Apple's new factories

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:

  1. Tooling or capital equipment. The “Capital” at the root of the concept of “Capitalism”.
  2. Skills, talent and knowledge. This is the softer kind of asset that turns out to be harder to replace or buy.
  3. 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.

An insidious problem emerges when outsourcing:  suppliers tend to become competitors. It happened in the PC industry with Acer vs. Dell. But it’s also happening to Apple. Consider how Samsung’s foreknowledge of Apple’s orders allowed them to anticipate the demand for large screen smartphones. Receiving orders years in advance for memory, screens and CPUs in the hundreds of millions would be a clear indication of demand. Receiving funds with which to build capacity is an enormous help when turning on production for your own versions of the product.

With that knowledge and the capacity built to serve Apple, Samsung was able to go from near zero market share in smartphones to being the largest vendor in two years a feat that Apple itself could not accomplish.

The supplier-turned-competitor is one of the risks of outsourcing production and is at the root of disruption from value chain evolution.

Hence it’s gratifying to see that Apple has committed to “in-sourcing” assembly of at least one product. Tim Cook in an interview with Rock Center:

And next year we are going to bring some production to the U.S. on the Mac. We’ve been working on this for a long time, and we were getting closer to it. It will happen in 2013. We’re really proud of it. We could have quickly maybe done just assembly, but it’s broader because we wanted to do something more substantial. So we’ll literally invest over $100 million. This doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.

For the first time since the 90s, Apple is taking steps to control the last pieces of the value chain it participates in.

It’s a baby step and perhaps it’s going to remain symbolic, but one can imagine a trajectory for this effort which will pay off as well as retail has paid off ten years after the first Apple store opened.

Looking for more information on the renaissance of production and its effect on the technology industries? Then come to Asymconf and take part in the debate.

  • And this step is Cook’s only

  • r.d

    basically Foxconn is assembling iMacs in the US.
    Brazil factory is also foxconn.
    There is big difference between Made in the USA
    and Assembled in the USA.

    • Barchiel

      Oh just shut up. They have to start somewhere.

      What are YOU doing to bring more jobs to the country.

      …yeah, that’s what I thought.

      • The A6 processors are made in Austin (by Samsung for Apple), I believe.

      • ChuckO

        From the Bloomberg interview: “It’s not known well that the engine for the iPhone and iPad is made in the U.S., and many of these are also exported—the engine, the processor. The glass is made in Kentucky”

      • KirkBurgess

        It’s a shame that people also gloss over the fact that the software is also made in the US.

      • dgrayson98

        Most Americans couldn’t tell you what software is. They want to swing a sledge hammer and be paid well for it, 1890s-style.

      • The iMacs use intel’s processors, the Apple’s are only for mobile devices, iPhone and iPad.

      • “And next year we are going to bring some production to the U.S. on the Mac. We’ve been working on this for a long time, and we were getting closer to it.”

        Tim said “the Mac” and did not identify a specific model. That could mean anything from a Mac Mini to the Mac Pro… or a new Mac using ARM chips.

      • It will be the Mac Pro for a dozen obvious reasons.

        It’s the easiest to build, causes the least problems if things go wrong, you obviously start with the smallest problem (ie lowest volume), etc, etc.

        (On the positive side, this may be the occasion for the final update of the Mac Pro that certain sectors of the internet have wanted for so long.)

      • I’ve wondered about the Samsung plant in Texas, so I did some surfing…

        Sammy opened the plant in 2007, at a cost of $3.5 billion — to produce NAND flash memory — primarily for products like iPods and cameras… pre iPhone, iPad, AppleTV ARM demand.

        Then, apparently, Sammy spent an additional $4 Billion to upgrade the plant to shift production to CPUs (their own and Apple’s)… post iPhone, iPad, AppleTV ARM demand.

        I wonder how much of the $7 Billion (Total investment) comes from Apple?

        If the Apple investment is substancial, I wonder what control/options Apple has over operation and ownership of the plant? (It would be very un-Apple to leave any loose ends to a critical supply chain operation or component).

      • ChuckO

        Dude, easy, r.d.’s got good and important points. U.S. jobs are U.S. jobs and doing this could be important in terms of encouraging engineering students in the U.S. that there will be work for them. But we have to understand exactly what Cook did and didn’t say and it’s important for people to understand exactly what will be happening in the U.S. and I suspect that a lot of the internals of what they build won’t be manu’d in the U.S. This will be an assembly plant and a good start hopefully for more.

