We could have quickly maybe done just assembly, but it’s broader, because we wanted to do something more substantial. So we’ll literally invest over $100 million.”
The sum of $100 million is slightly more than 1⁄100 of the company’s profits last quarter, so the announcement was dismissed in some quarters as a publicity ploy. It’s very possible that’s all it is. On the other hand, the relatively small size of the initial investment doesn’t mean the company isn’t taking the effort seriously. It’s possible that it’s an experiment, a small pilot program exploring whether the company can profitably and reliably make its products in the U.S. And if any tech company could make it work, it’s Apple.
Labor costs make up a fairly small sliver of the cost of an Apple product. Still, according to Blake Johnson, a manufacturing and supply chain expert at Stanford University, Apple is not simply going to replace $2.50-an-hour labor in Shenzhen with $15-an-hour American workers. Instead, the plan is most likely to shift to more automated manufacturing, an approach that Johnson points out makes particular sense for Apple. Whereas Dell dominated the PC market a decade ago by offering customized computers, Apple grew into the largest company in the world by selling a limited suite of products: iPhones, iPhones, iPods, and Macs. “Apple’s product line is highly standardized, with a very small number of products and very few configurations, and that makes it much easier to do automation,” Johnson says. There’s some precedent for this in the company’s DNA: NeXT, the company Steve Jobs founded after being fired as Apple’s CEO in 1985, built its workstation computers in a robo-factory in Fremont, Calif.
One measure of how serious Apple is about the venture is how the company will define “manufacture.” The final assembly of a Mac is the least complicated part of producing it—it’s largely just plugging things into each other. But in his interview, Cook emphasized that Apple was planning to do “something more substantial” than that. If the company, for example, is going to push to have more of its components made in the U.S., that would be a big deal—and a serious challenge. One of the reasons tech CEOs give for why they don’t do more of their manufacturing here is that, in the years since that work left and went to Asia, the network of American component makers that used to supply the domestic electronics market has dried up. In other words, it’s not just iPads that are made abroad, but all the parts that go into them, too.
There is, however, some historical precedent for rejuvenating such a network. When Japanese car companies started building cars in the U.S., they were leery of using American-built components in their cars, assuming that they wouldn’t meet higher Japanese standards. That attitude has changed over the years—this year the website cars.com declared that the America-built car with the highest proportion of American-made parts was the Toyota Camry.