You want iPhone assembly jobs? Mr. President, you can’t HANDLE iPhone assembly jobs.

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You want iPhone assembly jobs? Mr. President, you can’t HANDLE iPhone assembly jobs.

The “Make it in America” crowd are just making populist noises.

Lots of talk about this NY TIMES article, How U.S. Lost Out on iPhone Work.

The article just reinforces what I’ve been telling the “make it in America” crowd for years– the decision to manufacture in China was not just a matter of cheaper labor. You just CAN’T do this stuff in the USA. Besides lower manufacturing costs, China offers mature supply chains, economies of scale and, increasingly, a world-class transportation infrastructure. It’s industrial environment is uniquely suited for this type of work, while USA is better suited for high-tech, ultra high value work. High-cost Germany might be a good model– they are a powerhouse in high-end car manufacturing among other things. Thgey don’t feel the need to look down the value chain for opportunities.

According to the article, Obama actually asked Steve Jobs what it would take to make Iphones in the USA instead of China.

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

I believe the president knew damn well it was a naïve question, but was motivated to ask it for political reasons. I also believe that most of the “bring it home” crowd are motivated to express populist sentiment at the expense of a reasoned argument.

Then the article goes on from there:

The president’s question touched upon a central conviction at Apple. 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.

There is no serious debate about US suitability for this type of high-volume/low margin assembly work. If we want to emulate a manufacturing power, we should look to Germany, not to China.

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Comments

  • Cornelius Mueller | January 29, 2012 | Reply

    Well, let's face it: The wider public will have to deal with this talk a bit more prior to the presidential election. It's a good subject for politicians (not only in the US) who, on the other hand, have very little substance, fired up by stories such as 'Philips is moving its shaver production back from China to Holland'. What they conveniently forget is, that the key production for the shavers was never in China, in the first place, and that the Philips concept of shipping the shaver-heads from Holland to Shanghai and then back was designed to fail. The present campaign against Apple products made in China is just another spin in this wider story played before a background of confusion in Europe and the US. We won't much hear about the matter one year from now. Quite a few of those who tear Apple and Foxconn apart at the moment still advertise their iPhone Apps, it seems even they don't believe what they are preaching. As for your suggestion, to look to Germany - I would like to second that, but it might be a long shot until the US workforce has reached a comparable level of skill. Won't be done over night.

  • Bruno Lhopiteau | January 29, 2012 | Reply

    A lot of this makes sense. However, I believe that what the "make in America crowd" is saying (not talking about those with a short-term 2012 political agenda) is that this situation the article describes is the result of deliberate policies by successive US governments (the same - probably worse - can be said of my home country, France and most of Europe). The "you can't do this stuff in the USA" is in big part the result of such strategic choices, not fate. Which means it can be controlled, it can be changed, as part of each country's industrial policy (most of Europe has given up having an industrial policy, in the name of the "invisible hand of the market", we all know the result). It can't be done? Look at what Europe did after WWII, or Japan, look at China and its 5-year plans. I also find some of the "facts" listed in this and countless recent articles rather amazing. Foxconn or anyone else hiring 3,000 workers overnight, not to mention 8,000 industrial engineers in 15 days? In a country suffering from a rather significant skills shortage? I have large customers manufacturing consumer electronics products (we help them with the reliability/maintainability of production lines), they are indeed very good at recruiting and training people, but I don't see how those numbers are possible. But I may be wrong, and I never talked to anyone in Foxconn (note the article says Foxconn either denies those "facts" or refuses to comment).

      • David | January 30, 2012 | Reply

        Hi Bruno. Thanks for the comment. FYI, here’s an article from the Seattle Times which makes a point similar to yours. http://seattletimes.nwsource.com/html/jontalton/2017346775_biztaltoncol29.html I still don’t think that: 1. It would be remotely possible, even with a “Manhattan Project” mentality, to re-invent our industrial environment to accomodate high-volume/low-margin assembly. Think about how many state and federal laws would need to be re-written, regulatory regimes loosened, etc. 2. We would even WANT to push our labor force so far back down the value scale. David

  • William | January 29, 2012 | Reply

    Granted, current perception states that China is the only country in the world to scale mfg to the point of real profitably, (I live in CD and have family in management positions in FC) but there are many recognized studies that forecast cost parity in the MFG fields within the net few years. Granted, there are many, many variables, but it is true that the days of cheap China labor are truly over.

      • David | January 29, 2012 | Reply

        Hi William, Certainly labor rates may reach parity (the now-famous Boston Consulting Group report states that labor-rate parity with the USA will occur in 2015). That may or may not happen as predicted, but regardless China is heading away from the low-cost labor model as fast as it can. China is not a cheap-labor manufacturing destination anymore. But it's not (or it doesn't need to be) all about labor rates. This is my point.

  • William | January 29, 2012 | Reply

    BTW The high end German SUV's sold here in China, the bulk of them are actually made in the USA. Thus the recent headlines.

  • Helen Zhang | January 30, 2012 | Reply

    As a Chinese, I do want these jobs can be kept in China but I also hope our workers may have quality time with their family and we could see fish swimming in the river in China.

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