In the immediate wake of Apple (NASDAQ: AAPL) CEO Tim Cook’s disclosure last week of the vendor’s $100 million plans to move some Mac manufacturing from overseas back to the United States, the easy pickings was either to applaud the move or diminish it for lack of true impact; in other words, to complain that it was mostly window dressing.
Detractors lining up on one side criticized Apple for the seemingly meager investment—what’s $100 million to a company with $121 billion in the bank, and, even more to the point, what’s $100 million to a company whose annual capital expenditures budget runs to $10 billion? Quick answer—not much. Some critics also exactingly noted that high-tech manufacturing plants may not produce a significant number of jobs, as articulated by Daniel Gross, writing in the Daily Beast, noting that Apple’s $100 million may only net about 200 new manufacturing jobs, a “paltry bang,” as he put it, for Apple’s investment.
Apple is but the latest American company to “reshore” jobs after years in which IT makers moved production opportunities elsewhere, a redirecting prompted by rising wages offshore, quality control issues and a newfound impulse on the part of manufacturers to keep a heavier finger on the process, as pointed out in this article in The New York Times. On the basis of its market presence, however, the vendor has garnered a great deal of attention for the move, dwarfing Lenovo’s announcement in October that it plans to begin making PCs in North Carolina next year. Yes, that Lenovo, as in the worldwide PC market shipment leader.
Which brings us to the main point. Rather than using a wide-angle lens to view Apple’s manufacturing strategy, perhaps, for now, it is best viewed through a narrower prism–that is, what impact will it have on the PC industry, and could it compel others to follow suit?
Inasmuch as Apple isn’t going to transfer more than a small portion of its production to the United States next year, and the fact that, by most measures, the vendor’s share of the worldwide PC market is less than 6 percent, the material impact of its move on the PC segment is negligible at best, as pointed out by Craig Stice, a senior principal analyst as IHS, a U.K.-based researcher.
“The percentage of production likely to be shifted by Apple from Asia to the United States in 2013 is likely to be negligible, both for the company and for PC industry at large,” said Stice. “Lenovo’s announcement appears to have flown under the radar—while Apple’s move has dominated the headlines. Apple is a company that is always in the spotlight, and the company’s image sets the standard in the PC world. If Apple is doing it, will others follow?”
The best answer right now is maybe, depending on whether other vendors can make the business case for moving. In other words, can they lower their cost-of-goods and boost their responsiveness to market demands by reshoring?
In Apple’s case, as IHS points out, two of its three Taiwanese manufacturers, namely Quanta and Foxconn, have small manufacturing facilities in the United States, where Apple easily can divert some Mac production, although right now there is no word from the company on that one.
By researcher IDC’s measure, Apple doesn’t register in the top five for worldwide PC shipments for Q3 2012, although the vendor does hold the third spot in the United States with a 12.5 percent share, well behind HP (NYSE: HPQ) at 26.1 percent and Dell (NASDAQ: DELL) at 20.7 percent of the segment.
From an IT standpoint, the real question surrounding Apple’s strategic move is, will it result in more PC’s shipped and a correspondingly higher share of the worldwide and U.S. markets? That’s not a question likely answered by a mere $100 million.
Source Article from http://www.thevarguy.com/2012/12/11/why-apples-small-manufacturing-shift-could-be-a-big-deal/
