Last week, the New York Times published an article written by Charles Duhigg and Keith Bradsher intitled: “How the U.S. Lost Out on iPhone Work”. It was a brilliant article detailing the realities of why China constructs 70%+ of Apple’s products and why America can’t compete with China’s factories/workers. The article got so much praise, that now there is talk of it winning the Pulitzer but in its brilliance, there were some shockingly sad realities about America’s manufacturing past/present/future.
Let’s start at the beginning. About a year ago, President Obama came to California and had dinner with silicon valley’s heavy weights – C.E.O.s from companies like: Netflix, Genentech, Oracle, Google, Intel, Facebook and Apple. At the dinner, each C.E.O. was asked to have a question ready for President Obama. As the story goes, when the late Steve Jobs (C.E.O. of Apple) was talking, President Obama interrupted him and asked: “what would it take to make iPhones in the United States? Why can’t that work come home?” Without blinking, Steve Jobs looked at the President and responded: “Those jobs aren’t coming back.”
Why aren’t those jobs coming back? Why can’t we complete with China and its workers? Why is Apple, a company with cash assets now worth almost 100 Billion and a stock price that puts it only second to Exxon (market Cap) not doing more to return some of that wealth back to America. These are some hard questions to answer and unknown to most of us, these questions have some very uncomfortable answers. Answers that not only define our country and what it has become but also, how we live and buy things. Here is where the answers start:
Weeks before the first unveiling of the iPhone 4, Apple decided to make last minute changes to the screen – last minute changes that effected every aspect of the iPhone’s assembly line. The decision to change the screen was made in the afternoon – by midnight, the whole assembly line was re-worked for the proper changes and the foreman of the factory woke up 8,000 workers (middle of the night) – putting them to work (each had been given a biscuit + some tea). 96 hours later, the factory was producing 10,000 iPhones a day – with production ramping up daily.
Charles Duhigg and Keith Bradsher go on to point out that executives they spoke to said: “The speed and flexibility is breathtaking…There’s no American plant that can match that…” when speaking of Chinese factories. So, Here is where we start to see the real divide:
Similar stories could be told about almost any electronics company — and outsourcing has also become common in hundreds of industries, including accounting, legal services, banking, auto manufacturing and pharmaceuticals.
But while Apple is far from alone, it offers a window into why the success of some prominent companies has not translated into large numbers of domestic jobs. What’s more, the company’s decisions pose broader questions about what corporate America owes Americans as the global and national economies are increasingly intertwined.- New York Times
So let’s go back to President Obama’s question to the late Steve Jobs: “Why can’t that work come home?” The sad reality is not so complex but it is tragic on many levels and Mr. Jobs was right in saying: “Those jobs aren’t coming back.”
1) The Establishment: The established factory and factory cities in China make moving full scale manufacturing back to America nearly impossible. At just one of Foxconn’s factory cities, nearly 1 million people work, sleep, live and eat. Imagine moving all that infrastructure back stateside.
2) The Chains That Bind: The established Asian supply chains would make mass production, assembly and changes much more expensive, if factories were located in America. The majority of the hundreds of small parts that make up the iPhone 4S are made in Asia – meaning that they would need to be shipped all the way to America for assembly.
3) Information Economy: While America has quickly adopted an information economy, we have also abandoned the manufacturing economy that made this country grow. We no longer have the facilities necessary to bring jobs back (look at Detroit’s buildings) and if we were to start building our infrastructure, it would take years to catch up to China.
4) They’ve Got Skillz: While skilled workers can be trained anywhere, China has industrialized training – with specific manufacturing positions being filled within 2 weeks. Workers go to training schools, within massive factory cities and study 15+ hours a day. This is expected in China and the average factory worker has “submitted” to this type of treatment/work. Americans have never experienced this type of industrialized learning and treatment, at least not in the last 3 generations. Maybe during the industrial revolution and after the 1929 stock market crash, did American workers see that type of life.
5) I’ll work for 30¢/Hour: The most prominent difference between manufacturing jobs in China and America are the laws. This includes hundreds of labor, safety and wage laws. What is the minimum wage law in your state? $8.25/Hour? How about 30¢/Hour and you work a 36 hours work shift! That’s right – there have been reports of people working 36 hours straight.
6) I’ll buy that for a dollar: Buy “Made in America.” People have speculated the cost of an American made iPad 2. The numbers have ranged all the way up to $1,140 – please keep in mind that these are fact based estimates and not tested. Yet, for the sake of argument let’s say Apple made two versions of the iPad: One made in America and the other made in China – how would the average capitalistic american consumer react? Right now, you walk into an Apple store and see on the shelf two iPads – times are tough – the economy is hard – your wallet is not what it used to be. The Chinese iPad on the right has a sign that reads: $499 – the American made iPad on the left has a sign reading: $699 (they are the same iPad/build quality/specifications) what do you pick? I think it’s fair to guess that the majority of people would still buy the Chinese built iPad.
It’s not that we can’t compete – we aren’t even playing the same game. The average Chinese worker and the average American worker can’t compete, they live in two different worlds. Over the years, Americans have fought for standardized labor laws, protecting the standard of life and living they desired. China has essentially sold the majority of its population into slavery to the world. This is the brutal truth to why those jobs will never come back to America. It isn’t a matter of Americans not being able to put together an iPhone, its a matter of, “I won’t do it for 30¢/hour!” The “Jobs” issue is immensely complex and while I have done my best to cover the main points – this is not solely an economic problem. This is a social, economical, moral and cultural problem. Sadly, there will be no real solution and no “jobs” will come back to America until people truly understand what they are asking for when they say, “I want those jobs back!”
Charles Duhigg and Keith Bradsher have written what I consider, (hands down) the best article of the year….so far. Please go and read it in its entirety, as my summarization does not do it justice. You can find it here – New York Times.