ENTERING GLOBAL MARKETS

3 Steps to Getting Apple's Manufacturing Back in the U.S.A.

The presidential debate stirred a debate about outsourcing jobs overseas. Here's how one expert believes Apple can bring manufacturing back home.
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Near the end of Tuesday evening's presidential debate, Candy Crowley, the evening's moderator, posed one last question to the two candidates.

"iPad, the Macs, the iPhones, they are all manufactured in China," Crowley said. "One of the major reasons is labor is so much cheaper there. How do you convince a great American company to bring that manufacturing back here?"

Republican candidate Mitt Romney fielded the question first, saying that America should be tougher on China's patterns of currency manipulation, which essentially makes it cheaper for U.S. businesses hire labor there.

President Barack Obama, on the other hand, simply said many of these jobs will never come back "because they are low-wage, low-skill jobs."

"I want high-wage, high-skill jobs," he said.

But there are optimists out there who believe Obama is wrong and who believe Apple could one day return its manufacturing to America.

Harry Moser is one of those optimists.

Moser is the founder and president of the Reshoring Initiative, an organization whose mission is to bring "good, well-paying manufacturing jobs back to the United States by assisting companies to more accurately assess their total cost of offshoring."

For more than a decade, Moser has been an evangelist for one basic idea: shifting the thoughts of American CEOs from "offshoring is cheaper" to "local reduces the total cost of ownership."

"I would tell Apple, 'Do the math,' as Obama would say," Moser says.

It's not as if Apple hasn't considered it. In fact, Tim Cook, Apple's CEO, was recently asked if the company would ever bring back the manufacturing jobs it had outsourced to Foxconn. Specifically, Walt Mossberg, the legendary tech writer, asked Cook: "There's been a lot of talk recently about reviving manufacturing here in the U.S. You used to have a factory, I think in Colorado. You're probably the most influential company in technology, and you're an operations expert--will there be an Apple product ever made again in America?"

To which Cook responded, "I want there to be!" But, he argued, "there's an intense focus on the final assembly. Could that be done in the U.S.? I sure hope so. But look, how many tool-and-die makers do you know in America? I could ask them, nationwide, to come here tonight, and we couldn't fill [a few hundred seats in] this room."

Moser readily admits that even if Apple decided to return its manufacturing jobs, it would face a number of hurdles--beyond just the additional labor costs.

"We do have to have more high-skilled workers," he says. "We have dramatic shortages of high-skilled workers. We do have to train multiples of what we're training."

He continues: "My argument to Apple is: If you brought back iPhone and iPad manufacturing to the United States, you'd be the only company that could do it, because you are the only company that could have the margins. You would still make a profit on the units. Once you've done it, and none of your competitors could follow, you'd be the only tablet device made in the U.S.A."

Earlier this year, The New York Times reported that manufacturing locally in the United States would add $65 to an iPhone's expense. (But that's not really a problem for Apple: "Since Apple's profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward." However, other research has estimated the costs would be higher. A study from the University of California, Berkeley, places the additional marginal cost of an American-made iPhone at more than $300.)

Moser's second argument would require the government to take more action, a position that would probably be met with quite a bit of opposition from more conservative groups. To address the labor shortage, government should target existing trade schools and offer free tuition to students who wish to pursue tool making as a career, Moser says.

Finally, a major barrier to Apple's reentry into the United States is the lack of an iPhone parts ecosystem. Although a few notable U.S.-based companies service Apple--Corning, for instance, makes the iPhone screen, in upstate New York--the government needs to incentivize the third-party diode-, semiconductor-, and resistor-producing firms to come back to the United States as well.  

"Instead of Solyndra, start making small gambles; find companies that are doing small volumes and motivate them to grow at a higher volume so they can start selling to Apple," Moser says. "Pick somewhere where labor rates are low, and identify a number of those ecosystem components and aggregate them in one cluster. Don't support by argument; support by action."

Last updated: Oct 19, 2012




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