Posted by & filed under Apple, outsourcing.

Description: Not long ago, Apple boasted that its products were made in America. Today, few are.

Source: nytimes .com

Date: Jan 21, 2012

When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.   But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States? Read Rest of Story

Questions for discussion:

  1. Why did the U.S. lose out on iPhone work to oversees markets?
  2. What do you think could be done to make it so iPhones are made in America rather than overseas?

12 Responses to “How the U.S. Lost Out on iPhone Work”

  1. Ivan

    To start, the biggest reason why most electronic companies are in China is cheap labor. The Chinese government realized this a few years ago and they kept it that way so companies like apple could continue manufacturing their products in there. China as we know it, has based his economy in manufacturing (just like India has based it on outsourcing and Brazil in agriculture).
    It is difficult to compete with specialized countries when they have so many engineers available, almost at the palm of your hand; employees –due to being so distant from home- live and eat at work, so in this case, like the article says: “Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames.”
    Another big factor is culture; most of us have worked an eight-hour shift or have taken a university class. You could agree with me that a vast majority of people starts getting ready to go out five or ten minutes before the time is up. When the time comes, we simply leave, regardless of whom is left behind. In China, an employee leaves the factory when the boss is done, if he works twenty hours a day, so do you. So, why would a company take their business elsewhere when you have more benefits manufacturing internationally? I think we all know why.

  2. Ivan

    To start, the biggest reason why most electronic companies are in China is cheap labor. The Chinese government realized this a few years ago and they kept it that way so companies like apple could continue manufacturing their products there. China as we know it, has based his economy in manufacturing (just like India has based it on outsourcing and Brazil in agriculture).
    It is difficult to compete with specialized countries when they have so many engineers available, almost at the palm of your hand; employees –due to being so distant from home- live and eat at work, so in this case, like the article says: “Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames.”
    Another big factor is culture; most of us have worked an eight-hour shift or have taken a university class. You could agree with me that a vast majority of people starts getting ready to go out five or ten minutes before the time is up. When the time comes, we simply leave, regardless of whom is left behind. In China, an employee leaves the factory when the boss is done, if he works twenty hours a day, so do you. So, why would a company take their business elsewhere when you have more benefits manufacturing internationally? I think we all know why.

  3. CAP

    “The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.” This quote pretty much explains it all. The manufacturing companies overseas are just so much better than what American plants have. It is no wonder that companies such as Apple use their workforce and not the workforce in America. Apple is just doing business. The point of having a business is to make money and Apple is doing just that. Why would they spend thousands to Americans who expect to be paid more when they can just spend less to the people overseas and gain more products in return. I don’t think the leaders of Apple are really thinking of what’s best for America, but are thinking of what’s best for Apple. That’s how I think alot of companies think. Most companies would always do what’s best for their company and think about everything else afterwards. I don’t blame Apple for going overseas to do most of their manufacturing. I would probably do the same thing if I knew I could make more money else where and still have the same product. America just needs something that will make companies want to work with them.

  4. Scotty

    Apple as we all can agree on was going to be under the microscope at some point as the demand for all their products were absolutely overwhelming. Personally it does not bother me one bit that the company decided to go to other countries simply because there is no way in hell that you could get anyone in america with the work ethic that some of those countries en-still in their people, where it is driven into their values , all though i dont think its very ethical of course of apple to take advantage of these people making them work 12 hour days on a biscuit and some coffee. From an economical and profitability stand point it would make no sense to pay americans to do these jobs as the tag “made in america” often costs allot more in comparison to “made in other countries”. I Personally do not believe that there is any way that Apple will ever return to america to produce any of their product and strongly believe they will like all other electronic companies pursue countries where costs of manufacturing and overhead is relatively low and contribution margin is high. There is no hope to win this giant back unfortunately.

