Why Apple is bringing production back to the US, and what this means for you and me

By http://e27.cohttp://e27.sg/2012/12/11/why-apple-is-bringing-production-back-to-the-us-and-what-this-means-for-you-and-me/ | Dec 11, 2012 | Asia

“Made in the USA” is the trend, with Apple moving some of its manufacturing back to U.S. soil. What will this mean for the outsourcing industries in Asia?

In what seems to be a move against rational business thinking, Apple is reportedly moving some of its production back into the U.S. While outsourcing of business processes and manufacturing to lower-cost countries like China has given companies a lot of gains in terms of cost-savings, does this shift mark the change of an era in outsourcing?

Assembled in China

Look at the label on your MacBook, iPhone, iPad or iPod Touch, and you’re likely to see the label “Designed by Apple in California. Assembled in China.” In the recent weeks, though, technology reviewers have reported being able to acquire machines that were marked “Assembled in the U.S.A.” Notably, these are desktop computers that were likely to have been given the final assembly treatment in the U.S. (such as memory or spec upgrades). But CEO Tim Cook himself has confirmed that the company is keen on bringing back production to America.

In a TV interview on NBC, Cook says Apple has been “working for years on doing more and more in the United States,” adding that by 2013, Apple “will do one of our existing Mac lines in the United States.”

To my mind, whatever cost increase that domestic manufacturing in the U.S. that Apple will incur is likely to be offset by benefits. For instance:

  • Speed to market – Assembling devices within the U.S. can significantly reduce shipping times and logistics costs. The cost of transportation is on the rise, after all.
  • Risk reduction – Events like the Thailand flooding proved to be catastrophic to companies that had manufacturing bases there, such as hard drive producers. Moving production closer to one’s biggest market makes sense in terms of reducing or mitigating these risks.
  • Boosting the domestic economy – To my mind, the bigger effect here would be that Apple can give the domestic economy a big boost by hiring and setting up shop locally, and therefore encourage more consumption (of iPhones, iPads and Macs, perhaps?). It’s like pump-priming in macro-economics. Give the people more money to spend so they can buy more of your products!
  • Goodwill – Criticisms due to labor issues can take a toll on a company’s brand and image. Moving production back to the U.S. affords better control and monitoring, in terms of labor standards. This is perhaps a big marketing move on Apple’s part.

Additionally, labor cost in the region — particularly China — is reportedly on an upward trend, and the rate of increase is fast outpacing that of the labor cost in the U.S.

What? Me worry?!?

Should Asian manufacturing outfits be concerned? Foxconn is reportedly planning to expand its manufacturing lines to the U.S., given the American clamor for domestically-produced or assembled goods. The Taiwanese firm currently assembles Apple’s iPhone, iPod and iPad product lines in its facilities in China. Some components are already made in the U.S., though, including the touchscreen glass, which is made by Corning.

Apple is just one company, of course. However, given the leadership status the company is currently in the technology industry, it’s likely that other brands will follow suit, with Apple as the catalyst. This might signal a change in the world economy in the years to come, as manufacturing becomes more machine and robot-driven. We humans may have finally edged ourselves out in terms of labor, with bots now taking care of tasks previously borne out by lowly-paid workers.

Better value

But given these changes, the challenge now would be how to derive better value from these trends. For instance, moving beyond manufacturing, will there be a shift in other outsourced business processes, too? Then BPO hubs like India and the Philippines might want to pay heed.

Will outsourcing be significantly reduced? Then affected Asian countries can perhaps turn to a domestic or regional market (China is the biggest mobile market today, for instance). Are we losing jobs to robots? Then our educational systems and training facilities should focus on educating the youth on designing and maintaining these machines rather than doing more labor-oriented tasks.

It’s all about reading the signs of the times and acting (or reacting) accordingly.

Featured Image Credits: TheRegister