A recent series of articles from the New York Times has set off quite a bit of discussion about Apple Inc. and their manufacturing practices that touch upon the larger issue of manufacturing in America versus abroad.
First, let me note that I am a long-time Apple enthusiast. I can remember driving around in the early 1980s with my dad in his pickup truck, which was adorned with an Apple logo sticker on the back window (as seen in this inset photo of Apple’s logo, circa 1983). The sticker came with the Apple IIe that my father, an early computer adopter and enthusiast, had purchased to my delight. After becoming a fan of the IIe and Apple in general, I used Macs at work in the 1990’s (when my budget couldn’t accommodate Apple’s then-pricey demands on us consumers). I became an Apple consumer again (this time without my father’s bankrolling) about seven years ago with my purchase of my own Power Mac , and I became an iPhone aficionado about four years ago.
In fact, I am typing these words on my beloved Apple iMac in my home office with my trusty iPhone by my side. I’m interested in purchasing the iPad3 upon its release. And, I am also quite interested – from both a consumer and business perspective – about the possible release of an Apple television, which is rumored to feature Siri-esque intelligent voice recognition/control, a motion-interface control, and may offer consumers a new means to watch content on an “ala carte” rather than “buffet” basis.
I admire Apple for its innovation in product design, functionality, content delivery model, and marketing. Apple puts an American exclamation point on state-of-the-art global innovation and business success. As of late Apple has gone back-and-forth for the title of the World’s most valuable company. Apple currently reigns supreme on CNNMoney/Fortune’s Worlds Most Admired Companies list, ranking first both in innovation among tech companies and most admired company overall.
However, the aforementioned Times series notes that the majority of Apple’s products are manufactured overseas. Apple currently has over 40,000 employees in the U.S, and added 8,000 workers last year. That’s impressive. But as the Times points outthe roughly 700,000 contractor employees in Apple’s supply chain are mostly outside the U.S., and are often in low-cost nations such as China.
The growing number of manufacturing jobs in places like China bring rising wages for local people as they shift away from rural agricultural jobs. Indeed, rising wages along the Eastern Coast of China are causing some firms to reassess the location of their manufacturing operations. Ultimately, from the U.S. perspective, there will likely always be pressure from low labor costs from sources outside the U.S. be they from China or elsewhere, such that our advantage should increasingly reside in manufacturing process, product and organization innovation and flexibility.
What would it take to make a future edition of the iPad or its ilk in America? About 7-8 years ago, I had the opportunity to be part of team involved with a seminar series on China and other nations using low-cost (and often commodity-based) manufacturing and other competitive advantages that was impacting U.S. manufacturing and the U.S. economy. As we discussed at the time, none of us ever want low wages to become a driver of American manufacturing, and American manufacturing is increasingly becoming focused on value-added rather than commodity-based operations.
In order to be successful, you need a skilled workforce with the technicians, machinists and engineers necessary to innovate in the product’s design, process of manufacture, in the product itself and beyond. On this topic, the Times series writes that “though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need.” The article touches on the sheer scale of available engineering talent that China offered to meet Apple’s large-scale production needs, reporting that “Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones” and that “it would take as long as nine months to find that many qualified engineers in the United States.”
This is particularly of interest to me given MEP’s role in providing American smaller manufacturers with the technical and business expertise needed to support more flexible and innovative manufacturing operations. This also ties back to a recent blog on efforts to increase the number of STEM (science, technology, engineering and mathematics) students that graduate from America’s schools.
What do you think? Drop me a line…