The Breakdown

Explaining Southern California's economy

Why Apple doesn't build anything in the U.S.

Apple Store in Beijing.
Apple Store in Beijing. Lintao Zhang/Getty Images

A long time ago in a galaxy far, far away — well, actually, it was just the USA — Apple made stuff in America. In fact, it manufactured its computers in California, right in its own Cupertino back yard. As Minyanville points out, until 1992, Apple hardware was made in the USA. Now iPhones and iPads are made anywhere but.

I know, 1992 seems like a century ago. There was no Web to speak of, and certainly no smartphones or tablets. Computers were not yet truly ubiquitous in the workplace. They were far from common in homes. But the writing was on the wall.

So why did Apple move its production overseas? Good question, and one that the New York Times recently asked:

Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Evidently not. Perhaps because even when Apple was making products in Freemont, Calif. it wasn't housing 8,000 workers in dormitories and subjecting them to 12-hour shifts. When the iPhone was about to debut years later, the Chinese government was prepared to do whatever it took to convince Apple that Asia was the place to construct the device:

For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.

Then a bid for the work arrived from a Chinese factory.

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

More importantly, the factory was fully prepared to be integrated with the Asian supply chain. Cheap labor that works 12-hours straight and lives in a dorm is one reason to locate production in China. But the fact that all the other components to modern consumer electronics are built nearby is a more compelling one. To roll back the clock, whole component industries would have to return to the U.S.

If you take this out of the Apple context and think about it in terms of the broad nature of work and how it's changing, you can get worried in a hurry. Americans are never going to work the way aspiring middle-class Chinese do. Unfortunately, the new industries that Americans want to work for don't hire at the level of the auto industry in the 1950s. As the NYT story notes, GM employed half a million workers in its Golden Age. Apple employs a fraction of that.

It's exceptionally difficult to figure what the solution to this problem is. How can we create good, middle-class jobs, and lots of them? How can California become a manufacturing hub for the high-tech devices of the future, dreamed up in Silicon Valley and Los Angeles?

There are no easy answers. But given how well Apple is doing by employing small armies of Chinese who are content to live like college students, just without the college part, it's tough to see how any global corporation will make changes to how they do things and deliver value to its shareholders. The Apple Way is far too compelling, even if it's not the same as the American Way.

Follow Matthew DeBord and the DeBord Report on Twitter.

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