Reposted from The New York Times
Catherine Rampell and Nick Wingfield | December 6, 2012 | NY Times
Apple plans to join a small but growing number of companies that are bringing some manufacturing jobs back to the United States, drawn by the growing economic and political advantages of producing in their home market.
On Thursday, Apple’s chief executive, Timothy D. Cook, who built its efficient Asian manufacturing network, said the company would invest $100 million in producing some of its Mac computers in the United States, beyond the assembly work it already does in the United States. He provided little detail about how the money would be spent or what kinds of workers might benefit.
Apple, which long manufactured parts in the United States but stopped about a decade ago, has been under pressure to create more jobs here given its market power. It sold 237 million iPods, iPads, Macs and other devices in the year ended in September.
“I don’t think we have a responsibility to create a certain kind of job,” Mr. Cook told Bloomberg Businessweek. “But I think we do have a responsibility to create jobs.”
Some analysts are hopeful that the move by a big, innovative company like Apple could inspire a broader renaissance in American manufacturing, but a number of experts remain skeptical.
“I find it hard to see how the supply chains that drive manufacturing are going to move back here,” said Andre Sharon, a professor at Boston University and director of the Fraunhofer Center for Manufacturing Innovation. “So much of the know-how has been lost to Asia, and there’s no compelling reason for it to return. It’s great when a company says they want to create American jobs — but it only really helps the country if those are jobs that belong here, if it starts a chain reaction or is part of a bigger economic shift.”
Over the last few years, companies across various industries, including electronics, automotive and medical devices, have announced that they are “reshoring” jobs after decades of shipping them abroad. Lower energy costs in America, rising wages in developing countries like China and Brazil, quality control issues and the desire to keep the supply chain close to the gigantic American consumer base have all factored into these decisions.
“Companies were going abroad in pursuit of cost reduction, and it turns out there were a lot of unintended costs,” said Diane Swonk, chief economist at Mesirow Financial. “America has been looking a lot more competitive lately.”
Even so, the impact on the American job market has been modest so far. Much of the work brought back has been high-value-added, automated production that requires few actual workers, which is part of the reason America’s higher wages are not scaring off companies.
American manufacturing has been growing in the last two years, but the sector still has two million fewer jobs than it had when the recession began in December 2007. Worldwide manufacturing appears to be growing much faster, even for many of the American-owned companies that are expanding at home. General Electric, for example, has hired American workers to build water heaters, refrigerators, dishwashers and high-efficiency topload washers, but continues to add more jobs overseas as well.
Apple has not announced plans to move the complex, faster-growing portions of its product lines. Macs now represent a relatively small part of Apple’s business, accounting for less than 20 percent of its nearly $36 billion in revenue in its most recent quarter. The company’s iPad and iPhone products, which amount to nearly 70 percent of its sales, will continue to be made in low-cost centers of manufacturing like China, mostly on contract with outside companies like Foxconn.
Mr. Cook’s statements suggested Apple was planning to build more of the Mac’s components domestically, but with partners. He told Bloomberg Businessweek that the plan “doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.”
Whether Apple’s newly announced plan might help create other higher-paying jobs along the supply line depends on the nature of the manufacturing.
Other computer manufacturing has been trickling back to the United States after largely shifting overseas in the 1990s.
In October, Lenovo, the computer giant based in China, said it would begin making its Think-branded computers, including notebooks, desktops and some tablets, at a facility in Whitsett, N.C. The move will create 115 manufacturing jobs at the plant, the company said.
Mark Stanton, director of global supply chain communications for Lenovo, said that moving the jobs to the United States would allow Lenovo to offer faster turnaround times for its customers in North America than if the machines were coming from overseas, and that the company was not specifically creating the American jobs because of any political pressure.
“We’re certainly not unaware of the economic situation and political environment,” he said. “It’s an added benefit, but we didn’t go in with that premise. We went in with a business case.”
The globalized model of the electronics industry was shaken last year by supply chain disruptions after floods in Thailand. The auto industry faced similar challenges after the tsunami in Japan. Not coincidentally, Ford recently announced that it was adding 1,200 jobs in Michigan, and foreign-owned auto manufacturers like Honda and Volkswagen have also invested in more hiring and training in Indiana and Tennessee.
For the most part, companies seem to be stepping up production in the United States for domestic customers, as opposed to exports, said Chad Moutray, the chief economist at the National Association of Manufacturers. (Companies are moving their production closer to where their customers are in Europe, too. Five years ago, Hewlett-Packard supplied all of Europe’s desktops from China, but today it manufactures in the Czech Republic, Turkey and Russia instead, according to Tony Prophet, senior vice president for operations for H.P.’s PCs and printers.)
But the United States is also becoming a more attractive place to manufacture goods destined for overseas markets. While the National Association of Manufacturers and other business groups complain about an antibusiness tax and regulatory environment in America, an international ranking from the World Bank on the “ease of doing business” placed the United States near the top of the list, and countries like Brazil, India and the Philippines near the bottom.
“If you ask how many days does it take to open a business, to get electricity, things like that, you realize there are a lot of reasons why the business environment is really much better here than in places where labor happens to be really cheap,” said Torsten Slok, chief international economist at Deutsche Bank Securities.
On Thursday, the White House said it was encouraging to see more big American companies bringing back manufacturing.
“Policy matters, and our country is pushing policies that encourage manufacturing, R.& D., infrastructure, skills and the support for growing supply chains,” said Gene Sperling, director of the president’s National Economic Council. “I think what you want is a mutually reinforcing cycle, where basic economic trends that make the U.S. more competitive for manufacturing and for creating supply chains is encouraged and supported by policies that recognize those location decisions have broader spillover impacts that benefit the economy beyond specific companies.”
Charles Duhigg and Quentin Hardy contributed reporting.