If you take a look at the back of your iPhone, iPad, or any Apple product you have, you’ll see ‘Assembled in China’. Many people wonder why Apple has chosen to outsource all of its production overseas, specifically to China. Many believe Apple are just out to make tons of money and that’s the sole reason for the relocation…but it’s not the truth.
Why? Why can’t Apple’s gadgets be assembled in the United States? Or in general terms, why can’t international consumer electronics and computer businesses do their manufacturing work internally, helping create local jobs and boost its existing economy?
China can support Apple’s high demands
After tons of research, The New York Times published a very informative report which covered interviews with both former and current executives at Apple. The reason behind the relocation itself is quite simple — iPhones aren’t manufactured in America because they simply can’t be. Put simply there’s not enough manpower to support the manufacturing of Apple’s products.
The factory in China where Apple products, specifically iPhones, undergo final assembly has approximately 230,000 workers. In the US, there are only 83 cities that have the same population as this factory’s number of employees. Meaning the number of possible workers in the US is not enough to cover Apple’s needs.
In China, an estimated quarter of their workforce lives in company-owned dormitories. These barracks are located on factory property. Many people are living and working at the factory. Such jobs are in high demand in China, and they can hire many people overnight. These examples prove that the measure, speed, and efficiency of Chinese manufacturing surpass anything the US is presently capable of.
Assembling locally would affect consumers most
In addition to the manpower China offers, most of the raw materials used to make Apple products are also manufactured overseas. A lot of them are within a short distance of the final assembly plant. Shipping those components to any US-based factories would mean higher costs and potentially even experience manufacturing delays.
In terms of traditional outsourcing and manufacturing, it also costs more money to manufacture in America. This is because workers need to be paid more. There are also expenses on worker benefits, insurance and higher taxes. Since companies want to generate revenue, added costs are inevitably transferred on to the consumer in increased prices for goods. In simpler terms, this would mean that American-manufactured Apple products would cost more.
China is the best fit for Apple
Apple’s decision to outsource its manufacturing to China is really about who can build the most number of Apple products within the shortest amount of time. This also meant that China is able to remain flexible and immediately adaptable to the needs of Apple. In a report, an Apple executive also stated that the US no longer has the people with the skills that they need.
One particular example would be the release of the iPhone. There is a huge demand for it, and Apple knew it needed to be finished as fast as possible. Apple was aware that it wasn’t attainable in US manufacturing, and that it would result in delays. With this, they sought out the service of Chinese factories, and they were able to quickly finish the tasks.
This is because in China, manufacturers can ask a large number of engineers to work on the required manufacturing overnight. As they have an abundant supply of labor force, this allows them to finish a large capacity of workload quickly. The US simply cannot employ 250,000 workers overnight. This makes China a flexible and capable supplier.
Yes, Apple is reaping the financial rewards. But this is because China has an abundance of hard-working people with the right skills. They are willing to accept demanding jobs, such jobs are standard to millions of Chinese, including workers who have technical skills.
PS: If you’re interested in learning more about what China is doing to improve it’s manufacturing industry, check out my recent post ‘Why We No Longer Fear ‘Made in China” here.
Giovanni’s passion and interest in global sourcing and trade gives him insight and understanding that most would miss. His love of research mixed with his background in business makes for an interesting read.