  5. BK

    Our generation is one that wants everything for nothing. Our mentality is to do as little as possible to get much as we can. No one in North America is willing to sit in a factory and make a phone intended for his or her use. That idea would be preposterous (sarcasm!!!). The reality is, it is cheaper to outsource everything overseas. Why do you think Wal-Mart makes so much money? Make it for cheap over there; sell it for cheap over here. The opposite is true, too. It would be more expensive to make Apple products (or any product for that matter) over here, which would drive up the cost of sale. Apple may not be ethically correct for providing thousands of jobs to across-sea nations, but they are logically sane in wanting to earn the largest margin possible. The reason any business exists is to make money. If we want to provide jobs to North Americans by manufacturing jobs here instead of in other countries, we need to figure out a way to provide a cost so cheap for a product that we can compete with other nations. This would mean cutting pay rates, reducing the prices we pay for raw materials, and essentially, diluting “the American dream”.

  6. Jillian Howard

    The purpose of a company is to maximize profits. Apple has made the decision to manufacture its products in China to maximize profit. One way in which apple could produce lower costs was cheaper labour for semiskilled workers. This cheaper labour provided by China rather than the United States. Apple is unique in that they produce devices with precision cut glass. To produce this glass in the United States was going to cost a fortune; fortunately, Apple found a company in China who was more than accommodating for Apple’s needs and at a lower cost. China supports Apple in the fact that they are able to produce materials in several industries that can accommodate the specialized resources needed for Apple devices. Foxconn City is where iPhone’s are assembled. Unlike the standards of most American citizens, the employees in these facilities live in dorms, work 12 hour shifts 6 days a week and are plentiful to find and hire. Another reason why China can accommodate manufacturing iPhone’s more so than the United States is that their resources of qualified engineers are plentiful. It would take the United States nine times as long to find the amount of qualified engineers necessary. From the evidence provided it is clear that China is well more established than the United States in regards to providing a proper facility that can accommodate Apple’s expanding market demand.

  7. Garang

    Since the world is going “flat” through global information system, people of diverse psychological, geographical and cultural backgrounds are being integrated into a single, globalized technological context. As a result, major companies such as Apple seeking to maximized their profit tend to outsource their production facilities in such of cheap labor in a globalize world. In addition, outsourcing also provides a steady supply of human labor in areas of dense population such as China. Apple decided to outsource their production facilities due to lack of cheap and affordable mid-class-skilled workers in the United States. China is an emerging, industrialized nation with high human mid-skilled workers desperately in need of jobs. Due to high competition, the market price for human labor is quite low compare to the US skilled workers. In addition, the high abundance of human capital is an extra incentive for Apple to outsource its production facility in China.
    According to my suggestion, one way to bring back Apple Company is to enforce macroeconomic policy restricting outsourcing coupled with government policies in creating mid- class-skilled workers that will provide steady flow of human labor. In addition the Government should also enact regulations on minimum wage that meets employees and Corporate demands to avoid fluctuations in human labor.

  8. Jingyi Wang

    When you buy an iphone, you will find there are some words printed on the box case: Designed by Apple Company in California, product in China. As we already know, there are cheaper labor force in China. It is the biggest reason that why Apple Company choose to produce the iPhone in China. Every company wants to save the cost and maximize the profits. As the Apple’s executives believed, “ the vast scale of the overseas factories as well as the flexibility, diligence and industrial skills of the foreign workers have so outpaced their American counterparts that ‘Made in the USA’ is no longer a viable option for most Apple Products.” In China, there are enough semiskilled worker can produce iPhones effective time with the low cost. As this reason, people can but iphone with the price right now. But if the Apple Company changes to manufacture its products in the USA, the cost will increase much and the price will be increased much. People may not afford them. The word is “falt” in the nowadays, the Integration with the global economy influences every countries. In low cost, it is hard to compete with the developing countries for the USA.

  9. Jon

    I think the phrase that sums up this article is one employed by Betsey Stevenson: “Profits and efficiency have trumped generosity.” The way I see it is that there are two issues here: employment and profit. These companies headquartered in the United States could give jobs to American workers, which would greatly benefit an economy in terrible shape. I don not believe the Apple executives statement “The U.S. has stopped producing people with the skills we need.” These jobs don’t require an engineering degree from MIT. However, if they gave their jobs to US workers, they cut their profit margins to shreds. Production costs, higher wages, cheaper access to raw materials and inefficient plants make keeping operations in the States unwise, from a business standpoint. While Apple is in many ways leading the market, they must also consider that they are in a constant battle for market share. Any competitive advantage is sought intently by Apple. The unfortunate aspect is that, for U.S workers, they have so say in the issue. It is the companies that make the decisions.