      • If r.d had read the post properly, he would’ve noticed that Cook said Apple is not doing just assembly. What it’s doing is “broader and more substantial.”

      • Dan

        But, of course, no one knows what “broader and more substantial” means other than Mr. Cook.

      • True but it means much more than mere assembly work.

      • Mr. Cook is not a joker. When he says something he also means it. He also does not need to explain anything because actions talk for them selfs. Within few years you will see what he meant.

      • To be honest, I fully back Barchiel’s response. It’s not that r.d. doesn’t have a point, but he’s quite dismissive without adding much to the conversation. This is a very interesting change that Apple has made which I think should be studied. I’m sure they are thinking that there is a long term strategic advantage to moving factories here. To me, I look at it like the AppleTV. It’s an experiment that is biding it’s time.

    • JohnDoey

      The software is made in the US, and that is 99% of the device. Everything else is a photo frame.

    • “Made in the USA” is a meaningless term. How obsessive are you going to go?

      Do you insist that the all the components be made in the USA? (eg chips)
      Do you insist that the substrates for those components be made in the USA (eg wafers)
      Do you insist that the raw materials of those substrates be made in the USA (eg silicon and dopants)
      Do the machine tools need to be made in the USA? What about the trucks that transport these various items? What about the oil those trucks burn?

      There is a reason that the law uses terms like “assembled” with precise definitions, whereas know-nothings use terms like “made”.

  • Chuck

    The language becomes confusing to me. In this case is “manufacturing” actually assembling? Second, did Cook say Apple will be doing this or is there the possibility that Apple’s manu partners will be doing this for them in the U.S.?

    • ” This doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.”

    • Does Apple really engage in Retail when they don’t actually own the store?

      • ChuckO

        Right, but having there own stores is extraordinarily import to Apple. I could see REALLY owning manufacturing being equally important to them but that getting back into manufacturing would be much more of a journey than getting into retail. If they were even interested in doing it. But maybe this is a step in that direction?

      • GeorgeS

        I expect that Apple does not own many of their stores, the ones in malls. Typically, that space is rented, as it is part of a larger building.

      • Davel

        I think Horace was referring to best buy vs an apple store which they do own.

    • The line between “manufacturing” and “assembly” is somewhat blurry. But it sounds like this is more serious than just putting the final modules together. Certainly the FTC’s definition of “made in US” requires more than that, anyway.

      As to your second point, I’d certainly interpret this as Apple working through contract manufacturers in the US, rather than owning the entire plant outright, though it sounds like they’re financing at least part of the building up of the plant.

      I also note that this is being done for the Mac line, which is probably much more expensive to ship per dollar of end-user price than most of Apple’s other products. Being able to use rapid US ground transport for “just in time” delivery of their heavier products is likely to be a big win. I don’t know what it costs Apple to air-ship a 27″ iMac or a Mac Pro from China, but it’s got to be significant. I wouldn’t be surprised to see both East and West Coast production facilities to keep transport times short and costs down.

      It’s not clear to me that it makes as much sense for Apple to bring back iPhone or iPod production. Those products are very small and light, and presumably shipping is a very small part of their end price.

      The larger iPad and MacBooks are more likely to move back to the US at some point, I would guess. If they do, I’d expect that the circuit boards would continue to be made in China (because most of the components are made in that area), but the mechanical components and final assembly would be done in the US, based on what’s heaviest/bulkiest to move around.

      One of the problems we have with US production is that there are almost no US-based printed circuit board facilities available here to make the raw (without components) boards. Also, many of the components that need to be placed are very low-cost passive parts, which I suspect aren’t worth shipping very far. So putting the circuit board fab close to the component vendors makes a lot of sense there, and it makes more sense to ship the higher-value completed boards instead.

      I wouldn’t be surprised if Apple is starting their US production as a test run on products where the volume is relatively low and a production problem or cost issues won’t be a disaster, much like they quietly trialed the 32nm A5 in the later phase of iPad 2 production. If it works out, they can then ramp up to whatever degree makes sense to Tim Cook.

      If I remember Horace’s comments right, Nokia has a strategy of producing their cellphones close to the markets they sell them in, perhaps Apple is thinking about adopting this strategy. Certainly they and Foxconn are now doing this in South America, in Brazil. I wonder if Spain is next…

      • Nokia used to have that strategy. They’ve since zagged away from controlling production just as Apple zigged in the other direction.

