Two articles in the NYT last week on the success of Apple as a business and the impact that success has had on US employment and on Asia speaks to our future. I’ll discuss the first article here and the second article on the health costs of overseas production in a separate post.
The success of Apple has not duplicated the success of GM and Ford in the 1950s. A success, which employed over 400,000 workers in the US. Most of the jobs associated with Apple have happened in Asia among the companies supplying Apple with parts and assembled products. The 700,000 jobs created in the Apple supply chain, which is “mostly overseas”, dwarfs the 43,000 Apple employees in the US.
We like to think of Apple as a modern day American high tech business success story, that if replicated, would ease unemployment and increase income among the “99%”. The truth is a bitter pill. The cutting edge technology most associated with the United States high tech — Microsoft, Apple, etc. –is unlikely to lead to manufacturing jobs here according to this article. The reason is not just our higher wages compared to Asia. The cost of labor is a very small part of the cost of electronic devices.
…For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies…..
…. the focus on Asia “came down to two things,” …. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” ….
Asia, chiefly China, is the home of hundreds of suppliers of electronic parts. To be a player in the supply chain it pays to be there. When demand for Corning’s high strength glass (the glass used in the iphone) rose following their success with Apple, Corning increased production in Taiwan and Japan because that’s where their customers are.
The ability of Asian companies to respond quickly to Apple is highlighted in the story about changing the iphone screens from plastic to glass. Steve Jobs wanted it done quickly.
In mid-2007, after a month of experimentation, Apple’s engineers finally perfected a method for cutting strengthened glass so it could be used in the iPhone’s screen. The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones. Within three months, Apple had sold one million iPhones.
The other advantages of Asia are a plentiful of mid-level technicians and engineers and the ability to hire and put them to work quickly and government subsidies that speed up production.
One final quote:
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. via Apple, America and a Squeezed Middle Class – NYTimes.com.
This sounds like bad news all around for us. However, Chinese do in fact see something wrong with their splendid success– the subject of my next post.