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12/6/2012
05:32 PM
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Apple Mac To Be Made In USA

Apple shareholders may not be thrilled, but Apple's decision to make some Mac computers in the U.S. will bring more jobs, training to domestic workers.

"One of the absurdities of Apple's model in the past is that it uses extraordinary control over its supply chain and input costs to generate piles of cash which just sit idly on its balance sheet," he said. "It isn't used to hire U.S. workers, nor is it distributed to shareholders as dividends. If Apple sits on less cash and employs more U.S. workers, then that has to be better for the U.S. economy. Are the shareholders interested in that? Probably not, because theirs is a fairly instrumental relation to the firm. But even Apple's shareholders should see the reputational damage related to its Chinese sub-assemblers, and so might look favorably on a strategy to move some assembly back to the U.S. as a means of allaying these fears and adding value to the product. This might also pressure other competitors to follow suit, which would again mark Apple out as a leader not a follower."

Janice Hammond, Jesse Philips professor of manufacturing at Harvard Business School, said in a phone interview that while it's not clear how much manufacturing volume will return to the U.S. in a single Mac product line, what excites her about Apple's decision is that there seems to be a growing understanding of how to make decisions about what do and not do offshore.

For a long time, she said, companies have been primarily focused on taking advantage of lower labor costs offshore, with a few also considering the benefits of work rule differences in other countries. "One of the very interesting things about people bringing manufacturing back into this country is the speed to market and flexibility they will have compared to importing goods from some distant place like China," she said.

"I don't think the U.S. can compete with China on labor costs and I don't think the U.S. wants to compete with China on labor costs," Hammond said. "Then the question becomes, 'What is the competitive advantage of sourcing domestically?' ... The advantage of manufacturing domestically is that as demand swings, one can quickly adapt."

Hammond pointed to the series of market disrupting events over the past few years, such as the 2011 tsunami and earthquake in Japan and Hurricane Sandy in 2012. "The further your manufacturing is from your market, the more those disruptions will cost you," she said.

It's also advantageous to have your manufacturing close to your research and development facilities, Hammond said.

Hammond stressed that the ability to react quickly to market changes is particularly important for goods that are fashion-oriented, which she argues electronics have become, in the sense that consumer electronics are produced with short lead times and demand prediction is difficult.

Domestic manufacturing also has benefits in terms of intellectual property protection, transportation lead times and tariffs, Hammond observed. And she noted that the "news coming out of Foxconn for the last few years has been problematic" for Apple's image. So domestic manufacturing may help Apple from a marketing perspective, as well as logistically.

Hammond said she recently visited New Balance's manufacturing facility in the U.S., noting that 25% of the shoes that the privately held company sells in the U.S. are made here. The company's U.S. workers are several times more productive than the company's workers overseas, she said, and they've developed some very flexible manufacturing processes to allow them to meet demand for specific sizes.

"You can be very agile if you have domestic manufacturing and if you structure and manage it correctly," she said.

Hammond said that while it may be welcomed when companies act altruistically, public companies can't be expected to accept lower profits to create domestic jobs. "What I would like to do is get companies to really think about the advantages of domestic manufacturing," she said. "So it's not simply altruism but it makes good business sense."

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JVC
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JVC,
User Rank: Apprentice
12/7/2012 | 5:01:15 PM
re: Apple Mac To Be Made In USA
There are two benefits to Apple not mentioned in the article: (1) protection of trade secrets, and (2) changes in forthcoming tax laws to bring businesses back to America
Bob Gill
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Bob Gill,
User Rank: Apprentice
12/7/2012 | 6:25:37 PM
re: Apple Mac To Be Made In USA
This is a Godsend and Apple is leading the way. Hopefully, companies like GM, Ford and Boeing will start doing manufacturing in the USA.

In reading reports about this, you'd think Apple is leading to way to bring manufacturing back to the USA. There are 10M people involved in manufacturing in the USA.

Even Intel has thousands of people doing manufacturing in the USA.
verber001
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verber001,
User Rank: Apprentice
12/7/2012 | 7:04:32 PM
re: Apple Mac To Be Made In USA
This is just about money. Apple has no ideology that loves America so much that it will keep jobs in America. As JVC says, there are now tax breaks for companies to keep a certain number of jobs in America. And this is a marketing ploy. The amount of American to Overseas jobs is ridiculously small. Apple is losing it's market share to Android, down 34% to Android's 54%. Tie in their less than innovative designs lately, coupled with their bad management decisions from everything from software to VP's; and Apple is starting to get a bit desperate. We'll have an iPhone 5S in less than 6 months...that says a lot of how this is going to go.
AustinIT
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AustinIT,
User Rank: Apprentice
12/7/2012 | 7:05:46 PM
re: Apple Mac To Be Made In USA
Don't be so quick to be fooled by Apple's token nod to critics of their offshoring program.

Apple led the way to overseas manufacturing leading up to - and certainly accelerating after - the Dot.com crash. They (along with practically every other company) have been chasing the lowest cost, least restrictive means to get their products made. Talk about human rights abuses and environmental disaster...

This grand experiment in offshoring has been a colossal failure for everyone except for the companies themselves. In the US, we have lost jobs, we have lost know how, and we have lost the once great competitive edge that we had.

Lastly, I am disgusted by Cook's comments that Apple sought offshore talent for manufacturing because we (the US) didn't have educated people here to do it. Nothing could be further from the truth. And to hear him use that excuse makes me want to puke.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
12/7/2012 | 7:14:31 PM
re: Apple Mac To Be Made In USA
Even if Apple's motives may not be pure, it's nice to see a U.S. company doing something that will improve the U.S. employment outlook and will help sustain manufacturing expertise stateside.
AustinIT
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AustinIT,
User Rank: Apprentice
12/7/2012 | 8:27:52 PM
re: Apple Mac To Be Made In USA
Foxconn (Apple's Chinese contract manufacturer) has separately announced plans to expand their North American manufacturing capability. One would presume this in in support of Apples plans...

To be seen whether these new jobs will be either plentiful or of a living wage.
TaylorSwiftFan
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TaylorSwiftFan,
User Rank: Apprentice
12/8/2012 | 4:50:35 PM
re: Apple Mac To Be Made In USA
Come on, $21 an hour for an assembler, make that more like $9 or less an hour.
If they would bring back electronics into the schools that would be a start for kids to become educated in (I think a today's necessity) technology. I had the luck to be able to go to to a public school which offered electronics in both Junior and senior high!
They care more for the college prep and sports that teaching the nuts and bolts of technology!
Who is going to repair all this fine technology? Oh wait, we just throw it away and buy new when it fails! It's no wonder the Asians are jumping ahead of us! We better start learning Chinese real soon for they will OWN the US in time!
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