Monday, January 23, 2012

How the U.S. Lost Out on iPhone Work

Excellent front-page article in Sunday's New York Times.

"Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas. Why...?"

"Apple employs 43,000 people in the United States and 20,000 overseas... Many more people work for Apple’s contractors: an additional 700,000 people engineer, build and assemble iPads, iPhones and Apple’s other products. But almost none of them work in the United States. Instead, they work for foreign companies in Asia, Europe and elsewhere, at factories that almost all electronics designers rely upon to build their wares...

"Apple executives say that going overseas, at this point, is their only option...

"Though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need...

"Apple’s success has benefited the economy by empowering entrepreneurs and creating jobs at companies like cellular providers and businesses shipping Apple products...

"In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. 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...

"Foxconn City was further evidence that China could deliver workers — and diligence — that outpaced their American counterparts.

"That’s because nothing like Foxconn City exists in the United States.

"The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant...

" “They could hire 3,000 people overnight,”  

"Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.

"In China, it took 15 days.

"Companies like Apple “say the challenge in setting up U.S. plants is finding a technical work force,” said Martin Schmidt, associate provost at the Massachusetts Institute of Technology. In particular, companies say they need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find, executives contend. “They’re good jobs, but the country doesn’t have enough to feed the demand,” Mr. Schmidt said...

"It is hard to estimate how much more it would cost to build iPhones in the United States. However, various academics and manufacturing analysts estimate that because labor is such a small part of technology manufacturing, paying American wages would add up to $65 to each iPhone’s expense. Since Apple’s profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward.

"But such calculations are, in many respects, meaningless because building the iPhone in the United States would demand much more than hiring Americans — it would require transforming the national and global economies. Apple executives believe there simply aren’t enough American workers with the skills the company needs or factories with sufficient speed and flexibility. Other companies that work with Apple, like Corning, also say they must go abroad...

"Corning was founded in America 161 years ago and its headquarters are still in upstate New York. Theoretically, the company could manufacture all its glass domestically. But it would “require a total overhaul in how the industry is structured,” Mr. Flaws said. “The consumer electronics business has become an Asian business. As an American, I worry about that, but there’s nothing I can do to stop it. Asia has become what the U.S. was for the last 40 years.”...

"Modernization has always caused some kinds of jobs to change or disappear. As the American economy transitioned from agriculture to manufacturing and then to other industries, farmers became steelworkers, and then salesmen and middle managers. These shifts have carried many economic benefits, and in general, with each progression, even unskilled workers received better wages and greater chances at upward mobility.

"But in the last two decades, something more fundamental has changed, economists say. Midwage jobs started disappearing. Particularly among Americans without college degrees, today’s new jobs are disproportionately in service occupations — at restaurants or call centers, or as hospital attendants or temporary workers — that offer fewer opportunities for reaching the middle class...

"While other companies have sent call centers abroad, Apple has kept its centers in the United States...

"“We shouldn’t be criticized for using Chinese workers,” a current Apple executive said. “The U.S. has stopped producing people with the skills we need.”...

"What remains unknown, however, is whether the United States will be able to leverage tomorrow’s innovations into millions of jobs..."

Very Interesting and eye-opening.  We need to develop the workforce needed to be successful in the global economy.  We are not.  We need to rise to the challenge!

1 comment:

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