      • AFAIK Apple sells the majority of their products outside of the US. Last time I checked shipping from the US is more expensive than shipping out of HK. Or am I mistaken?

      • Relentlessfocus

        I agree when you say Apple sells the majority of its products outside the USA but I think the ratio of iMacs sold in the USA vs the rest of the world may be a lot higher than any other apple product. Haven’t been able to find data to back that up though.

      • Relentlessfocus

        Apologies for a slight flight of fancy but I was thinking….
        Having read reports that Foxconn may be setting up factories in the USA I suddenly had a thought. First if Foxconn is going to try manufacturing in the USA I seriously doubt they want to deal with unions, health care and other employment costs that would be required if they used the Chinese model of hiring lots and lots of assembly line workers. I don’t think they could offer value for money given total overall worker costs. Humans also need training and as we’ve seen in China they can get angry and frustrated when the product manufacturing demands stress out the human ability to adjust.
        What would make more sense to me would be a highly automated factory using (forgive me) next-gen state of the art robotics run by very few highly trained technicians. These factories could in theory be cookie cuttered and set up in loads of different locations to achieve maximum overall efficiencies like the shipping issue referred to by Walter Milliken above. The development costs would be expensive but I think Tim Cook would love to disrupt the economics of assembling computers and he certainly has the cash to fund a cutting edge manufacturing/assembly setup. Foxconn and Apple may well have mutually valuable assets, skills and their goals are well aligned which would make such an idea attractive.
        A similar idea was used by Steve when he built the NeXT factory so doing this kind of thing is in Apple’s DNA. Cutting manufacturing/assembly costs is clearly a significant competitive advantage and Apple has plenty of room to grow its PC market share even as the overall number of PCs is shrinking so it might well be something to look for.

  • poke

    I think CPUs might explain Samsung’s current success. ARM CPUs are common to all post-iPhone smartphones and demand for them has grown with the iPhone/Android industry. As Apple’s supplier, Samsung would’ve had an early advantage in building out capacity to produce ARM CPUs. If the rest of the Android manufacturers are constrained on CPUs, that would explain Samsung’s huge advantage. It’s hard to see what moving manufacturing away from Samsung at this point could achieve, but they can stop anything similar happening in the future.

    • I think there were plenty of ARM CPU suppliers — Qualcomm, NVIDIA, TI, and Broadcom all make ARM products aimed at that market. Samsung does have an instruction set license, rather than just the more usual core license, but I haven’t seen much evidence they’ve been using that to gain an advantage (like Apple’s A6 does); their ARM products all sound like standard cores.

      I do wonder if we’re going to see Samsung suddenly come out with a customized ARM processor SoC with a strong resemblance to Apple’s A6, rather than using the supposedly power-hungry next-generation A15 ARM core. There’s supposed to be a firewall between Apple’s products and Samsung’s, but at the least I’ve got to believe that Samsung is tearing down production A6s from iPhones and looking to see what tricks Apple is using in them, if not exploiting their access to the mask set and test vectors.

      I do suspect one of the reasons Apple would move away from Samsung’s SoC fab is to reduce the opportunities for early information leakage about key points of Apple’s SoC designs into competing products. At the very least, there’s general knowledge that the production engineers gain from working on one product that will carry over to others.

      • Walt French

        Try googling Samsung’s Exynos 5250 (now rebadged as “4 Quad,” “5 Dual,” etc.). I dunno how much Sammy is into the architecture, but this is an aggressive bump in speed, throughput & geometry, so they ain’t just making carbon copies of some tapes from ARM.

      • According to what I saw when I looked it up, it’s a stock ARM A15 dual-core design. I’m sure Samsung is involved heavily in the fit of the core to the process, and in the process synthesis library used to implement the core, but it doesn’t sound like they’re actually changing the core’s design, per se, the way the architecture license permits them to.

        Anyone with their own process does have to do a significant amount of design work creating the synthesis libraries, but that can only do so much if the core’s design is optimized around a different target application. My understanding is that the A15 is indeed very fast, but was optimized for rack server applications primarily, which have a different view of power/performance tradeoffs than mobile does. In servers, power considerations are primarily heat-related, and performance is more important. The processing load is also very different — no GUI, and lots of repetitive operations running many instances of one or two applications (web server, database server) across large data sets, and relatively little need for real-time. Not sure exactly how this affects the core designs, but I’d expect it to do so. It certainly affects how many cores can usefully do work (servers are high-parallelism, mobile devices not very much so).

