China is the best fit for Apple Apple’s decision to outsource its manufacturing to China is really about who can build the most number of Apple products within the shortest amount of time. As Cameron knows, Apple is a byword of everyday sleekness. Outsourcing allows the company to be both effective and efficient. The answer may lie with incentives. (Gary Reyes/ Staff). Apple is only selling their products to the American people; they are not giving back to them in any other way. “Our argument is: Depending on how mature the production process is, or how modular your product is, if you have a very mature process and a very modular product, it’s probably OK to ship that stuff off,” says Harvard University business professor Willy Shih, who with colleague Gary Pisano just finished writing “Producing Prosperity: Why America Needs a Manufacturing Renaissance.”. And if you've really never done any of those things, rest assured your prime minister has. “I’ve always been interested in business models,” Le says. “There are things we can do,” Cook said in May at the D: All Things Digital Conference, “and that’s what we are working on.”. Outsourcing definitely does have its benefits and if it's used in a proper manner after conducting detailed research on manufacturing country and facility it can help the companies in not only reducing their production costs but also increasing their production, generating more revenue, increasing their cash flow, getting more and faster return on investments and improving their technology. Post was not sent - check your email addresses! And while robots can be pliable workers, they are a fixed cost — a drag on the bottom line, whether they are working or not. The next one that gets the most benefit from this outsourcing is Chinas economy. His White Leaf USA has produced not millions, but 1,000 computers in the past year. I’m not suggesting that Cook, 51, who apparently wants to increase domestic manufacturing, could learn something from Le, 23, who is manufacturing domestically. Outsourcing refers to the act of getting things done from outside the home country. Outsourcing is the business practice of contracting with an outside party to take care of certain tasks instead of hiring new employees or assigning those tasks to existing staff. Le’s U.S. manufacturing strategy has worked well for him so far. “One of her biggest things was that she wanted to take care of her employees and she wanted to open up opportunities for people in the U.S., in an industry that she loved,” Le says. It has its headquarters in … And think of White Leaf as not so much. I come away with the idea that work/life balance is kind of an American concept or a Western concept.”. White Leaf builds computers right here in Silicon Valley as part of founder and CEO, Andrew Le's vision of bringing jobs and manufacturing back to the United States. By evaluating these specific key points, hopefully the decision you are facing can become more clear. Apple's attraction to outsourcing the assembly of its flagship product to China comes from the cost cuts associated with doing so. “Our goal is to show that it can work.”. He sees a profitable company churning out 4,000 to 5,000 desktops a month — preferably in Silicon Valley. If Le’s company were sitting anywhere else in the country, it might be hard to take his optimism seriously. By locating the same iPhone factory in America, Apple would add more than $25 billion in labor costs a year, which would completely wipe out Apple’s 2010 profit of $14 billion. This is the accepted logic of globalisation, which lets companies keep costs down, which allows the ordinary westerner to spend less money shopping, and which offers poorer nations in the east a means to develop their economies. Eastern Europe, India and Asia are the most frequent choices … How can managers combine core competency concepts and strategic It has become the business success story of our age: the firm others want to emulate, and prime ministers want to name check. The advantages of proximity for the $500 billion company were eclipsed long ago by the efficiencies of enormous outside contractors. That economic reality is the topic of this latest installment in a series of occasional columns looking at the surprising health and the budding resurgence of manufacturing in the Bay Area. Nor is it about the company's survival: it would still do tremendously well were it to bring those factories back home. “It’s folks that like to have the status of something on their desks that kind of shows off their uniqueness. Apple, the most valuable and most profitable company in the world, had been paying a corporate income tax of 5 percent or less thanks to a loophole in … For one thing, White Leaf is privately held, and while Le aspires to be profitable, he is not subject to shareholder pressure for ever-increasing profits. Get Morning Report and other email newsletters. Sorry, your blog cannot share posts by email. 