Why not in the US? Brazilian billionaire wants Apple manufacturing contract | tuaw.com

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Short story: a Brazilian billionaire is building a 90-square-mile area specifically for the purpose of attracting companies, Apple included, to use it for building their products—instead of China.

My question: Why isn’t anybody doing this in the US?

Are the products that Apple and others are building so labor-intensive that it would break their banks to build them in the US? It used to be that high-tech items were built in Japan. Now, even the Japanese outsource to China. What’s so special about China?

I’ll admit that what I’m saying here is based a lot on conjecture. I assume that labor rates are ridiculously low in China, based on what I read daily on the intarwebs. And I’m assuming that robots are not used for these assemblies because reconfiguration of tooling is a lot more difficult for an automated production line than when the line consists of humans. That would give Foxconn a great deal of flexibility in its product mix.

With those thoughts in mind, then what would be the difference between a Foxconn factory and an Apple factory?

First, automation: Based on Steve Jobs’ previous experience with assembly plants, they would be worlds apart. The original Mac factory in Freemont, CA, was nearly totally automated which, for 1984, was pretty darned good. Yes, hands were involved in some of the circuit board assembly process, but the process was very automated for its time. In this day and age, I doubt any hands would be involved in the whole process, especially with Apple’s low-mix, slow-to-change product line. Steve would totally see to that.

But could it be totally automated? I think it could. But another question: could it be totally automated for a reasonable price? In 1984, the Mac plant cost $20M. That’s a lot of money to invest in a plant that produced a Mac every 27 seconds. Let’s assume that a new plant would cost 10 times that now—$200M. According to 2010 sales figures from last quarter, Apple sold about 27 million iDevices (i.e., “not Macs”). The capital cost of the factory would add $7.50-ish to the cost of each device. Or it would suck $7.50-ish per device out of Apple’s profit. Anyway, it could pay for itself in one year.

Question: would you pay $7.50 more for a product that said quite clearly on the front, “Now made in the USA for only $8 more!”? In the US, I’m certain you would. In the EU? Maybe.

Ooops! It turns out that the sales figures I quoted above were for one quarter of the year alone! Would $2 be too much to pay for “Made in the USA”? I don’t think so.

Second, labor: I’m sure the plant would have a fair number of people who tend to the machines, and that fits right in with the US’s need to maintain a high-tech service job base. Gradually, we’re shipping overseas all of the jobs that we can. Brainpower can telecommute from India, Poland, etc. But hands-on maintenance cannot. Construction cannot. Plant management cannot. Trucking could not. So it would be beneficial for the US if Apple built a plant that requires some hands-on help for its care and feeding every now and then.

Third, location: Easy. Tennessee, close to Memphis, as a matter of fact. First, Tennessee got Steve his new liver quickly; it would be a nice payback to the state to which he owes his life. Second, it’s where FedEx has its massive hub. Clearly, that would be a bonus. Third, the affordability of building and working in Tennessee is pretty darned good. (Google it on your own. I’m feeling lazy today.) I do figure the chemical and natural resource cost if sourced from within the US might be higher than in China (and, in fact, might still be sourced from China). But, again, I’d have to guess that the higher price might be worth it.

Would it require any sort of “industrial park?” Nope. Just land and electricity. I mean, this billionaire guy is building an “industrial park” with the hopes of attracting Apple and others. In other words, he’s driving up the price of being there to attract companies to be there. If Brazil were such a great place to be, it should sell itself, sans business park concept.

It seems to me that Tennessee (though I’d prefer it to be Connecticut, of course, just so I could be involved) would be an ideal spot for Apple to plunk down a factory. And I’d love to see that happen.

Steve, would you comment, please?

Update, January 2, 2010

One company, MacNeil Automotive Products—you know them as “WeatherTech”—has done three things right, in my opinion. First, they have brought their manufacturing capacity back into the US. Second, they are expanding that capacity, also in the US. And, third, they are publicizing the heck out of it. David MacNeil writes about this transition on the company’s website. He has been very public and very vocal about this transition and buildout, taking an additional two page spread in every issue of Car and Driver I’ve received since they started the buildout to publicize it. That’s two pages in addition to the usual four to six pages they normally use. He must be doing something right.

Do his products have the same cachet as Apple products? I’d say so, based on my experience with them. They fit and feel better than any floormats I’ve run across in the automotive store. They command a price premium. And they work very well.

Are Apple and MacNeil in the same game? No, not at all, so saying “It works for MacNeil, so it would work for Apple” is certainly a specious conclusion.

But it does give some food for thought, no?

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