        The early belief was that Apple’s A6 was either a souped-up ARM A9 or some kind of A15 design, until careful benchmarking and the Chipworks teardown discovered the custom core design and its performance behavior.

        So I think that yes, Samsung is doing aggressive things with their process, but that they are indeed really doing carbon copies of the ARM still, at least at the CPU architecture level. That’s assuming the reports of the Exynos use of A15 core are accurate, which is always questionable on the net, but I’m inclined to believe them until I see evidence otherwise.

        CPU design and optimization is a rather arcane black art, and *very* few places in the world actually do it: Intel, IBM (I think), AMD, and ARM are the only ones I can think of offhand. And now Apple to some degree. The question is whether Samsung will join the club now that Apple has.

      • Tatil_S

        Isn’t that just an A15, mainly intended for higher performance server type applications where power consumption is not the utmost concern?

      • Walt French

        Just noting that Samsung is hardly the dullard mailboy operating the office photocopier.

        Anybody with any design chops can control speed/power/capability along several dimensions. I wouldn’t encourage anybody who isn’t himself a silicon expert to offer simplistic analysis. And I don’t see anybody whom I think actually *IS* an expert, saying anything of the sort.

      • Tatil_S

        Unlike your caricature of my comment, using ARM’s designs, even without much customization, does not constitute photocopying. Even then, there are only a handful companies that can pull it off if the target market is smartphones. Letting ARM do much of the development and standardization is the idea behind licensing the technology from it, so there is no shame in using a tool as intended.

        My comment was directed against your evaluation as aggressive jump in speed, throughput and geometry. For example, Wikipedia says it is 32nm, so why would you call that an aggressive jump in geometry? Running a chip at high frequency is also not a big deal by itself. It is all about the trade-offs and whether there are other ways of achieving the same performance. Intel hit the wall on MHz improvements at one point for a reason. Evaluating worth of a CPU/GPU combo based on a headline clock frequency of just the CPU is not all that rational. It certainly does not mean much for most consumers, unless it makes UI of the OS running on that hardware more responsive.

        Intel claims Atom comes in a version for smartphones, but the real world power consumption (among other issues) rules it out. That documentation does not constitute evidence of its suitability for smartphones. There are many quad core smartphones sold in international markets, while the same model name uses dual core versions in the US. They may reach some headline benchmark to get bragging rights, yet their battery life is shorter. However, it is quite likely that Samsung has done a better job than Intel on that front, so I would not expect utter failure if it says it can be used in smartphones.

      • Walt French

        I didn’t intend my comment as a caricature of yours. I was responding with the belief expressed elsewhere that the Exynos A15 doesn’t show much design skill. Instead, it is a clear step forward in processing power, one apparently intended for smartphone use. I misspoke by writing to suggest it was aggressive in EACH of the categories I listed; I think it represents only advance in each, and is aggressive in being the FIRST 64-bit ARM chip, and produced at a high speed and leading geometry at that.

        The first actual device with a given design always has additional effort involved. Samsung

        It appears that neither TI nor nVidia ship devices with smaller features. The Exynos is the first ARM 64-bit CPU. I am not trying to claim this is somehow overwhelming but rather saying that Samsung is close enough to cutting edge on CPU that any other firm’s advantage over it in the next year or two, will be modest at best.

      • Tatil_S

        “Samsung is close enough to cutting edge on CPU that any other firm’s advantage over it in the next year or two, will be modest at best.”

        I agree. Actually, TI is getting out of smartphone processor business and announcing layoffs, so it definitely will not be a threat to Samsung. 🙂 I think the competitive advantage, if any, for its competitors will probably lie in other components that can be bundled in, such as GPU, connectivity, power management or software.

      • BoydWaters

        Exynos A15 is still 32-bit (ARMv7), I believe…

      • Walt French

        thanks for the correction.

      • poke

        I wonder what the capacity is/was though. Samsung supplies the two biggest companies in smartphones and tablets (itself and Apple). The other smartphone manufacturers are much smaller and are sharing a number of different suppliers. So the capacity of those suppliers is presumably much lower for this class of processor. Presumably Samsung invested heavily to meet Apple’s demand and Apple might have supplied capital.

