And what a timely reappearance it is.
Apple CEO Tim Cook announced that the company whose commitment to manufacturing in China became emblematic both of the lost US production advantage and the risks of the low wage labor strategy said in an interview that Apple would return some Mac assembly in the US.
The move makes sense at a time when consumers are beginning to question the goals and values of US companies. Apple, in particular, has seen its stock price challenged as investors express concerns about its post-Jobs leadership, the sustainability of its business advantage and the strength of its brand in light of myriad missteps.
To its credit, Apple has responded to these concerns despite its magical sales and profit growth. Taking to heart Andy Grove's warning that only the paranoid survive, Apple is examining every aspect of its business to assure that complacency does not create an opening for competitors to exploit.
This is particularly crucial for a company whose reputation is based on a mystical connection with a devoted customer base built largely on intangibles like the look and feel of its design, its iconoclastic approach to functionality and the ascetic values it purports to represent. All of which have enabled the company to charge the highest prices in the industry while garnering dominant market share. That is a fragile mix, difficult to achieve and even harder to maintain. One that could easily be upset by a change in perceptions.
Despite its big intellectual property win over Samsung, Apple remains threatened by the popularity of the Android model. Samsung's widely praised ads mocking the Apple faithful clearly stung. So returning some production to the US, however insignificant in a financial sense, has outsized public relations value.
And, it should be noted, in a typically clever Apple twist, Cook's comments suggest that while the manufacturing may be done in the US, management of the production may well be under the aegis of one of its contractors, perhaps even Foxconn. So if the effort goes wrong, blame can be outsourced. And people think this management group is insufficiently steeped in its founder's ethos? JL
Adam Satariano and Josh Tyrangiel report in Business Week:
Apple Inc. (AAPL) plans to spend more than $100 million next year on building Mac computers in the U.S., shifting a small portion of manufacturing away from China, the country that has handled assembly of its products for years. “Next year we’re going to bring some production to the U.S.,” Cook said in an interview with Bloomberg Businessweek. “This doesn’t mean that Apple will do it ourselves, but we’ll be working with people and we’ll be investing our money.”
Apple, which until the late 1990s made and assembled many products in the U.S., moved manufacturing to Asia to take advantage of the region’s lower labor costs. The planned investment makes up a sliver of Apple’s $121.3 billion in cash, and probably won’t meaningfully affect profit margins. Still, it reflects pressure on companies to create even a modest number of domestic jobs as the unemployment rate hovers near 8 percent and the economy rebounds from the recession that ended in 2009.
“I don’t think we have a responsibility to create a certain kind of job,” Cook said. “But I think we do have a responsibility to create jobs.”
Cook discussed the investment plans in an interview that touched on his relationship with Apple co-founder Steve Jobs, the recent dismissal of senior executives and the company’s competition with Samsung Electronics Co.
While Cook didn’t outline where the manufacturing would happen or how much would be produced in the U.S., he said the company will work with partners and that the operations would include more than just final assembly.
Creating Jobs
Many of the parts that go into the iPhone and iPad already are made in the U.S. This includes the display glass, which is made in Kentucky, he said.
Apple also has created jobs in the mobile-software industry through the introduction of the iPhone in 2007, which fueled an explosion in creation of applications, he said.
Besides building a new headquarters in Cupertino, California, Apple is working on a campus in Austin, Texas, Cook said. The company is building new data centers in Nevada and Oregon, while expanding an existing one in Maiden, North Carolina, he said.
Before shifting work abroad, Apple had handled manufacturing in such locations as as Elk Grove, California, near Sacramento, and Fountain, Colorado, near Colorado Springs.
Mac desktop and laptop computers -- once Apple’s cornerstone -- have been dwarfed by the iPhone and iPad more recently. With sales of $23.2 billion on 18.2 million units last year, Macs accounted for just 15 percent of total revenue. The device is currently manufactured mostly in China.
Foxconn’s Fixes
Apple and its manufacturing partner Foxconn Technology Group have faced criticism from labor- and worker-rights groups for the conditions at facilities where Apple products are made. Cook defended Apple’s practices, including enlisting the Fair Labor Association to audit Foxconn’s factories.
“We’re doing a number of things that I think are really great, really different, and industry-leading,” Cook said. “No one is looking at this as deeply as we are or going as deep in the supply chain.”
Other companies that have said they’ll shift production back to the U.S. from overseas include Caterpillar Inc. and General Electric Co. Google Inc. this year delayed a wireless media device that it had pledged to build in California.
Cook, in the interview, also addressed his recent decision to revamp Apple’s management team to improve cooperation among groups. Senior Vice President Scott Forstall, a main architect of the iPhone software that’s now on more than 400 million Apple devices, was fired in October amid complaints that he clashed with other senior executives.
Samsung Ties
“These moves take collaboration to a whole different level,” Cook said, without discussing specific executives. “We already were -- to use an industry phrase that I don’t like -- best of breed. But it takes us to a whole new level. So that’s what it’s all about.”
Cook also said Apple has a complicated relationship with Samsung, one of Apple’s biggest component suppliers and its chief rival in the smartphone and tablet markets.
The two companies are in the midst of patent-infringement lawsuits around the world, including one in California, where a jury said Samsung should pay Apple more than $1 billion in damages.
“Life is a complex thing sometimes, and yes, it’s awkward,” Cook said. “I hate litigation. I absolutely hate it. For us, this is about values. What we would like, in a perfect world, is for everyone to invent their own stuff.”
Apple opted to take Samsung to court “after lots of trying,” Cook said.
Jobs’s Advice
“We felt we had no other choice,” he said. “We tried every other avenue, and so we’ll see what happens in the future.”
Cook also recalled the meeting last year when Jobs asked Cook to become CEO. Jobs, who would become chairman, said he wanted a smooth transition, and that Cook shouldn’t burden himself with wondering how Jobs would run the company.
“The conversation occurred at a period of time when I felt Steve was getting better, and I think he felt this way as well,” said Cook, who was named CEO in August 2011. “So from that point of view, I was a little surprised.”
Cook said he expected Jobs to serve as chairman for a “long, long period.”
Asked about missing Jobs, who died the following October after a long battle with cancer, Cook said, “I do, every day.”
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