The answer is pretty obvious, right? It’s cheaper labour! But is that the only reason why Apple (and other companies) outsource its workforce to China as opposed to keeping them in America? No. There’s more. The New York Times has an excellent report on why Apple ignores America when it comes to making the iPhone, and how that’s better for Apple.
During that infamous Silicon Valley dinner with Barack Obama, the POTUS asked Steve Jobs, “What would it take to make iPhones in the United States?” And once upon a time, Apple would have loved to make the iPhone in the US of A. In fact, the old Apple prided itself on making products in the US. But ever since the early 2000s, Apple has made most of its products outside the US. Why? It’s a combination of not only cheaper labour but better labour, better factories and scale. According to the New York Times, who spoke with Apple executives:
Apple’s executives had estimated that about 8700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.
In China, it took 15 days.
That flexibility, speed and scale in factory workers just doesn’t exist in the US. Apple says it “shouldn’t be criticised for using Chinese workers” because “the US has stopped producing people with the skills we need”. There just aren’t enough skilled workers in the US that have that in-between degree of high school and university. That’s what Apple wants in its factory workers and that’s what China gives ‘em.
And though everyone cites how the cost of labour is much cheaper in China, the fact is labour is less important to a company’s bottom line than supply chains are. And the reality is all the supply chains to manufacture consumer electronics exist in China. Components are made in this facility, glass next door, a million screws can be found down the road, so on and so on — that convenience saves companies a lot more money than the benefit of hiring cheap labour.
Go read the full report on Apple and China. It’s a great one. [NY Times]
Image: Tony Law/Wired
olearymo
Monday, January 23, 2012 at 9:06 AMI’d love to know what Jobs’ response to Obama was?
morgs
Monday, January 23, 2012 at 10:49 AMsteve: because our country is full of morons
obama: damn right!
both: lololololol
Ash
Monday, January 23, 2012 at 9:16 AMNot only that, asian workers in general also have a much better work ethic. Call it a racist comment if you want, but when you compare the hard working nature of chinese, Indians, and Japanese to the likes of some western countries where they heavily rely on government support when they are jobless, then you can see where these peoples work ethic comes from – the simple fact that they need to succeed to keep a job and feed their families otherwise they have nothing to fall back on.
RobbyM
Monday, January 23, 2012 at 9:35 AMBy “better work ethic” I assume you mean low wages and the companies being able to say “we’ll fire you if you complain or don’t work the 12+ hours we expect you to”??
Yes I can’t imagine why workers in Western nations aren’t willing to put up with the same work conditions.
Oh and would I be correct in assuming that if something happened that prevented you from being able to work – say become disabled, that you refuse a pension?
Timmahh
Monday, January 23, 2012 at 9:51 AMI notice you conveniently forgot or are unaware of the atrocious conditions these Chinese labourers are working under. They are treated like prisoners and are not allowed to make friends or have any real social lives simply by threatening them with the sack! They are housed in dormitories with others shift members so they can’t make any real attachments or friends. They can’t even talk to family and are watched all the time, even when outside.
Think I’ll stick with our system thanks!
Azza
Monday, January 23, 2012 at 10:07 AMIndeed, I sent Gizmodo a link to an article about the chinese factories working on apple products last week, but was obviously ignored. This talk of skilled engineers is appalling, considering they have employed underage workers. Those dormitories have tiny beds that fit together like a jenga tower that the workers sleep in and whenever they have a big launch coming up, the average hours for the factory workers go to about 14 hours a day. This isn’t even considering that one worker died from working 36 hours straight. iPads and iPhones are hand made because people are so cheap.
I would love to hear what an average suicide rate in a US factory is versus foxconn.
RobB
Monday, January 23, 2012 at 10:25 AMAre you referring to sensationalized media reports or what you actually know of? I have spent months in Chinese factories up and down the country from Zhongshan to Shanghai and am yet to come across “appalling” work conditions.
Deed
Monday, January 23, 2012 at 10:34 AMIt’s no use RobB. The media does so well in feeding the general public what to believe it’s hard for them to imagine otherwise.
Titsnass
Monday, January 23, 2012 at 10:37 AMOK, but did you visit the factory where Apple products are made? These fact are well documented and there are various documentary reports as well. Your attitude is part of the problem, not the solution!
Matt
Monday, January 23, 2012 at 11:21 AMPlease don’t say “the factory where Apple products are made”. You’re talking about Foxconn, who the majority of people only know the name of because of this sensationalist media garbage. Maybe this would shed some more light:
Foxconn’s Major Customers
It’s not the place where Apple products are made, it’s the place where Amazon, Cisco, IBM, Intel, Microsoft, Motorola, Nokia, and Sony products are made.
Titsnass
Monday, January 23, 2012 at 11:38 AMPainting it with a broader brush doesn’t make it a better place, but I get your point! :)
Telextial
Monday, January 23, 2012 at 6:10 PMI think he’s saying that, because:
“Foxconn assembles 40% of the world’s consumer electronics products”
It probably has the largest share of workplace incidents. That’s an insane production output there.
