Apple to "Repatriate" Some Production back to U.S. from China

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By EW News Desk Team | December 10, 2012 11:07 AM EST

Economy Watch

Tech giant Apple Inc will invest nearly $100 million next year in order to shift a small proportion of its production capabilities back from China to the United States, announced its chief executive Tim Cook on Thursday, in a move widely seen as a high-profile test of American manufacturing competitiveness.

Appearing on NBC's Rock Center, as well as in an interview with Bloomberg BusinessweekCook said that the investment would go toward production of an existing line of its world-famous Mac computers, while asserting that the operation would include more than simply final assembly of the product.

"We've been working on this for a long time, and we were getting closer to it," he told Bloomberg Businessweek.

"We're really proud of it [and] we could have quickly maybe done just assembly, but it's broader because we wanted to do something more substantial," he added.

The world's most valuable company has since the late-1990s been gradually shifting most of its manufacturing to China, where there have been recent complaints over poor working conditions. Apple also faced heavy political pressure to shift some of its manufacturing back to the U.S., as exemplified during the presidential elections when both President Barack Obama and Mitt Romney were asked specifically about how they would persuade Apple to move back.

Related: Infographic: Apple's A Billionaire, But Its Workers Are Dead Broke

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"For the first time since the 90s, Apple is taking steps to control the last pieces of the value chain it participates in," said Horace Dediu, a mobile industry analyst at Asymco, to theFinancial Times"It's a baby step and perhaps it's going to remain symbolic, but one can imagine a trajectory for this effort which will pay off, as well as retail has paid off 10 years after the first Apple store opened."

"It is almost like a trial," added Carolina Milanesi, an analyst at tech research firm Gartner Inc to the Wall Street Journal. "If it works it works, and if it doesn't work they can say they tried it."

Cook himself admitted that the company had a "responsibility to create jobs" in the U.S., though he ruled out moving all manufacturing back from China.

"Honestly, it's not so much about price, it's about the skills," he said. "Over time, there are skills that are associated with manufacturing that have left the US. Not necessarily people, but the education system stopped producing them . . . The consumer electronics world was really never here."

The announcement comes just a day after Apple posted its worst stock drop in four years, erasing $35 billion in market capitalization. After opening 2 percent lower on Thursday, taking its valuation below $500bn for the first time since March, Apple shares closed up 1.57 percent to $547.24.

Andre Sharon, a professor at Boston University and director of the Fraunhofer Center for Manufacturing Innovation, told the New York Times that Apple's move was unlikely to inspire more American companies to move back home, despite rising wages in China.

"So much of the know-how has been lost to Asia, and there's no compelling reason for it to return. It's great when a company says they want to create American jobs - but it only really helps the country if those are jobs that belong here, if it starts a chain reaction or is part of a bigger economic shift," Sharon said.

Related: America Needs To Rethink Its Priorities With China: Stephen Roach

Related: America's China-Centric Blame Game Is Absurd: Stephen S. RoachR

Related: Chinese Consumers Willing To Pay More For "Made in USA" Goods: BCG Study

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The article was first published by Economy Watch.

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