1 Reason We Make iPhones in China (It's Not What You Think) China is much more than a … They can be awakened in the middle of the night to begin work on a redesigned process. In addition to Apple, who else benefits from Apple's decision to outsource assembly to China? Chinese labour accounts for a tiny proportion of the company's costs: $US7.10 for each phone, which accounts for about eight hours of assembly. The made-in-China model, on the other hand, has carried no such social benefits, either in Apple's home country or in the People's Republic. After that, and the terrible publicity that followed, Apple put pressure on its subcontractor to raise workers' pay and improve conditions. An example of the superior responsiveness, in assembly, to Apple’s needs is the impressive speed and flexibility of … All Access Digital offer for just 99 cents! ... Outsourcing factors work on very thin margins, because high … Former Apple CEO Steve Jobs believed that jobs could be created in the United States even though his company’s major manufacturing base was overseas. Step-by-step solution: Chapter: Problem: FS show all show all steps. What are the potential costs and risks to Apple? Those production jobs tend to be in small operations, relying on automation and making early iterations of high-tech devices or producing highly specialized products. It’s not something that everybody else has,” he says. When President Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, he asked Apple founder Steve Jobs what it would take for iPhones to be made at home. The electronics giant assembles its gadgets in China. But the two companies — White Leaf USA and Apple — do provide a fascinating view into the revival of manufacturing in the Bay Area and the complex set of ingredients that make the region a logical place for some manufacturers, but not others. 3. But Tsay says any notion that Apple will start assembling iPods, iPhones and iPads in the United States is sheer fantasy. The Cresc team took the average wage in the US electronics industry of $US21 per hour and calculated that the total production cost would increase to $US337.01. What are the potential costs and risks to Apple? “We decided over a decade ago that there were things that we could do better than anyone else and those things we wanted to do ourselves,” Cook explained at the All Things Digital conference. Yet there is another way of viewing the company. Foxconn, which makes those iPhones, has to work to an incredibly tough contract with Apple that forces it to keep all costs to a minimum. When hiring an employee, you may only have access to a small, local talent pool. Outsourcing creates CAREER opportunities. 2. Expert outsourcing advisory, support & brokerage for your business. But in Silicon Valley, the story of a young entrepreneur working to turn convention upside down by focusing on eye-catching computers, designed for high performance, has a familiar ring. This allows you to... 2. However, it should at least, be considered by every business. Compare that with a sale price (including downloads) of $US630 and Apple makes $US452 on each phone: a whacking gross margin of 72 per cent. And yet there is a paradox here. “That’s kind of our main goal, to bring manufacturing and production back into the United States and into the valley,” Le says. To manage Apple Card Monthly Installments, you need an iPhone with iOS 13.2 or later or an iPad with iPadOS 13.2 or later. So, think of Apple as mature and modular. What he and his employees came up with was a line of desktop computers in black, blue and pink that are compact — about 9 inches by 8 inches by 4 inches for the smallest model — and retail for $420 to $1,500. “Apple has been on the record saying they simply couldn’t get that kind of responsiveness here. SANTA CLARA — At the end of a cul-de-sac in an industrial stretch near the freeway here, Andrew Le looks out over a concrete shop floor where he is pursuing an ambition that few in their right minds would tackle in 2012: manufacturing desktop computers in the heart of Silicon Valley. White Leaf builds computers right here in Silicon Valley as part of founder and CEO Andrew Le's vision of bringing jobs and manufacturing back to the United States. In fact, his desktop initiative grew out of the fact that the volatile nature of making parts for other companies means there are slow times when orders aren’t coming fast enough to keep everyone busy. “And one big business model, of course, is Apple and the idea of design. Despite a struggling economy, the number of manufacturing jobs in Silicon Valley has grown in the past two years. 