It wasnt long ago that products from Apple, perhaps the most recognizable name in electronics manufacturing around the world, were made entirely in America. This is not so anymore. Now, almost all of the approximately 70 million iPhones, 30 million iPads, and 59 million other Apple products sold yearly are manufactured overseas. This change represents more than 20,000 jobs directly lost by U.S. workers, not to mention more than 700,000 other jobs and business given to foreign companies in Asia, Europe, and elsewhere. The loss is not temporary. As the late Steven P. Jobs, Apples iconic co-founder, told President Obama, Those jobs arent coming back.
At first glance, the transfer of jobs from one workforce to another would seem to hinge on a difference in wages, but Apple shows this is an oversimplification. In fact, paying U.S. wages would add only $65 to each iPhones expense, while Apples profits average hundreds of dollars per phone. Rather, and of more concern, Apples leaders believe the intrinsic characteristics of the labor force available to them in China which they identify as flexibility, diligence, and industrial skills are superior to those of the U.S. labor force. Apple executives tell stories of shorter lead times and faster manufacturing processes in China that are becoming the stuff of company legend. The speed and flexibility is breathtaking, one executive said. Theres no American plant that can match that. Another said, We shouldnt be criticized for using Chinese workers. The U.S. has stopped producing people with the skills we need.
Because Apple is one of the most imitated companies in the world, this perception of an overseas advantage might suggest that the U.S. workforce needs to be better led, better trained, more effectively managed, and more motivated to be proactive and flexible. If U.S. (and Western European) workers are less motivated and less adaptable, its hard to imagine that does not spell trouble for the future of the American workforce. Perhaps, though, Apples switch from 100% Made in the U.S.A. to 10% Made in the U.S.A. represents the natural growth pattern of a company going global. At this point, the iPhone is largely designed in the United States (where Apple has 43,000 employees), parts are made in South Korea, Taiwan, Singapore, Malaysia, Japan, Europe and elsewhere, and products are assembled in China. The future of at least 247 suppliers worldwide depends on Apples approximately $30.1 billion in orders per quarter. And we cant forget that Apple posted $16.1 billion in revenue from the first quarter of 2014, perhaps in part because its manufacturing in China builds support for the brand there.
As makers of some of the most cutting-edge, revered products in the electronics marketplace, perhaps Apple serves not as a failure of one country to hold onto a company completely, but as one of the best examples of global ingenuity.
What are the pros and cons for local and overseas labor forces of Apples going global? What are the potential political implications for country relationships?
Do you think Apple is justified in drawing the observations and conclusions expressed in the case? Why or why not? Do you think it is good or harmful to the company that its executives have voiced these opinions?
How could managers use increased worker flexibility and diligence to increase the competitiveness of their manufacturing sites? What would you recommend?