updated 05:35 pm EST, Sat January 21, 2012
Apple story shows China flexibility over US
Newly uncovered details behind Apple's original iPhone launch have underscored the reasons why manufacturing jobs aren't likely to return to the US in large numbers. Referring to Apple's well-known decision to switch from plastic to glass for the original iPhone's touchscreen, the New York Times understood that Jobs was furious the iPhone couldn't be put in a pocket with keys and avoid display scratches. The only way to get scratch-resistant glass in a timely way was to go to Foxconn's plants in Shenzhen, where Apple from a sudden midnight notice could have them producing 10,000 units a day with the updated model inside of 96 hours.
"There’s no American plant that can match that," an anonymous, one-time Apple executive said.
The glass itself, while manufactured by Corning in Kentucky, needed a cutting plant to produce finished products. In China, a government-subsidized plant was not only waiting for the deal but had started expanding in anticipation. It could field employees 24 hours a day and had ready-made samples.
Officially, Apple has disputed the story of the midnight production start, arguing that its own regulations demanded worker timecards that would physically prevent staff from working at odd hours and at such short notice. Employees dispute this, however. Outside of the report, it's been a common belief that Chinese contract factories often sanitize their behavior when they expect an audit from a foreign company to minimize the perceived violations.
While Apple's transition between 2002 and 2004 to offshore manufacturing was partly dictated by lower labor costs, it's now understood that then-COO and now CEO Tim Cook wanted the adaptability and rapid turnaround of the part chain. Whole "cities" of factories like Foxconn's are not only physically close but can make production changes within hours, including part swaps and increased production. Recent Apple supply manager Jennifer Rigoni explained that Foxconn could hire 3,000 workers overnight, something impossible to do in the US; sheer population differences mean that even high-skill workers are easier to find.
Despite stereotypes, Apple isn't alone in making such supply choices. Amazon, Dell, HP, Motorola, Nintendo, Nokia, Samsung, and Sony all source from Foxconn, while other companies in the area often have similar long hours and low pay. Many of those who boycott Apple would in many cases also have to give up the Android and Windows devices they own.
Apple, for its part, has echoed opinions of many companies that the education and skills needed for domestic manufacturing aren't present, whether or not supply chain efficiencies make sense. During the well-known dinner President Obama hosted last year with Jobs and other technology luminaries present, Jobs said he wasn't worried about the US' future but had wanted active solutions, such as active support for training more US-based engineers.
The pronouncements would cast doubts on a new proposal by Republican presidential candidate Rick Santorum that would be aimed at trying to lure manufacturing jobs from companies like Apple back to the US. He seized on an idea popular among the political right of giving a tax holiday to repatriate revenue as long as it was invested in US industry. While numerous companies have complained of steep taxes they might have to pay to bring revenue back, the tax break would mostly affect the factories and the wages, not the training and supply chain issues.