OLD Media Moves

Apple brings good news to manufacturing

December 7, 2012

Posted by Liz Hester

Earlier this week, U.S. manufacturing unexpectedly fell to its lowest level in three years. Not a great sign for the economy Reuters pointed out:

U.S. manufacturing unexpectedly contracted in November, falling to its lowest in over three years in a sign the sector may be struggling to gain traction, according to an industry report released on Monday.

The Institute for Supply Management (ISM) said its index of national factory activity fell to 49.5 in November from 51.7 the month before. The reading was shy of expectations of 51.3, according to a Reuters poll of economists.

A reading below 50 indicates contraction in the manufacturing sector, while a number above 50 means expansion.

The index hit its lowest since July 2009 and contracted after two straight months of growth that followed a soft period over the summer months.

The employment index fell to 48.4, and was below 50 for the first time since September 2009.

But that doesn’t mean companies aren’t investing in the U.S. Apple CEO Tim Cook said Thursday he was considering making some of its ubiquitous computers in the states, moving production out of Asia.

Here are some details from the Wall Street Journal:

In a rare move, Apple Inc. on Thursday said it plans to invest more than $100 million next year to bring some production of its Mac computers to the U.S.

The investment, which would likely involve third-party manufacturers, comes as Apple and other U.S. hardware makers face scrutiny at home for the amount of production outsourced to partners in Asia, mostly in mainland China.

Since taking over Apple last year, chief executive Tim Cook has repeatedly identified increasing Apple’s manufacturing investment in the U.S. as a priority. Samsung Electronics Co. already makes Apple-designed microprocessor chips for the iPhone and iPad in Texas.

Which manufacturing partners Apple will working with and exactly which processes will happen on U.S. soil remain unclear. The company said that Apple will do more than simply assemble parts manufactured elsewhere. A spokesman declined to comment further.

Mr. Cook disclosed Apple’s manufacturing plans in interviews with NBC News and Bloomberg News.

But as the New York Times points out, computers aren’t generating the growth they used to for Apple. Now nearly half of revenue comes from the iPhone:

Apple, the biggest company in the world by market value, moved most of its manufacturing to Asia in the late 1990s. As an icon of American technology success and innovation, the California-based company has been criticized in recent years for outsourcing jobs abroad.

“I don’t think we have a responsibility to create a certain kind of job,” Mr. Cook said in the Businessweek interview. “But I think we do have a responsibility to create jobs.”

The company plans to spend $100 million on the American manufacturing in 2013, according to the interviews, a small fraction of its overall factory investments and an even tinier portion of its available cash.

Over the last few years, sales of the iPhone, iPod and iPad have overwhelmed Apple’s line of Macintosh computers, the basis of the company’s early business. Revenue from the iPhone alone made up 48 percent of the company’s total revenue for its fiscal fourth quarter ended Sept. 30.

BusinessWeek’s cover story is a wide-ranging interview with the CEO (done as a Q&A), so I’ll leave you with Cook’s own words on the manufacturing move and the responsibility to create jobs:

You were instrumental in getting Apple out of the manufacturing business. What would it take to get Apple back to building things and, specifically, back to building things in the U.S.?
It’s not known well that the engine for the iPhone and iPad is made in the U.S., and many of these are also exported—the engine, the processor. The glass is made in Kentucky. And next year we are going to bring some production to the U.S. on the Mac. We’ve been working on this for a long time, and we were getting closer to it. It will happen in 2013. We’re really proud of it. 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. This doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.

On that subject, it’s 2012. You’re a multinational. What are the obligations of an American company to be patriotic, and what do you think that means in a globalized era?
(Pause.) That’s a really good question. I do feel we have a responsibility to create jobs. I don’t think we have a responsibility to create a certain kind of job, but I think we do have a responsibility to create jobs. I think we have a responsibility to give back to the communities, to pick ways that we can do that … and not just in the U.S., but abroad as well. I think we have the responsibility to make great products that we can recycle and that are environmentally friendly. I think we have a responsibility to make products that have a greater good in them.

That’s the one that is most important of all, because a cigarette company could give back things and environmentally dispose of their product or something like that. But we want to provide a product that changes people’s lives in some way. We spend a lot of energy focusing on education. We created iBooks Author and gave it away for free. We wanted to reinvent the textbook and reinvent the classroom and try to really go a long way to solving the student engagement problem. It doesn’t solve every problem in education, but it solves a very important one, right?

Well said, Tim, well said.

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