Trump and Irish-led research on Apple's global supply chain
Donald Trump, presumptive Republican Party nominee for the US presidency, announced last January that he would force Apple to return its overseas manufacturing to the United States. While Trump can contradict what he would or would not do even in the same interview, Vivek Wadhwa, a US academic and entrepreneur, in the Washington Post on Tuesday suggested that robotics are changing the labour-cost equation at a time when there is uncertainty about the Chinese economy. Prof Wadhwa used data from Irish-led research on Apple's supply chain in Asia in his Post piece.
“I think we’re going to get things coming. We’re going to get Apple to start building their damn computers and things in this country instead of in other countries,” Trump said and separately he has threatened to impose a 45% tariff on Chinese imports to the US because of China's alleged manipulation to keep the value of the renminbi low against the US dollar — the facts are that in recent years it is Japan not China who has been aggressively using its currency value to boost exports.
Apple has contract manufactured its powerful Mac Pro at a factory in Texas since 2013, but almost all its products (including the iPhone) are mainly made and assembled in China.
The electronics giant had about 66,000 employees of its 2015 110,000 global full-time equivalent payroll, in the US — most of the US staff work in retail and call centres.
In February 2011, Steve Jobs, then the ailing Apple CEO, attended a dinner for President Obama in Silicon Valley with other tech chiefs (see image above).
The New York Times reported a year later that as Jobs spoke at the dinner, President Obama interrupted with a question: what would it take to make iPhones in the United States?
“Those jobs aren’t coming back,” Jobs said, according to a dinner guest.
The New York Times wrote:
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 USA” is no longer a viable option for most Apple products.
The age of huge US manufacturing plants is over.
A 2011 Federal Reserve Bank of Minneapolis paper noted:
In 1950, US Steel employed 30,000 workers at its Gary, Indiana, plant, and Bethlehem Steel had a factory of similar size in Sparrows Point, Maryland. Ford’s massive Rouge River plant near Detroit employed even more workers — over 100,000 in the 1930s.
Things are far different today. Gigantic employer plants like these are virtually extinct in the United States. Indeed, as of 2007, only 47 plants with more than 5,000 workers exist, half as many as just 10 years earlier. To find massive-employer manufacturing plants, look to China. The Foxconn complex in Shenzhen where iPhones are assembled, for example, is credited in news reports with employing an astonishing 300,000 workers.
A recently published paper by Seamus Grimes, emeritus professor of geography, at the Whitaker Institute for Innovation and Societal Change, National University of Ireland Galway, and Dr Yutao Sun, a member of the Faculty of Management and Economics, Dalian University of Technology, Dalian, China, uses Apple’s 2015 published list of supplier companies and their subsidiaries and analyses how "one of the world’s most significant lead technology companies and its network of core and non-core suppliers have become increasingly embedded in China’s information and communications technology (ICT) global value chain."
Previous research had shown that the net value added in China of each iPhone was in single digit US dollars.
According to the authors, the Apple supply chain comprised 198 global companies with 759 subsidiaries with 336, or 44.2%, of the subsidiaries manufacturing in China; 115 in Taiwan; and 84 in Europe or the US.
An analysis of the ownership of the subsidiaries operating China showed that only 3.95% were Chinese. Just 2.2% of the core component suppliers were Chinese while the biggest proportion, 32.7%, were Japanese; 28.5% American; 19.0%; and 6.5% were European.
Foxconn, the Taiwan-owned assembler of Apple's products in China, is developing robots while Prof Wadhwa notes in the Post that "robots cost less than $40,000 to purchase and as little as a dollar per hour to operate. And unlike human workers, they will work 24-hour shifts without complaining."
Apple could shift production from China but it is unlikely to kowtow to a President Trump.
US employment in manufacturing was at 18m in 1990, 17m in 2000, and just over 12m in April 2016.
Pic on top: Apple's Steve Jobs, bottom-right in black shirt, and Facebook's Mark Zuckerberg, flank President Obama, at a February 2011 dinner in Silicon Valley, with tech company chiefs.