Why Does Apple Manufacture iPhone in Asia?

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The New York Times has published a lengthy, but fascinating piece titled “How U.S. Lost Out on iPhone Work,” offering an interesting insight into Apple’s supply chain.

Not just Apple, but almost every consumer electronic company’s manufacturing is outsourced to Asian countries. So what’s the reason behind that?

You’d think it’s cheap, unskilled labor, but there’s a lot more behind these companies’ decision to move their manufacturing to Asian countries, than just saving money on paying wages.

NYT, speaking to many people both in and outside Apple, presented various examples where Asian manufacturers and suppliers proved to be lot more flexible and efficient than their U.S. counterparts.

Early iPhone prototypes had a plastic screen, prone to scratches, which obviously Steve Jobs didn’t like and demanded a glass screen instead. Apple eventually got Corning to manufacture the glass required, but it required a lot of processing to finally use it on the iPhone.

[F]iguring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.

Then a bid for the work arrived from a Chinese factory.

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

one of Apple's assembly lines (Foxconn)

An ex-Apple employee who worked with foreign suppliers and manufacturers like Foxconn said:

“They [Foxconn] could hire 3,000 people overnight,” said Jennifer Rigoni, who was Apple’s worldwide supply demand manager until 2010, but declined to discuss specifics of her work. “What U.S. plant can find 3,000 people overnight and convince them to live in dorms?”

China also has an edge over the U.S. when it comes to engineers:

Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 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.

Apple says that the U.S. can’t provide them with workers who are skilled just about enough for their positions which have now been outsourced to China. The skill level Apple desires for these jobs is a degree in between high school and college.

The article makes for an weekend excellent read, and you should visit the NYT link below to read it in its entirety.

[via NYT]

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