Businessweek’s big interview with Apple CEO Tim Cook is sure to provide dozens of items to keep everyone talking all day, but I thought this was the most intriguing element in terms of where the national conversation is:
Josh Tyrangiel: You were instrumental in getting Apple out of the manufacturing business. What would it take to get Apple back to building things and, specifically, back to building things in the U.S.?
Tim Cook: It’s not known well that the engine for the iPhone and iPad is made in the U.S., and many of these are also exported—the engine, the processor. The glass is made in Kentucky. And next year we are going to bring some production to the U.S. on the Mac. We’ve been working on this for a long time, and we were getting closer to it. It will happen in 2013. We’re really proud of it. We could have quickly maybe done just assembly, but it’s broader because we wanted to do something more substantial. So we’ll literally invest over $100 million. This doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.
Charles Fishman has a good piece in the Atlantic about the general forces driving U.S. firms away from Chinese production and back to U.S.-based production. Energy costs are one factor, but so is the fact that the wage differentials have narrowed enormously. Urban Chinese manufacturing labor costs about five times as much as it did at the turn of the millenium and the trajectory is still toward fairly rapid increases. Firms aren’t exactly shuttering factories in response, but major new investments don’t look as promising as the once did.
Meanwhile, Fishman recounts that the union at Appliance Park “agreed to a two-tier wage scale in 2005—and today, 70 percent of the jobs there are on the lower tier, which starts at just over $13.50 an hour, almost $8 less than what the starting wage used to be.” Basically US factory jobs command less of a premium over retail jobs than they used to, and Chinese factory jobs offer less of a discount than they used to so the logistical convenience of not needing to fly your design team back and forth from the Pearl River Delta five times a year weighs more heavily in executives’ minds than it did ten years ago.
