By Kevin Meyer
I admit it, I love Apple products. For me they just work how I want them to, and I haven't seen the "blue screen of death" since I switched from PC to Mac years ago. But as I've said many times in the past I really dislike Apple's manufacturing "strategy" and I hate having to bump up against a moral, ethical, and operations philosophical question every time I walk into an Apple Store.
Besides the much discussed worker (don't tell me Apple really considers factory folks "team members" or "associates") safety issues, what really perturbs me is when the traditional business community lauds Tim Cook as a "supply chain genius." Give me a break. On what planet is putting virtually all of the manufacturing capability of a multi billion dollar company in pretty much the same place in a socially unstable country with unpredictable future economic policies that is often in overt political conflict with your home country, requiring product transport across the largest ocean in the world, considered "genius"? Sorry, that flunks elementary school risk analysis, and as I wrote a year ago, it's just an average, traditional supply chain that happens to be very big.
So this morning The Wall Street Journal reports that Apple is going to diversify its manufacturing. A big, bold move? Not exactly.
But under current Chief Executive Tim Cook, Apple is dividing its weight more equally with a relatively unknown supplier, giving the technology giant a greater supply-chain balance. Pegatron Corp., named after the flying horse Pegasus, will be the primary assembler of a low-cost iPhone expected to be offered later this year. Foxconn's smaller rival across town became a minor producer of iPhones in 2011 and began making iPad Mini tablet computers last year.
You read that right – "smaller rival across town" – in this case Shanghai. Not exactly a huge amount of risk abatement, let alone supply chain "genius." And how many of you Office Space movie fans snickered at "Pegatron"?
Meanwhile we have another mobile phone company, Motorola, with a stunning announcement this morning.
Cellphone pioneer Motorola announced Wednesday that it’s opening a Fort
Worth manufacturing facility that will create 2,000 jobs and produce its
new flagship device, Moto X, the first smartphone ever assembled in the
Motorola’s partner in the Texas project, global contract manufacturer
Flextronics, has leased a 481,000-square-foot factory – about the size
of eight football fields – in Fort Worth and has begun recruiting the
nearly 2,000 workers who will assemble the Moto X, due to be released
this summer. The factory, built by cellphone maker Nokia in the 1990s,
had employed 3,800 people at its peak before it was closed in 2007,
according to news reports at the time.
Wait… high volume electronics manufacturing in the U.S.? How is that possible?
Motorola Mobility officials said they see significant business logic
to having a factory close to the engineers who are designing a new
flagship smartphone and the customers they hope will buy it. Officials
say it aids innovation while allowing for leaner inventories and lower
“Doing that work of actually assembling the phone
close to home will allow us to fix things faster, innovate faster,” said
Dennis Woodside, chief executive of Motorola Mobility, a division that
was bought by Google last year for $12.5 billion.
Bingo. There's more, much more, to manufacturing than just the "cost" of labor. Other companies in similar industries are also recognizing this, and to be fair, Apple is actually one of them.
Chinese computer maker Lenovo announced in October that it would build
laptops and tablets in North Carolina, and Apple said this month that it
would invest $100 million in a plant to assemble some of its Mac
computers in Texas. Google, meanwhile, is producing the initial versions
of its wearable Glass mobile devices in California.
And also to be fair, a huge market for Apple will be China and it is a good supply chain strategy to build product close to your customers. We'll see if there will be any long-term meat on those $100 million bones. I have hope.
Meanwhile, thanks and congrats Motorola (and Flextronics) for thinking smarter about manufacturing.