        We know that fabrication is extremely capital intensive and presumably this class of processor is more demanding to manufacture at scale than other components that may have been common in to earlier devices. Apple also has higher margins so it would have been better positioned to help Samsung build out capacity whereas other suppliers may have been struggling to scale their operations.

        Of all the components that Samsung supplies Apple and could have benefited from their early investment, CPUs seem like the best candidate to me.

  • Pingback: Analysis: Why Apple's bringing the Mac back to the US |

  • Pingback: Analysis: Why Apple's bringing the Mac back to the US - Need2review | Need2review()

  • Pingback: Analysis: Why Apple's bringing the Mac back to the US - Plugged Into The Matrix()

  • Relentlessfocus

    My understanding is that the parts, where ever they come from, are being assembled in the US and not by Apple but by Apple’s partners (presumably Foxconn but who knows). Apple is fronting the money to make this happen in its usual way of paying up front for the capital costs of putting together the manufacturing to be paid back over time.

    • I would not expect the up-front capital to be a loan.

      • Relentlessfocus


      • unhinged

        I agree. I think Apple is moving towards owning the means of production and hiring the labour and expertise to operate the factories.

  • LRLee

    Suppliers becoming competitors makes me think of Microsoft and its partners, and then Google and its partners. How soon before Microsoft decides that it won’t wait for its partners to make a compelling desktop product. I’m assuming that they are positioning the Surface as a laptop competitor already, not just a tablet offering. And with Motorola, Google will start eating its phone partners as well.

    • So far there’s no evidence that Motorola is doing significantly better as part of Google than it did independently. Samsung’s the one with all the market traction.

      • LRLee

        My guess based on absolutely nothing is that Google/Motorola will release a new “killer” phone with the next big update of Android. Or around the expected release of iPhone 5s. The new Android will be rolled out to the phone partners right before that event. I think the only traction a Googorola phone will get is against their Android partners. It will be a price race to the bottom then as the partners eat each other.

    • Tatil_S

      Microsoft does not outsource any software work, so it is not in much of a risk of getting its suppliers start competing against it. Actually, it is the opposite. The hardware companies are outsourcing OS design to MS, so if MS decides to wholeheartedly go into hardware business, it will be the one playing the role of Asus against Dell.

  • Pingback: 10 Thursday PM Reads | The Big Picture()

  • Pingback: Is Apple starting to move manufacturing back to the US to get away from its competitors? |

  • Does anyone think that this Mac will be the Mac Pro solution that Cook mentioned earlier this year?

    • Bruce_Mc

      Could be. Mr. Cook was very vague, but did say Apple would have “something” for Mac Pro users in 2013.

      I think these two announcements by Cook are legitimate examples of Cook changing things at Apple.

      • But are these really examples of Cook changing things at Apple vs. changes that were already in place? I agree that Jobs’ vision can only extend so far into the future. But let’s not forget that there was that story floating around when Jobs died that claimed Jobs had called Cook to discuss Apple’s next product the day before he died.

      • Bruce_Mc

        I wasn’t referring to what was announced; I’m referring to the timing of the announcements. “Here’s what we are going to be doing next year…” coming directly from Apple is different. We’ve heard that twice now.

      • Here’s what we are going to be doing next year…” coming directly from Apple is different. We’ve heard that twice now.
        As opposed to hearing nothing until something is ready?

      • Bruce_Mc

        “As opposed to hearing nothing until something is ready?”
        Yes, exactly. Commenting on future products has not been the norm for Apple.

    • Hadn’t thought about it, but your idea makes sense for a few reasons.

      • As I had the original idea, I should know why it makes sense, but I’d be curious to know what reasons you think make my idea make sense.

      • Don’t get too full of yourself, Tomas. I don’t doubt that you came to this conclusion, but I seriously doubt you’re the only one to do so. See here:

        Small manufacturing volume and more highly customized orders would be top reasons on my list.

      • I apologize for my “original idea” comment. I didn’t mean that I was the first human on the planet to think of this. What I mean was, having arrived at the conclusion, I should know why I arrived there. I was, therefore inquiring why/how you arrived at the same conclusion.

        Thank you for helping me think more critically about my word choices when attempting to communicate.

