Wednesday, July 26, 2017

Apple building new US factories, says Trump

The Wall Street Journal is reporting that Trump said Apple will build three new plants in the US:
Mr. Trump, in a 45-minute interview with The Wall Street Journal, said Mr. Cook promised him Apple would build “three big plants, beautiful plants.” Mr. Trump didn't elaborate on where those plants would be located or when they would be built.
As noted in the article, if this is true, it would be a sea change for Apple. The article suggests that these factories would be Apple owned and operated, not contract manufacturers:
Building three manufacturing plants would be unprecedented for Apple as it only has one plant of its own currently in Cork, Ireland, where it has operated since 1980 and benefits from lower taxes on overseas profits. Apple instead primarily relies on contract manufacturers such as Foxconn, Pegatron Corp., Wistron Corp. and others to make iPhones, iPads and Macs. 
Many long time Apple followers will remember that Apple's return to profitability in the late 90s was driven as much by Cook's supply chain efficiency as it was by Job's new products. Cook pruned Apple's excess inventory, shut down their own plants, and developed/expanded the relationships with contract manufacturers. Without Cook's efficiency, Jobs might not have had the resources or the time to Make Apple Great Again™.

If it is true that Apple is building new factories in the U.S., there might be a couple of drivers: 1) the products can be priced with a high enough premium that the additional costs are easily passed along to the customer (Mac Pro, or iPad Pro, or iPhone Pro?); and 2) because building the plants advances Apple's other priorities (overseas profits repatriation, political goodwill with administration). It's just too expensive to build electronics in the US for it to be a great business decision on its own, especially with a competitive market (like the regular iPhone.)

It would also be interesting to see possible locations of the plants, since states have become so willing to provide tax incentives for major manufacturing investments. I'm sure every state development office is salivating now over the thought of an Apple plant in their jurisdiction. 

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