2. Humans can be temporarily idled, laid off, asked to do different tasks, work overtime. He figures that allows him to set prices at $25 to $50 higher than comparable desktops, though he’s prepared to make adjustments depending on consumer reaction. Minh Do Le died at age 50 in July 2011. AM&S was founded in 2007 by his mother, Minh Do Le, who for years worked as an engineer in Silicon Valley. For all the stylishness and sleekness of its products, the Apple business model is an unattractive and, over the long term, possibly an unsustainable one. Benefits of outsourcing, not solely for Apple, but in general, include less cost and cheaper raw materials. But it didn't take the most obvious route of doing so, which would be: pay more to Foxconn, and direct it to use that surplus to increase wages. White Leaf builds computers right here in Silicon Valley as part of founder and CEO, Andrew Le's vision of bringing jobs and manufacturing back to the United States. To access and use all the features of Apple Card, you must add Apple Card to Wallet on an iPhone or iPad with iOS 12.4 or later or iPadOS. His firm faith in this synergy came from an understanding that the United States would only benefit from a strategic outsourcing strategy. In the beginning, mass manufacturers left in pursuit of cheap labor. So what would it cost to make the same iPhone in America? That pile of shares is now valued at about $US634 million. Apple, White Leaf show the pros and cons of…, Click to share on Facebook (Opens in new window), Click to share on Twitter (Opens in new window), Click to email this to a friend (Opens in new window), Coronavirus: Cases pile up in California, ICUs fill up in San Jose and U.S. exceeds death toll from 9/11, Apple, White Leaf show the pros and cons of outsourcing. Apple's rise to first among equals in the business world has coincided with a wider social trend: a general anxiety about the decline of the west. The most admired man in Silicon Valley was reportedly blunt: "Those jobs aren't coming back.". In January, the New York Times ran a lengthy investigation of the technology firm's manufacturing processes, which began by disclosing a conversation in 2011 between Jobs and Barack Obama. Apple has made and benefited from that argument. A medium apple — with a diameter of about 3 inches (7.6 centimeters) — equals 1.5 cups of fruit. Very few people argued with that assessment. Follow him at Twitter.com/mikecassidy. Last year, Apple built up cash reserves of $US100 billion - more than the US government. Focus instead on the way it does business, and all those iPhones, iPods and iPads aren't just exemplars of design and user-friendliness: they are devices that destroy western jobs. It was Cook, as Apple’s chief operations officer, who presided over the company’s move to hand off manufacturing to outside contractors, notably Foxconn, which supplies the world’s iPods, iPhones and iPads. But, he says, he’s managed to achieve margins above 10 percent. Apple is providing China with more job opportunities which benefit their economy. However, with American companies manufacturing overseas under public pressure to come home, how many will maintain foreign production? Pegatron. Le doesn’t need a massive workforce. Pegatron is another company rounding out the Taiwan lineup. This division of labour has certainly not helped China very much. Nor is it about the company's survival: it would still do tremendously well were it to bring those factories back home. In general, companies have been outsourcing more and more over the last decade, and it’s pretty reasonable to do so from a business perspective because of the benefits of outsourcing IT. Apple makes a staggering number of the same product over and over again — a model suited to factories filled with a low-wage and extremely flexible workforce surrounded by suppliers and other companies that have grown up over the years to support the production and transportation of its products. And it's something every entrepreneur wanting to outsource should read. And according to new research by the Centre for Research on Socio-Cultural Change (Cresc), it's clear that it would not only be affordable for Apple still to make its goods in America, it would remain hugely profitable. That is a big jump - but it still leaves Apple with a gross margin of 46.5 per cent on each iPhone - a level that Cresc's Sukhdev Johal estimates would probably still make it the most profitable phone in the world. 1. Cook is quick to point out that processors for the iPhone and the iPads are manufactured in Texas and that the gorilla glass for iPhones is made in a factory in Kentucky. US workers weren't skilled enough; not enough of them were trained in engineering. As I’ve written before, keeping manufacturing close to headquarters means companies can spot needed changes and make them quickly. When journalists or politicians discuss the way that western companies make goods in China, or anywhere else in Asia, they almost always start from the premise that this is how business is now done. For some people, however, the world is even smaller. The reason for concentrating on Apple in this fashion is not because it's a terrible company, but because it's an exemplary one. The President asked why Apple products could not be made in the US. Tim Cook, who is now CEO of Apple, announced a few weeks ago that he would begin buying back shares and paying dividends to investors. Here are three reasons to give this a try: 1. When you outsource, you can pay your help as a contractor. It wasn't Apple's fault it didn't hire Americans to make its goods: it was America's. 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