  10. MAS

    Most, if not all, of the components in Apple products are outsourced to countries like China and Korea. It will be very difficult for Americans to produce these products with the amount of efficiency needed in order to compete with the factories overseas. It seems as though the new American ideology is one that says “just pay someone else to do it”. Outsourcing provides American companies with a cheap alternative source of labour. This is a highly efficient and willing work force that is also flexible and obedient. A workforce that continually accepts the work offered to them. There is only more money to be made by outsourcing. So what are the risks associated with too much outsourcing? Take a look at all of the patent infringement lawsuits Apple is filing against Samsung. There are many similarities between the Galaxy S2 and the Iphone 4s, but who originally manufactured the Iphone for Apple? Samsung. Who supplies the A4 and A5 processors that are currently used in the newest Iphones? Samsung. The S2 crushed the 4s in the last quarterly sales, because consumers can see the difference in value between the two. Remember, the world is flat. Samsung took the idea of the Iphone and made it better. Perhaps this is what will push Apple to start producing in the States again.

  11. Morgan

    According to Mr. Cook, a former high-ranking Apple executive, outsourcing to Asia is more efficient because of two reasons: Asian factories “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” Not only are oversea workers cheaper, they are also better workers. The article mentioned an iPhone screen was revamped 6 weeks before it was scheduled to be released. 8,000 workers were woken in the middle of the night, given a biscuit and a cup of tea, and began their 12 hour shift. Even if factory employees were to sleep in factory dormitories in America, I highly doubt they would be roused in the middle of the night to begin a 12 hour shift. That can’t be legal here.

    A large issue Apple has about not wanting to hire American workers is the fact that there aren’t enough people and it would take too long to train them. Apple is awarding their top executives millions of dollars in salaries, stock grants, and compensation packages – money that could be better spend finding ways to keep jobs in America. Apple is reluctant to do so because that would “require a total overhaul in how the [electronic] industry is structured.” If the top employees were willing to give up their ridiculous salaries, then Apple would be able to train Americans with the skills required. Apple claims they would not be able to find the number of employees required to create millions of products in short amounts of time, but there are many struggling Americans that would do almost anything for a job – including relocating across many States.

  12. KNWE

    The US losing out on iPhone manufacturing to overseas plants is no different than the trend we have seen in various other industries (textiles, car manufacturing, furniture manufacturing, etc) throughout the US since globalization firmly took hold. The “Rust Belt” (formerly known as the Manufacturing Belt) of the Northeastern US is an infamous example of a similar phenomenon. Due to the high cost of labour, and presence of strong labour unions, in the Manufacturing Belt, many factories in this once manufacturing-rich region started to relocate. This became increasingly prevalent in the 1980s due to foreign trade liberalization. Thus, manufacturing companies began to relocate their factories out of the Manufacturing Belt to locations offering cheaper labour, such as the Southeastern US and various overseas locations. This process eventually decimated the economy of the region, giving rise to the use of the name Rust Belt to describe the region. This phenomenon is happening in advanced economies all over the world – moving labour intensive manufacturing facilities from areas with a high cost of labour to areas with a low cost of labour. The Apple iPhone is just another example of manufacturing being moved from an advanced economy to an economy with low worker wages, which is much better suited to producing a profit for corporations requiring large-scale manufacturing.

    It is highly unlikely that Apple could produce iPhones for the same cost in the US as they can in overseas markets offering cheaper labour. For Apple to manufacture iPhones in the US, either they would have to be willing to take a cut in profits on each iPhone sold, or the US government would have to heavily subsidise the corporation for locating in the US, or American citizens would have to be willing to pay more money for phones produced within their country.

Leave a Reply

Your email address will not be published.