How Tim Cook Steered Apple to New Heights… and Dependence on China
Austin Carr and Mark Gurman have authored a profile of Tim Cook for Bloomberg Businessweek, exploring how Cook took the baton from Steve Jobs and propelled Apple to once-unimaginable heights. In short: he offshored production to China, cut every possible cost (even down to fractions of pennies), and managed every aspect of production (with Apple employees supervising factory floors to spot inefficiencies). In the process, he greatly expanded Apple’s product lines, all while playing politics with a deft hand.
That’s not to be dismissive of Cook’s success. Unlike Steve Ballmer’s Microsoft, in which the company made more money than ever while struggling to maintain its core products, Cook’s Apple has developed a wide variety of new products and services. While some products might have temporarily stagnated (such as the Mac mini and Mac Pro), no major product has rotted on the vine. And Apple, under Cook’s leadership, has pseudo-miraculously churned out new products even as the global supply chain buckled under the effects of the COVID-19 pandemic.
But the Bloomberg story has a deeper and more concerning context: the inability of countries outside of China, especially the United States, to build products at scale. One of the more depressing aspects of the article is the stories about troubles at Apple’s Mac Pro plant in Texas, run by contract manufacturer Flex, with difficulties in acquiring components and problems with inexperienced workers. The article all but admits that it’s impossible to build such high-end electronics in the United States today. In contrast, Foxconn transformed an empty field in China into an iPod nano factory in mere months. Apple has taken steps in recent years to offload production to India and Vietnam, but the company has struggled with scale and quality issues in those countries too.
There’s no question that Cook’s Apple both says nice things about social justice and puts its money where its mouth is (see “Apple Launches New Racial Equity and Justice Initiative Projects,” 13 January 2021). But regardless of these efforts and Apple’s Supplier Responsibility policies, the more reliant Apple is on Chinese manufacturers, the more open it is to criticism of supporting a double standard, given the Chinese government’s actions with regard to Taiwan and Hong Kong, its Uighur population, and dissident voices of various stripes, among numerous other social and environmental concerns. We live in a global economy, but the need for more geographic diversity in manufacturing has become clear, given the past year’s supply chain shortages. Here’s hoping Apple shows the way there, rather than continuing its focus on China.
It would be better if production was moved from Red China to Foxconn’s factories on Taiwan. Of course their attempt to build a factory in these United States floundered and is behind schedule, so it isn’t realistic to expect they could build Apple products here.
Would it make a difference if Foxconn was building and running the US factory? Given the problem of unqualified employees, would increasing the use of robots make a difference to doing Apple’s manufacturing in the US (but that would reduce the aim of employing more Americans)?
I went to China in 1976 and those days we had supervised tours that included visiting factories which were rather underwhelming. But I was with a bunch of industrial CEOs and collectively they were upbeat about getting products manufactured in China. In hindsight they saw the potential whereas I was not wholly convinced.
Between the higher labor costs here and the lack of the underlying parts infrastructure the price would be considerably higher. Like it or not…these devices don’t have a steady demand…for a fall launch they need maximum production from July or so through Feb or so when demand starts to slow. That means more workers for part of the year…and this isn’t to speak ill of either our labor laws or unionized labor…but the combination of those two make a variable sized workforce not something easily achieved here if it is possible at all. The support infrastructure for the assembly lines…parts, vendors, etc…is another huge problem as it just doesn’t really exist here…and a big reason for that is back to labor supply, demand, and cost.
I am trying my best to avoid bringing politics into this discussion. There are huge problems with factories that Foxconn already built in the US but never staffed:
Definitely agree. Look at the problems Foxconn is having getting their first factory (Wisconsin) up and running in these United States. That is why I said it would not be realistic to expect Apple to build here. Also, based on my experience with automobiles built in these United States, the quality would not be as good as it is now.
It’s a problem, for sure. Does anyone know of high tech manufacturing successes in the US that could perhaps be used as a model?
Dell still builds some servers in Austin; everything else happens in factories in other countries. I think HP still does some assembly in the US.
Perhaps the biggest reason Steve Jobs hired Tim Cook was the supply chain he engineered for Compaq. He not only re-engineered Apple’s supply chain, he limited and focused Apple’s product line, and successfully oversaw the development and delivery of a host of new products, services and upgrades. IIRC, an important component of this strategy was shutting down Apple’s inefficient and problematic factories in the US. When it comes to manufacturing, I’m not qualified to second guess Tim.
Something else just dawned on me about manufacturing in China. That country is, by far, the biggest miner of silicon, producing 4,500,000 tons a year. The US is #4 at 320,000.
Foxcon saves a lot of money by manufacturing near the source of silicon. If Apple wanted to manufacture chips here, it would have to pay the cost of shipping raw materials to the US, as well as higher manufacturing costs.
Well, a few years ago, I would have said Boeing, but not so much now.