      • BoydWaters

        I wish I could buy each of you a beer. Or perhaps Asymco is more of a wine place? Anyhow. FWIW I didn’t take Tomas’ statements as claiming credit for sourcing this idea. Alas, Thuderbolt lacks the bandwidth of a Mac Pro motherboard’s PCIe slots.

      • You’re too gracious.

        I’ll drink beer, but prefer wine. A higher preference still would be a margarita or Washington Apple.

    • That’s a distinct possibility for several reasons.

      1) A manageable amount of production capacity — tens to hundreds of thousands of units as opposed to millions of units per year — more leisurely ramp up/down.

      2) More stable production — fewer upgrades needed to the manufacturing lines.

      3) The new Mac Pro does not, necessarily, need to be contained in a single box — with Thunderbolt, the new Mac Pro solution could be separate, interconnected boxes (modular components) for:
      — compute (CPU)
      — volatile (RAM) memory
      — graphics/sound media processing and rendering (GPU)
      — permanent (HDD) storage
      — archive storage
      — sharing and backup
      — I/O and networking

      You could add or remove/replace additional components as the need arises.

      4) Based on the jobs the new Mac Pro needs to do, there may be little need (if any), for Intel or Windows capability — if there is such a need, it could be handled in a separate box (component)

      Much of what is described above could be built with exclusive Apple components: CPUs; GPUs; NAND Flash.

      Also, this same design (using similar components) could be used to create a Home Server to support media libraries and iDevice setup, sync, recharge — as well as backup and iCloud match. etc.

      • EricE

        Thunderbolt is only two lanes wide. While cool, it’s hardly a substitute for slots. I sure hope your vision never comes to fruition.

      • Except, there are external thunderbolt card cages with slots.

      • unhinged

        You mean like a Mac Mini? 🙂

        I think the Mac Pro _does_ need to be in a single box, because it is otherwise hardly differentiated from the Mini or the iMac. However, it is likely to be much more customisable for those situations where really high data rates are required – rendering, statistical analysis, network control, etc – because even Thunderbolt imposes too much overhead when going to an external box.

  • GeorgeS

    “This capital equipment investment is the equivalent of owning one of the three asset classes that make up a manufacturing operation:”

    There’s a fourth: the buildings, themselves. That is the most inflexible part of a manufacturing operation and the one most likely to be rented. (There are a lot of REITs in the US that specialize in buying commercial property, including factories, and renting them back to the company they bought the buildings from.) Starting up a factory in the US is not a trivial matter. It can take 4-5 years to get a factory cited, approved (including environmental and safety reviews, which can take 2+ years), funded, designed, contstructed, and installed. The envelope manufacturer where my father was an executive (would now be called the CFO) took 3 years to build a new plant—in the early 1960s, when it was a lot easier to do.

    • Ahh… but…

      As luck would have it, there happen to be two excellent manufacturing plants available in the Silicon valley area — both of which are modern and meet current [recent] regulations.

      They are the NUMI plant — bought by Tesla but largely unused.

      The Solyndra Plant — in Segate negotiations.

  • Does anyone reading this know how Apple’s relationship with Liquidmetal might act as a catalyst in regard to US manufacturing. I imagine that molding – Liquidmetal’s process – is (far?) less expensive than Apple’s predominant practice of milling, and “welding” in the case of the current iMac.

    Of course, there must be many areas of cost savings in order to make the business case for manufacturing/assembly in the States, but this might be one area of contribution to that end.

    It’s also worth noting that Apple’s currently doing some Mac assembly in the States. Final assembly of (some?) customer configured Macs happens here, and the Macs actually ship stamped as made in the US.

    • Cory

      Liquidmetal is a niche product that won’t supplant aluminium as the structure for the majority of Apple’s computers. While the casting process may be less expensive, the material itself is expensive and not nearly available enough for mass production.

      • BoydWaters

        Microsoft’s Surface tablet is a molded magnesium alloy that sounds a lot like the Liquidmetal product.

