Apple is making highlights today with their decision to resume limited manufacturing in the US. Surely it will generate some good publicity. No longer than 2 years ago, at a dinner with the Silicon Valley execs, Steve Jobs told President Obama responding to the question what would it take to manufacture iPhones in the States: “These jobs are not coming back”. Are we witnessing a reversal of the trend? My answer is — not really, but this case of backshoring does make some business sense. Here is why.
Look what Apple is bringing back:
“Next year, we will do one of our existing Mac lines in the United States,” he [Tim Cook, Apple’s CEO – N.O.] said in an interview to be broadcast Thursday on “Rock Center With Brian Williams” on NBC.
Over the last few years, sales of the iPhone, iPod and iPad have overwhelmed Apple’s line of Macintosh computers, the basis of the company’s early business. Revenue from the iPhone alone made up 48 percent of the company’s total revenue for its fiscal fourth quarter ended Sept. 30.
But as recently as October, Apple introduced a new, thinner iMac, the product that pioneered the technique of building the computer innards inside the flat screen.
Apple has for years done the final assembly of some Macs in the United States, mainly systems that customers buy with custom configurations, like bigger hard drives and more memory than on standard machines.
Mr. Cook’s statements suggested Apple is planning to build more of the Mac’s ingredients domestically, although with partners. He told Businessweek that the plan “doesn’t mean that Apple will do it ourselves, but we’ll be working with people, and we’ll be investing our money.”
So the choice product is iMac – a niche product that accounts for a small fraction of Apple’s revenue. It’s good – possibly higher manufacturing costs will not make a huge dent in margins. More good news – some infrastructure is already here from the customized iMacs. Also given the product dimensions (larger ones do approach TV size), there might be some cost savings from transportation, lead time and inventory reduction.
Finally, what perhaps Tim Cook did not say in that interview, is that the domestic manufacturing of iMac might be a proving ground for the widely anticipated Apple TV. In that case it all makes sense: intellectual property will be protected better, prototyping cycle will be shortened, and logistics will be easier.