Three decades ago, Apple tried to manufacture its Macintosh computers in Fremont, California. They had a state-of-the-art plant where labor would be just 2% of the cost. After it did not work out, the factory closed in 1992.
Recently, some of the same kinds of problems surfaced in Austin, Texas.
A Texas Mac
In 2012, Tim Cook announced that the label on Apple’s Mac Pro computers would say Assembled in the USA. Made around the world, the components were sent to China. Their last stop would be Austin, Texas.
First though, Apple did some testing. In China it would have been easy. The people who got new versions of a machine were available 24/7. The Chinese were low cost, flexible, and appropriately skilled. On massive manufacturing campuses, hundreds of thousand of workers could make a lot of parts quickly.
But not in Texas.
By looking at a small screw, we can see the bigger problem. The Austin subcontractor, Caldwell Manufacturing, could not replicate the design or produce the quantity that Apple wanted. Explained by the NY Times, Caldwell had switched to more precise specialized manufacturing when Asian outsourcing began. They were not set up to do the tweaking or the speedy mass production that Apple needed. Even after delays, the parts were not quite right.
Facing a shortage of screws, Apple wound up getting them from China.
You get the picture. China has the “scale, skills, infrastructure and cost.” To create a U.S. version, the robotics, the specialized engineers, and the supply chain infrastructure would have to be built. They did not have it in Austin, Texas.
Our Bottom Line: Human Capital
Chinese labor gets somewhere between $2.10 and $3.15 an hour. In their command version of capitalism, a labor force is on call. Furthermore, on their sprawling gargantuan factory campuses, they have the teams that Apple needs when they need them.
Their human capital–the knowledge that a laborer is equipped with–is different from what Texas has to offer. As a result, Apple’s expansion in the Austin, Texas area is not at its Mac Pro plant. It is adding 15,000 non-manufacturing jobs.
Our featured image is from the NY Times.