If there were any question Apple Inc. (Nasdaq: AAPL) CEO Tim Cook is putting his own imprint on the iconic company, it can be put to rest. Apple is moving some of its manufacturing back to the US, the New York Times reports. Is this an appeasement move toward Apple critics or a sound business decision?
The NYT says Apple intends to invest $100 million in US manufacturing, a small fragment of its overall worth and its ready cash. Nevertheless, the paper quoted Cook as saying his company has some level of responsibility for creating jobs.
Cook, who rose through the operations and supply chain ranks, has a compelling business argument, as well. Apple manufactures most of its products through Foxconn Electronics Inc. , which has a huge presence in China. In spite of the advantages of low-cost overseas labor, transportation expenses (in the form of oil and gas) and Chinese wages are increasing. And China's currency is gaining strength. Analyses from the Treasury Department, Boston Consulting Group, and IDC have demonstrated that as these costs increase, China's labor advantages decrease.(See: US Gains Edge as China’s Currency Strengthens , Reshoring the US Economy, and Electronics Seen Benefiting as China's GDP Doubles.)
Assembling products near the end-market (in this case, the US) makes financial sense. Shipping products with any kind of bulk from China is time-consuming and increasingly costly. Apple releases its newest products first in the Americas and then rolls them out through the rest of the world. Cook told the NYT that some of its larger products ("larger" being a relative term), such as the iMac, will be made in the US, and jobs will include more than just final assembly.
Cook has made a number of significant moves at Apple from both the business and supply chain perspectives. Apple has released a small tablet, the iPad mini, contrary to former CEO Steve Jobs' assertion that a small tablet wouldn't catch on. Cook has pushed for supply chain transparency, releasing the names of Apple's leading suppliers and publishing findings about its partners' labor practices. Apple has been widely criticized for its alliance with Foxconn, which hires underage workers and forces employees to work long shifts at low wages. Cook has even apologized publicly for his company's stumblings -- something his predecessor never did.
At the same time, though, Apple is suing one of its biggest suppliers, Samsung Corp. over patent infringement. Samsung manufactures chips and the much-praised Retina display that go into Apple products.
Cook may be trying to defuse ongoing criticism of Apple's dependence on foreign labor. Apple, like other high-tech manufacturers, also holds much of its cash reserves overseas, avoiding US taxes. Establishing a US site would add marginally to the tax base. It remains to be seen what jobs Apple would create and where those jobs would be.
Does it matter what is behind Cook's onshoring plans? Is this a PR ploy or a smart business move? I'd like to hear your opinion.