  • LRLee

    With respect to Carl Sagan , if you want Apple to completely manufacture anything itself, it must first create the universe

  • Pingback: How Samsung built their Galaxy on the back of Apple |

  • Pingback: How Samsung built their Galaxy on the back of Apple()

  • Pingback: How Samsung built their Galaxy on the back of Apple « All Urban Radio()

  • Pingback: How Samsung built their Galaxy on the back of Apple | Hot Electronics Review()

  • Pingback: How Samsung built their Galaxy on the back of Apple | The Bob Clark()

  • Pingback: How Samsung built their Galaxy on the back of Apple «

  • JoTimmJo

    I guess it will open up a few jobs, I mean someone is going to have to look after all the 8 cent an hour Chinese kids they pipe in from Foxcomm lol

  • Pingback: iPhone Droids - Latest in Mobile – How Samsung built their Galaxy on the back of Apple()

    • Apple is now building 3 data centers billion dollar each (2 USA and 1 Hong Kong), expanding existing data centers, expanding existing factories in China and building a totally new processor plant in US (10 billion dollar investment?). That is lots of work to be done and nice that Apple has the cash to do it. =)

  • Justsaying

    Cost wise it makes most sense to manufacture iMac locally due to airfright cost savings. The larger display the more savings. So Apple TV display might be called iMac.. intense focus on livingroom is surely a good reason for Apple already persuing 5mm display thinkness for the new iMac.
    But moving manufacturing to the US is likely deeper than a political win or cost advantage. Apple would want to patent and own the machines/robot/assembly processes that build their uniqe ID using their newly invented/sourced materials and delay transfer of this knowledge to Samsung or their EMS partners.
    Being closer to Cupertino for initial product launch will likely reduce development time. After a launch they can have the other factories in regions manufacture in volume based on what Apple learned. This could help change the power between Apple and FoxConn. Might also be a way to reduce leaks – important as they move to six month cycles and don’t want sales to stale.
    This is likely much more about building competitive advantage in manufacturing and reduce time to market. Could be a great model for many other western companies..

  • Davel

    So what is your guess as the reason for the factory I the US? As you say in the linked article there are problems ramping up a production line. How does creating one in the US solve this? They can automate more, but then you have to change the control software to produce a new product. Is that faster than changing the steps and training people?

    In interviews Cook stated patriotism as a reason to manufacture here. Certainly transportation costs and communication are factors. Also I understand that the labor cost differential has narrowed so the other costs become relatively more expensive.

    • Tatil_S

      Transportation costs and the rising labor costs in China could be just as good a reason to pick Mexico as the manufacturing base.

    • unhinged

      Patriotism is likely to be the least important factor in the decision. Which is not to say it is unimportant, or “not a real reason.”

  • Matt

    Horace: I like your reasoning, but am wondering what the alternative would be. Considering that some key component for a complex machine is always outsourced, is there always significant risk that one of your suppliers will eventually compete with you? Similarly, why has Intel never competed directly in the PC world?

    • Tatil_S

      Well, considering the margins are much higher in CPU then assembling the whole box, you can also think of it as Intel outsourcing the PC manufacturing and branding to HP, Dell, Lenovo and Acer. 🙂

      • Over time Intel did move “up” the value chain designing the entire system. From integrated video to motherboards to other subsystems. Not only that but defining marketing strategies as in the case of the ultrabook.

      • Tatil_S

        My comment was a bit tongue in cheek anyways, but GPUs are another high value item, quite far apart from the low margin assembly and box shifting. Memory controllers and such can be seen as boosting CPU performance, inevitably has to be integrated. Even the relatively low margin components, such as WiFi chips, are likely more profitable than the margins enjoyed by the box shifters. I’d still say Intel is outsourcing assembly and box branding.

    • unhinged

      It depends how complex the whole widget is. While one component (such as a CPU) may be critical, how hard is it to build the rest of the item? Is there more than once critical component? How efficiently can the other components be obtained, integrated and assembled?

      There is always a risk of competition and it is slightly higher from a supplier, but it is not significant risk unless it is very easy to do what you are doing.

  • Tatil_S

    I am a bit confused about your assessment. Tim Cook’s comments sound like Apple will be owning 1, but not 2 and 3. In that sense, it does not seem like it is all that different than what it has been doing already, except for the location. If Apple is worried about upstream partners learning from it and becoming competitors later, outsourcing 2 and 3 is what enables them to learn, not whether they have title to the equipment that their managers, engineers and other labor force observes, uses and fine tunes everyday.

  • xiaozi

    Cook was clear that taking some products on-shore would not be a result of Apple building them in an (internal) Apple plant but rather providing some funding to partners. Read the Bloomberg interview and subsequent remarks.