Azza
Monday, January 23, 2012 at 5:07 PMThis American Life did a fantastic article on this subject of which they were also very transparent with their fact-checking methods and even references to reports that Apple released themselves. But even then, I have been to factories in Nantong and Shanghai and seen the conditions for myself. You have either been very lucky in the factories you visited, or simply a liar.
I’ll also point out the fact that labour unions in China being illegal and the suicide rates in their factories are hardly part of sensational media.
Michael
Monday, January 23, 2012 at 10:52 AMIt’s all true that the Chinese workers are subjected to awful working conditions by western standards – but you’ve got to remember that Apple did not create these conditions… And that if it were not for the likes of Apple employing these people, they would be back home in their villages living in absolute poverty. 60% of China still does not even have electricity. It’s a very positive thing that employment exists like this – it saves people from very real 3rd world poverty.
Gankul
Monday, January 23, 2012 at 9:49 AMSo americans are a combination of over qualified and under qualified??
Which need to be in the middle? the engineers or the line workers?
So they are saying, because it would take 9 months to get the engineers, it would e a problem. What happens once they get the engineers though? i would assume then that unless en mass leave, then they should be fine to keep production going.
chugs
Monday, January 23, 2012 at 10:00 AMApple might be evil but they sure make a great phone.
Rhysnotreece
Monday, January 23, 2012 at 10:12 AMAlso, then try and keep a new product a secret.
Lord Crumplebottom
Monday, January 23, 2012 at 10:40 AMI’ll believe that’s the ONLY reason when mah sh*t turns purple and smells like rainbow sherbet.
Makk
Monday, January 23, 2012 at 10:46 AMOf course some employers treat their staff like crap. It happea here too. I once worked for a retailer where a manager would make staff stay at work for up to 3 hours after a night fill without pay. When I said something, I was forced out of the company. There are also good places to work, and I’m sure China has them too. I personally don’t want my electronics made in a developed country. If you think stuff is expensive now, imagine what stuff would cost if manufacturers where paying people the award, and this goes for everything electrical.
James
Monday, January 23, 2012 at 11:39 AMI liked Joe Rogan’s idea of being able to buy a Karma free iPhone, made by people who are paid well and work normal hours. Sure, the phone would probably cost you $2000 BUT at least you have the choice of peace of mind. (and you sure would treat that phone well for that cost)
Ozoneocean
Monday, January 23, 2012 at 11:57 AMThat’s a fine, but false story. If labour costs weren’t an issue they’d be setting an example and paying the Chinese workers a wage comparable with workers in the US.
They do not.
Nor do any of the other device makers either of course, but it’s Apple giving us the bull here in this instance and you have to call them on it.
Osiris Fox
Monday, January 23, 2012 at 12:15 PMI will never buy Apple Products. Yes, they are fantastic devices, but I will never buy into the marketing hype. There are comparable devices out there with your own flavor, not vanilla, err I mean Apple.
Telextial
Monday, January 23, 2012 at 6:12 PMAh, I see. You’ll buy into the Galaxy hype instead. Each to their own.
Marianne
Monday, January 23, 2012 at 12:18 PMThe only reason China works is because it is cheaper because the whole system is geared to making enormous profits at great cost to labour, the environment,…
light487
Monday, January 23, 2012 at 12:21 PM200,000 you say? Try over 440,000 in the Shenzhen factories. Try 16 to 18 hour days.. it’s not just cheaper in terms of how much per hour you are paying but cheaper in terms of quality of life given to workers. One report shows that workers are forced to do the same job over and over for years, effectively crippling them before they are even 30 years old. Once they’re crippled, there is no more chance of work for them.. anywhere. The report suggested that simply rotating the workers around to different types of jobs within the factories every month or two would be enough to change this… but they won’t even do that because it’s cheaper not to.
Yes, it’s more than “cheaper wages” but it still comes down to the same thing “it’s cheaper”.
dfg
Monday, January 23, 2012 at 12:34 PMso again it comes down to america destroying itself by having plentiful education.
Karlos
Monday, January 23, 2012 at 12:36 PMWhat happens when the Chinese people rise up from there oppressed conditions? The Asian spring will come! Who will the corporate world support the people, or the regime that makes them rich.
Telextial
Monday, January 23, 2012 at 6:14 PMThat won’t happen. There’s way too much imbalance in China (meaning not a few rich elite, but huge numbers of them). In a few decades China will sort itself out, but revolution is highly unlikely.
Hotchips
Monday, January 23, 2012 at 6:36 PMThey won’t support either side, they will find new territories for cheap labour. Africa, some South American countries…
Makk
Monday, January 23, 2012 at 11:46 PMThen we move manufacturing to India. It’s already happening.
Snacuum
Monday, January 23, 2012 at 12:55 PM“The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.”
