Why Apple is forced to manufacture overseas

Ben Camm-Jones
24 January, 2012
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It isn’t just lower labour costs that are behind Apple’s decision to have most of its products manufactured in the Far East, according to a new report.

The New York Times published an article over the weekend that sheds light on Apple’s decision to use overseas production facilities rather than plants in the US – a question that President Obama once put to the late Steve Jobs.

It isn’t just lower labour costs, according to the article, but a belief that the manufacturing plants of the Far East and Europe offer better scale and flexibility, as well as access to more diligent and skilled workers unavailable in the US.

Though Apple had no official input into the article – Apple was apparently provided with extensive summaries of the  article but declined to comment – there was plenty of information apparently gleaned from Apple employees past and present.

“This article is based on interviews with more than three dozen current and former Apple employees and contractors — many of whom requested anonymity to protect their jobs — as well as economists, manufacturing experts, international trade specialists, technology analysts, academic researchers, employees at Apple’s suppliers, competitors and corporate partners, and government officials,” the NYT said.

Apple has some 43,000 employees in the US, with around 20,000 more dotted around the world, though the 700,000 or so people who work indirectly for the company -– through contractors and the like – are largely based outside the US.

An example of the reason why manufacturing takes place in the Far East provided in the article is based around Jobs’ decision to change the screen of the first-generation iPhone weeks before it launched. Jobs had noticed that his keys had scratched the screen of a prototype device he was using and demanded that the screens should be changed.

One former Apple executive recalled that in an assembly plant in Shenzhen, China, 8,000 employees were woken up, given a hot drink and a biscuit and put to work on the production lines in order to fit new screens to the iPhone units. Within a few days, 10,000 iPhones a day were passing through the plant.

Another reason for the decision to manufacture and assemble Apple products in the Far East is that the necessary infrastructure is already there – factories that make the various components needed to assemble and iPhone or iPad, for example, are all around, so shipping the various components to the US for assembly just doesn’t make sense when the devices could be assembled in the Far East before being sent on to the various markets.

Of course the rise of Foxconn, Apple’s manufacturing partner and the company that assembles around 40 percent of the world’s electronic devices, is another reason why Apple uses the Far East as its manufacturing base.

One Foxconn plant in China – known as Foxconn City – has 230,000 employees with around one quarter of these living in company ‘barracks’ on site.

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