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Donald, listen: the iPhone will not be made in the U.S. Not ever.

January 26th, 2016 |  Published in Apple, Digital and Mobile Technology

Trump skepticism

“Is this not my best skeptical look?  I mean, I am the greatest at skepticism!!”

By: Gregory P. Bufithis, CEO

26 January 2016 – That Donald Trump’s skill is leveraging fact-free rhetoric for political advantage is not news.  So much of the GOP-primary oxygen has been his demagoguery.Trump’s style degrades people and public discourse. His keen sense to go for the jugular and play to the “Kardashian culture” is effective.
Donald Trump is not necessarily anti-technology, but seems unimpressed by the U.S. tech industry. He doesn’t fawn over it, and sees its behavior as part of a larger problem. As a candidate for the Republican presidential nomination, Trump quickly proposed restricting the use of H-1B visas to protect U.S. jobs, and by doing so attacked a top legislative priority for the tech industry.
And his latest salvo takes aim at one of tech’s most successful companies … Apple. For its overseas manufacturing. Trump’s attack on Apple came at the very end — in the last two minutes — of his speech last week at Liberty University:
“We’re going to get Apple to start building their damn computers and things in this country instead of in other countries”.
Yep. Apple is Trump’s new proxy company to make a point about jobs. He’s already been all over Ford for moving some manufacturing jobs outside the U.S. I wonder what he thinks about the Johnson Controls/Tyco International inversion deal announced yesterday.
Of course, his line about Apple was met with huge cheers from the crowd. Trump knows he can’t go wrong in the eyes of voters by saying he’s going to bring manufacturing jobs back to the U.S., especially by making the biggest tech company in the world bring their offshore manufacturing operations back onto home soil. After all, Foxconn, the company Apple uses to assemble its iPhones and other products, employs over a million workers in China. In 2013, Fortune reported that 300,000 of those workers were dedicated just to assembling the iPhone 5s alone. And that’s to say nothing of the legions of foreign workers assembling iPads, iPods, and MacBooks. Bringing all those manufacturing jobs back to the U.S. would be a huge win for the American economy.
And, of course, even if Trump is elected president, it won’t happen. Boy … what he doesn’t know about technology, industry, manufacturing and supply chains could fill a book.
And let’s skip the legal/political reasons:  there is no U.S. law that can force an American company to make its products in America. And China, increasingly becoming Apple’s most important sales territory in the world, wouldn’t ban Apple’s products outright, but would almost certainly levy draconian import taxes on them if Apple pulled out.  Apple’s sales in China would nosedive.
Let’s look this strictly from a logistics standpoint:
  1. Apple simply wouldn’t be able to find enough skilled U.S. workers to fill its manufacturing jobs. As the New York Times wrote in 2012“though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need.”
  2. If you have been following some of the detailed reporting on the lack of skills in the tech field, you know that companies like Apple need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find. So if you can’t find people to fill the positions, you can’t scale your operations when the need arises:
  3. One critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives have estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States. In China, it took 15 days.
  4. And let’s not use the Mac Pro argument.  Apple moved manufacturing back to the U.S. for the Mac Pro but that’s because it’s a niche product with low sales and little need for scale. Most of the manufacturing can be done in the U.S. by robots, with the manufacturing process itself supporting around 360,000 jobs through third-party suppliers.
  5. As William Jacobsen laid out in a recent clip in his blog Revolution:
Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products. Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
 
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. 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. Within 96 hours, the plant was producing over 10,000 iPhones a day. “The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”
And this brings up a point I learned last year at the Mobile World Congress. The Foxconn City, where the iPhones are made, is an example of something that could not exist in the U.S. in 2016. The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. Foxconn Technology has dozens of facilities in Asia and Eastern Europe, and in Mexico and Brazil, and it assembles an estimated 40 percent of the world’s consumer electronics for customers like Amazon, Dell, Hewlett-Packard, Motorola, Nintendo, Nokia, Samsung and Sony.  They could hire 3,000 people overnight.
What U.S. plant can find 3,000 people overnight … and convince them to live in dorms?
This unbelievable notion that factories are magical places where one pushes a button and finished products pop out is depressingly common. While this ignorance is a mere annoyance to tech designers and supply chain managers, it can become more problematic when a would-be politician suffers from it and begins promising things he cannot possibly deliver.
Designers know that something as complicated as an iPhone is made from components.  Rain Noe, a designer friend who writes a blog called Core77, explained to me that those components come from suppliers. Sometimes those suppliers have sub-suppliers. These suppliers all use raw materials. Backing up all the way, at some point those raw materials are mined from the earth. Those raw materials travel through this magical thing called a supply chain where a variety of skilled and unskilled labor processes it into highly specific parts. These parts arrive by truck at Foxconn’s facilities, where an army of Chinese laborers that are paid less than U.S. laborers assemble them into iPhones.
That crucial supply chain is largely in Asia. The suppliers set up shop in and around China for reasons of geographical proximity. They’re keen to quickly get components in and finished products out.
America stopped training their workforce in a set of formerly crucial skills. Factories don’t just need assembly lines and assembly line workers, they need that massive supportive infrastructure around it, and in America that infrastructure has largely evaporated. American manufacturing is never going to come back on the scale that it once enjoyed. The best it can endeavor to accomplish are small- and medium-sized manufacturing outfits.
And on a personal basis, whatever gripes we may have with Apple about not being a good corporate citizen and fudging its taxes, the decline of American manufacturing is not one of the things on their “fault” list. Apple manufactures the Mac Pro in America because it makes good financial sense to, since the relevant suppliers for that particular product are here. Apple sources what American parts they can. If you believe the Apple web site, thirty-one of the 50 states provide parts, materials, or equipment to make Apple products.
So props to the-future-President-Donald-Trump for energizing his supporters with empty rhetoric, but the reality of manufacturing is far more complex and far harder to change than blowing hot air.

 

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"The mind that lies fallow but a single day sprouts up follies that are only to be killed by a constant and assiduous culture."
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