Chi­nese wages up 15%-20% each year

Ap­ple

Austin American-Statesman - - BUSINESS - B

ac­counts for a frac­tion of the cost of mak­ing a PC or smart­phone. Most of the cost lies in buy­ing chips, and many of those are made in the U.S., Cook noted in his in­ter­view with NBC.

The com­pany and Fox­conn have faced sig­nif­i­cant crit­i­cism this year over work­ing con­di­tions at the Chi­nese fa­cil­i­ties where Ap­ple prod­ucts are as­sem­bled. The at­ten­tion prompted Fox­conn to raise salaries.

Cook didn’t say which line of com­put­ers would be pro­duced in the U.S. or where in the coun­try they would be made. But he told Bloomberg that the pro­duc­tion would in­clude more than just fi­nal as­sem­bly. That sug­gests that ma­chin­ing of cases and print­ing of cir­cuit boards could take place in the U.S.

The sim­plest Macs to as­sem­ble are the Mac Pro and Mac Mini desk­top com­put­ers. Since they lack the built-in screens of the Mac­Books and iMacs, they would likely be eas­ier to sep­a­rate from the Asian dis­play sup­ply chain.

Re­gard­less, the U.S. man­u­fac­tur­ing line is ex­pected to rep­re­sent just a tiny piece of Ap­ple’s over­all pro­duc­tion, with sales of iPhones and iPads now dwarf­ing those of its com­put­ers.

Ap­ple is latch­ing on to a trend that could see many jobs move back to the U.S., said Hal Sirkin, a part­ner with The Bos­ton Con­sult­ing Group. He noted that Len­ovo Group, the Chi­nese com­pany that’s neck-and-neck with Hewlett-Packard Co. for the ti­tle of world’s largest PC maker, an­nounced in Oc­to­ber that it will start mak­ing PCs and tablets in the U.S.

Chi­nese wages are ris­ing 15 per­cent to 20 per­cent per year, Sirkin said. U.S. wages are ris­ing much more slowly, and the coun­try is a cheap place to hire com­pared to other devel­oped coun­tries like Ger­many, France and Ja­pan, he said.

“Across a lot of in­dus­tries, com­pa­nies are re­think­ing their strat­egy of where the man­u­fac­tur­ing takes place,” Sirkin said.

Carl Howe, an an­a­lyst with Yan­kee Group, likened Ap­ple’s move to Henry Ford’s fa­mous 1914 de­ci­sion to dou­ble his work­ers’ pay, help­ing to build a mid­dle class that could af­ford to buy cars. But Cook’s goal is prob­a­bly more lim­ited: to buy good­will from U.S. con­sumers, Howe said.

“Say it’s State of the Union 2014. Pres­i­dent Obama wants to talk about man­u­fac­tur­ing. Who is he go­ing to point to in the au­di­ence? Tim Cook, the guy who brought man­u­fac­tur­ing back from China. And that scene is go­ing re­play over and over,” Howe said. “And yeah, it may be only (pub­lic re­la­tions), but it’s a lot of high-value PR.”

Cook said in his in­ter­view with NBC that com­pa­nies like Ap­ple chose to pro­duce their prod­ucts in places like China, not be­cause of the lower costs as­so­ci­ated with it, but be­cause the man­u­fac­tur­ing skills re­quired just aren’t present in the U.S. any­more.

He added that the con­sumer elec­tron­ics world has never really had a big pro­duc­tion pres­ence in the U.S. So it’s really more about start­ing pro­duc­tion in the U.S. than bring­ing it back, he said.

But for nearly three decades Ap­ple made its com­put­ers in the U.S. It started out­sourc­ing pro­duc­tion in the mid90s, first by sell­ing some plants to con­tract man­u­fac­tur­ers, then by hir­ing man­u­fac­tur­ers overseas. It as­sem­bled iMacs in Elk Grove, Calif., un­til 2004.

Some Macs al­ready say they’re “As­sem­bled in USA.” That’s be­cause Ap­ple has for years per­formed fi­nal as­sem­bly of some units in the U.S. Those machines are usu­ally the prod­uct of spe­cial or­ders placed at its on­line store. The last step of pro­duc­tion may con­sist of mount­ing hard drives, me­mory chips and graph­ics cards into com­puter cases that are man­u­fac­tured else­where.

As­so­ci­ated PRESS

Ap­ple CEO Tim Cook, speak­ing last year in front of a pro­jec­tion of a Macbook Air and Mac Desk­top at Ap­ple head­quar­ters in Cu­per­tino, Calif., says the firm will spend $100 mil­lion in 2013 to move pro­duc­tion of a Mac com­puter line to the U.S. from China.

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