Two years ago, almost to the day, I wrote a post titled It’s time for Apple to look at owning factories again.
What I argued then was that of the problems that Apple had the means to fix, production was what most needed fixing.
Since then we’ve seen evidence of significant investment in manufacturing tooling, where Apple is effectively purchasing the means of production rather than just renting or contracting it out. This capital equipment investment is the equivalent of owning one of the three asset classes that make up a manufacturing operation:
- Tooling or capital equipment. The “Capital” at the root of the concept of “Capitalism”.
- Skills, talent and knowledge. This is the softer kind of asset that turns out to be harder to replace or buy.
- Labor pool. Although considered a commodity even unskilled labor is difficult to obtain if flexible employment is needed in a regulated environment.
It did not stop there. It has also used capital to ensure capacity through pre-orders thereby allowing the skills and labor to be more predictably applied by its suppliers (and preventing competitors from having sufficient supplies). Apple has also taken control of chip design for the vast majority of its CPUs thus building a more bespoke supplier chain.
However these are not enough steps to make production “good enough” to meet the demands of a billion customers buying a new product every other year. Continue reading “Apple's new factories”