Apple ... that's not so easy

Apple wants to make products in U.S., but that's not so easy

Critics want Apple to manufacture more products in the U.S. CEO Tim Cook does, too. But there's a lot in the way.

by Andrew Nusca  May 30, 2012

Let's make the iPhone in the good ol' U. S. of A. Who's with me?

There are few Americans who don't like the idea of an all-American iPhone, iPad or MacBook. "Designed in California," sure -- but why not made there, too?

During the D: All Things Digital conference this week, Apple chief executive Tim Cook suggestedthat he wanted his celebrated tech company to make more components, and perhaps assemble them, here in the U.S.

But it's not that easy.

Cook knows it. As a longtime operations guy, there are probably few things the man knows better than a supply chain. When he says the semiconductor industry is good in the U.S., it's good. When he says there aren't high-tech manufacturing skills in the U.S., he's probably right. But actions speak louder than words, and there are good reasons why Apple no longer makes its millions upon millions of products stateside -- because it just doesn't make good business sense otherwise.

We've seen this film before. Before founder Steve Jobs died, he made headlines for the same reason, as the national economy crumbled beneath Apple.

Here's an excerpt from a New York Times report in January:

It isn't just that workers are cheaper abroad. Rather, 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.

The reason: there's a very real tradeoff between what's good for workers and what's good for business. When push comes to shove, business wins -- which is why Apple's American employees enjoy comparatively nice perks while employees of its supply chain partners live in 8,000-strong dormitories, ready to be woken up at midnight to start a 12-hour shift making new parts for an iPhone that received last-minute design changes from California.

Imagine trying to do the same with an American worker. Unions would never stand for it, obviously, and chances are the rest of the family unit wouldn't, either.

My point is not to illustrate the benefits and drawbacks of unions, or even what's fair; rather, I'm trying to illustrate a landscape in which American companies can go overseas for greater flexibility, lower price and sheer speed. So long as there are nations in this world willing to do work others aren't, outsourcing will exist. In the capitalist system, businesses can't win in the free market unless they exploit every advantage.

There's a reason Apple, and GE, and many other well-regarded American companies keep most of their money offshore: so long as there's a cheaper alternative, it will be taken. There is no morality in money-making, even if there's still plenty to be made.

(Speaking of GE, that company has run into similar issues -- though for refrigerators and turbines, not computers.)

That's not to say things aren't changing. GE CEO Jeff Immelt has said that the U.S. is becoming more competitive as American firms, tired of decades of deterioration, snap to attention. Wages in the U.S. are still elevated -- good for individuals but bad for business -- but the skills, flexibility and speed are catching up.

The question is whether we'd really want them to. Does the U.S. really want to compete with China when human rights and quality of life standards are a bit more slippery? Manufacturing is a powerful driver of the American economy, but it's just one part of it. Whatever happened to the concept of a creative economy? (Answer: we realized we can't win on creativity alone. There needs to be some elbow grease, too.)

We focus on Apple because it's a beacon of American success and its products are made of components from all corners of the globe, but the truth is that the company can't do this alone. "Made in America" is a nice tagline, but it's a naive, unnecessarily restrictive strategy for a global company. So long as other nations are willing to outdo each other for business -- Foxconn City, anyone? -- corporations will follow.

In Tim Cook's case, that means there are few reasons to swim against the tide, aside from public opinion. All Apple can do is ensure that its supply chain partners are acting in accordance with local law. (Thus the Foxconn flareup.) But how do you take one company to task when an entire industry practices this way?

If you want Apple to manufacture in the U.S., you can't just pressure Tim Cook -- you need to pressure every Samsung, Dell, Hewlett-Packard and Sony to do the same, along with the governments in each country that manufactures products for those companies, and every supplier in between. That's a bigger hurdle than any single organization can surmount.

So if the U.S. can compete on flexibility, speed and scale -- we're not a tiny country, after all -- and get partially there on wages, thanks to a down economy, there's only one thing left to address: skills. If I'm Tim Cook, lord of all that is vertical, I'd wonder backing accelerated industrial development in the U.S. -- starting with the creation of technical schools that could create that coveted workforce of engineers without a bachelor's degree -- could help return the balance back to the U.S.

The Midwest, the Carolinas -- these American manufacturing hubs already exist, but they're not geared for electronics. If the U.S. wants China's contracts, it needs to build a hub that can outduel the Shenzhen export hub.

Then again, capitalism need not be moral. At the end of the day, what's really in it for Apple? If we want Apple to manufacture its products in the U.S., we shouldn't keep asking Tim Cook about it. We'd probably need to go a bit higher up in the chain of command.