Oh no! And one of the most profitable and well-respected electronics companies can’t deal with that? Hell they’re designing new products all the time, it would take nothing to plan to shift production to the US for fabrication of their new products over a 9 month R&D period. Of course it’s just the money.
light487
Monday, January 23, 2012 at 1:44 PMYes.. I mean.. ok.. say it takes 9 to 12 months to setup… in the meantime you run things through China.. then when it’s all setup, you bring everything through to USA.. right.. right?
Oh wait.. Americans have rights.. they can say no.. they can question the working conditions.. they can strike.. they don’t need to resort to killing thesmelves to get attention.. they can complain to independant industry bodies and unions to get fair and equal treatment… too much trouble.. too much money.. too much time wasted.
Ozoneocean
Monday, January 23, 2012 at 2:03 PMExactly true.
The line that it’s about sheer numbers is a flat out lie.
It is definitely not Apple alone who do this by any stretch of reality, but they are the ones lying about it in this instance.
Abe
Monday, January 23, 2012 at 2:06 PMWow gigabyte arent on the list, even HTC!! feel a bit better now…
Mac
Monday, January 23, 2012 at 2:41 PMI bet every single one of you geeks has a smart phone, and not one of you skin flints would pay a cent more for it than you had to. So shutup about working condition and go back to your angry birds you hypocritical losers.
Azza
Monday, January 23, 2012 at 5:00 PMI’m pretty sure you would lose that bet, as yes I think everyone here has a smartphone, most would be happy enough to pay a little more if there was good karma attached to it.
Ozoneocean
Tuesday, January 24, 2012 at 3:01 PMWell said. I would pay more. And I certainly paid more for my smartphone than I would’ve for any iphone!
Suzie
Monday, January 23, 2012 at 5:08 PMI remember being in HK decades ago and wondering what the line of people out the front of major construction sites were. It turns out they were unemployed building workers waiting for someone on site to die so that they could take their place. 2012 and nothing’s changed.
Telextial
Monday, January 23, 2012 at 6:17 PMWow. You do know that decades ago Hong Kong was a completely different, much smaller, city under British rule, right? Also, it’s an entirely different city to the rest of China; both in people and in business. Really, that sort of talk shows little in world knowledge.
moloko
Monday, January 23, 2012 at 5:56 PMIt’s cheaper, that’s all.
Boz
Tuesday, January 24, 2012 at 1:31 AMI think you fail to realise the point of the article. Sure, it can get more expensive, pay could increase 50%, but it still won’t come back because the US infrastructure is no longer there. No semiconductor fabricators, no plastics or glass manufacturers, no engineers. Labour is only part of the issue – for years Asian countries have used their governments to offer tax-free holidays to US companies to manufacture there – now that they’ve ripped the manufacturing infrastructure out of the US, it’s financially impossible to bring it back.
Cheaper is not the issue here – it’s all about the companies around Foxconn that make the parts, the engineers that float around the area, the ability to bring 200k people together to make a shedload of iPhones in the space of a few days, the development cycle of only a couple of months to feed a hungry Western desire for the latest and greatest every year. The US has lost the manufacturing muscle, and that’s a lesson for all developed countries.
And forget the karma iPhone – for every million iPhones sold you might sell 1 karma iPhone, even if it was $50 more expensive. It will still have components made in China, because they’re the only ones making those components.
Pmj
Monday, January 23, 2012 at 10:50 PMThe US government has nothing better to do than to try and stifle business. I’d bet that it could take you a year or two to get approval to build a new factory in the States. The government completely missing the point that tens or hundreds of thousands of factories have been closed over the years, and with them, their contribution to the trade balance, jobs, etc. Washington is all about red tape, willfully ignoring it’s consequences. Compare that to China, where they build new factories on the chance they might get your business. The US is broken, and nothing will improve until the problem is recognized and paid more than lip-service.
Ozoneocean
Tuesday, January 24, 2012 at 3:05 PMYou’re being silly here in the context of this article:
What you’re saying is that by forcing business to pay a living wage and treat workers humanely, the US government is “stifling them”.
Quite silly.
Maybe you didn’t intend that, but in the context of this article that is what your post means.
pmj
Tuesday, January 24, 2012 at 8:38 PMI’m saying that the article is missing a very important point. Salaries are higher in the US than in Asia, this is a fact, and will never change. Red tape can be ripped up. Right now, all parts of the American Government are for hire. Hey senator, I’d like to provide you with $10 million in funds for your campaign if you’ll support this new bill I wrote for you that helps put my competitor out of business. Also, my business buddy will make a bundle if you force all factories to comply with xys8287 standard, for which he is the only company that verifies that stuff.”
Pollution control is a good thing, reasonable wages is a good thing, most other rules are an obstacle to an American getting a job. If there isn’t a really good reason for a rule, get rid of it. Multi-year timetables for factory approval guarantees the factory will be built elsewhere.
alinquias
Wednesday, March 21, 2012 at 5:04 AMThis is bullshit reasoning, America doesn’t have the qualified workers and the needed “flexibility” because we don’t have the infrastructure, we don’t have the infrastructure because uber-rich companies like Apple don’t care about building it.