Some MACS to be produced in the US again

Found this interesting article published by the Wall Street Journal by Jessica E. Lessin and James R. Hagerty 

Apple CEO Says Mac Production Coming to U.S.

Apple Inc. AAPL +1.54% plans to build some Mac computers in the U.S. for the first time in about a decade, investing $100 million next year in an effort that could serve as a high-profile test of American manufacturing competitiveness.

The world's most valuable company has faced political pressure to bring jobs home and reduce its reliance on foreign subcontractors whose treatment of workers has come under harsh scrutiny.

The investment is a small sum compared with the billions of dollars Apple spends annually on manufacturing world-wide, mostly in Asia, whose factories produce the bulk of its high-tech goods.

TIM COOK

Apple isn't providing details about the plans disclosed by Chief Executive Tim Cook on Thursday, beyond stating that it will work with manufacturing partners and do more than assemble parts built elsewhere. It said the investment would go toward production of an existing Mac line.

A company spokesman declined to comment on which parts would be made on U.S. soil.

Investment bank Piper Jaffray estimates that the sum would amount to 2% of Apple's 2013 capital expenditures. The company spent $9.5 billion on product tooling, manufacturing process equipment and other corporate facilities and infrastructure in its last fiscal year.

"It is almost like a trial," says Carolina Milanesi, an analyst at tech research firmGartner Inc. IT -0.09% "If it works it works, and if it doesn't work they can say they tried it."

Apple CEO Time Cook said the company will produce one of its existing lines of Mac computers in the U.S. next year. George Stahl has details on Markets Hub. Photo: AP.

Apple's plan runs counter to a decades-old shift of production of computers, smartphones, TVs and other gadgets to Asia, particularly mainland China.

The Cupertino, Calif., company has built up one of the industry's most sprawling and complicated global supply chains, a feat often credited to the efforts of Mr. Cook before he succeeded Steve Jobsas Apple's chief executive last year. Mr. Cook disclosed the new plan in interviews with NBC News and Bloomberg.

Apple has taken heat from human rights groups for safety incidents and high working hours in factories where their products are assembled, prompting Mr. Cook to invest in improvements. He has also publicly lamented the loss of manufacturing skills in the U.S. and played down the odds of bringing the bulk of production back from Asia, where years of investment have created sophisticated networks of parts suppliers and factories with specialized production tools.

But Tom Mayor, a Cleveland-based expert on manufacturing at Booz & Co., a management consulting firm, says Apple's latest move appears to be "more than just political expediency."

He said some technology companies have been rethinking their manufacturing strategies after last year's earthquake in Japan, which disrupted global supply chains.

Some now believe they should reduce reliance on Asia and avoid being caught "with a supply base that sits on the ring of fire."

Labor costs in China, which have been rising in the double digits annually, are also changing the equation on the margin.

Still Matt Sheerin, a senior supply chain analyst for Stifel Nicolaus, says doing PC manufacturing "in a very big way" in the U.S. doesn't make sense.

He says electronics manufactures like Flextronics International Ltd. FLEX +0.85%and Jabil Circuit Inc., JBL -1.60% which both make parts for Apple, have largely exited the PC business. "They would have to get major margin and price concessions or they would take a big hit," he said.

Flextronics and Jabil didn't respond to requests for comment.

Apple faces a series of challenges with the Mac production plan, including likely investments in production tools and training. Apple sold 18.2 million Macs in its last fiscal year.

Another hurdle will be qualifying for a "made in the U.S.A." label.

The Federal Trade Commission, which sets standards for such claims, says that products can carry that label only if "all significant parts and processing that go into the product" are of U.S. origin.

At least some of the parts in any sophisticated electronic device would be likely to come from Asia.

But companies are allowed to make qualified claims about their U.S. production, such as by describing products as being assembled in the U.S. Companies also can specify the percentages of content that come from the U.S. and elsewhere.

Mr. Cook has also identified increasing Apple's manufacturing investment in the U.S. as a priority. Samsung Electronics Co. 005930.SE +1.79% already makes Apple-designed microprocessor chips for the iPhone and iPad in Texas. Some new iMac desktop computers have been stamped with "Assembled in America."

Yet he has also pointed to the challenges, including the shortage of skilled tool and die makers compared with China.

Lessin, J & Hagerty,  J (December 6 2012) Apple CEO Says Mac Production Coming to U.S. Retrieved from      http://online.wsj.com/article/SB10001424127887324640104578162992446387774.html?mod=WSJ_business_LeadStoryCollection