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Apple CEO Tim Cook: This Is the No. 1 Reason We Make iPhones in China (It's Not What You Think). China is much more than a source of low-cost, low-skilled labor.
INC. ^

Posted on 09/05/2020 7:22:34 AM PDT by SeekAndFind

Take a look at the back of the box from which you unpacked your iPhone and you'll see this: "Designed by Apple in California Assembled in China."

Reading this tagline might trigger a vision in your mind of Jonathan Ive, Apple's legendary chief design officer, dropping the drawings and technical specs for the next-generation iPhone into a (highly secure) shared folder that its low-cost suppliers in China can access as they manufacture and assemble the product by the millions.

But as Apple CEO Tim Cook recently pointed out, this picture wouldn't tell the entire story of how an iPhone actually gets made today, or why Apple prefers to make them in China. At the Fortune Global Forum in Guangzhou in early December (my firm, McKinsey & Company, was the Knowledge Partner), I listened to Cook as he explained why Apple continues to favor China as its central base for manufacturing iPhones:

The number one reason why we like to be in China is the people. China has extraordinary skills. And the part that's the most unknown is there's almost two million application developers in China that write apps for the iOS App Store. These are some of the most innovative mobile apps in the world, and the entrepreneurs that run them are some of the most inspiring and entrepreneurial in the world. Those are sold not only here but exported around the world.

Highly skilled software developers developing apps for the App Store are one reason Apple likes to be in China. But the depth of highly skilled labor in the manufacturing space is why Apple makes its iPhones there:

China has moved into very advanced manufacturing, so you find in China the intersection of craftsman kind of skill, and sophisticated robotics and the computer science world. That intersection, which is very rare to find anywhere, that kind of skill, is very important to our business because of the precision and quality level that we like. The thing that most people focus on if they're a foreigner coming to China is the size of the market, and obviously it's the biggest market in the world in so many areas. But for us, the number one attraction is the quality of the people.

Citing an example of the type of a highly skilled supplier Apple works closely with, Cook talked at length about recently visiting one company that it has collaborated with for several years:

I visited ICT--they manufacture, among other things, the AirPods for us. When you think about AirPods as a user, you might think it couldn't be that hard because it's really small. The AirPods have several hundred components in them, and the level of precision embedded into the audio quality--without getting into really nerdy engineering--it's really hard. And it requires a level of skill that's extremely high.

And the idea that Apple simply hands over the design to a company like ICT, which just manufacturers according to spec, is simply untrue, says Cook:

It's not designed and sent over--that sounds like there's no interaction. The truth is, the process engineering and process development associated with our products require innovation in and of itself. Not only the product but the way that it's made, because we want to make things in the scale of hundreds of millions, and we want the quality level of zero defects. That's always what we strive for, and the way that you get there, particularly when you're pushing the envelope in the type of materials that you have, and the precision that your specifications are forcing, requires a kind of hand-in-glove partnership. You don't do it by throwing it over the chasm. It would never work. I can't imagine how that would be.

Addressing the designed-in-California, made-in-low-cost-China impression that many people have--an impression reinforced by the tagline that is printed on every box containing a new iPhone--Cook had this to say:

There's a confusion about China. The popular conception is that companies come to China because of low labor cost. I'm not sure what part of China they go to, but the truth is China stopped being the low-labor-cost country many years ago. And that is not the reason to come to China from a supply point of view. The reason is because of the skill, and the quantity of skill in one location and the type of skill it is.

And China has an abundance of skilled labor unseen elsewhere, says Cook:

The products we do require really advanced tooling, and the precision that you have to have, the tooling and working with the materials that we do are state of the art. And the tooling skill is very deep here. In the U.S., you could have a meeting of tooling engineers and I'm not sure we could fill the room. In China, you could fill multiple football fields.

Cook credits China's vast supply of highly skilled vocational talent:

The vocational expertise is very very deep here, and I give the education system a lot of credit for continuing to push on that even when others were de-emphasizing vocational. Now I think many countries in the world have woke up and said this is a key thing and we've got to correct that. China called that right from the beginning.

This article also appeared on LinkedIn.

Watch the entire interview with Tim Cook at the Fortune Global Forum:

CLICK ABOVE ARTICLE LINK FOR THE VIDEO



TOPICS: Business/Economy; Computers/Internet; Society
KEYWORDS: apple; asia; china; iphone; manufacturing; timcook
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To: SeekAndFind

I think Apple’s gets labor for free because they help the Chinese government track down government critics,


81 posted on 09/05/2020 10:22:19 AM PDT by ChinaGotTheGoodsOnClinton
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To: SeekAndFind

They aren’t the only place making smartphones. India and other countries in the region are used. With nearly 2.5 billion cellphones in the Chinese, Indian and Indonesian markets that’s where you need to build them.


82 posted on 09/05/2020 10:27:55 AM PDT by discostu (Like a dog being shown a card trick)
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To: discostu

Well, the article says that Tim Cook argues that the reason why Apple builds in China is because she has an educated mass of people who have the sophisticated tooling and assembly skills to make Smart Phones.

My question is, why not diversify supply chains to India or Indonesia ( two countries you mentioned)?

Is it because they don’t have the large number of skilled people that China has, or are there other factors involved?


83 posted on 09/05/2020 10:35:08 AM PDT by SeekAndFind
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To: cornfedcowboy
China has some of the most modern and sophisticated manufacturing facilities in the world. Highly automated too. Cheap labor isn’t that big of a factor.
In America a high percentage of our facilities are old and inefficient. Add high energy costs, taxes, and regulations and makes us non-competitive.

We are our own worst enemy due to our own governments.

Several years ago I was at a party where I had a long discussion with an entrepreneur who had pioneered a new concept product. He had shepherded it to market and had in his first year sold a lot of this electronic product made in California. He had a work force of over 300 workers in his California factory making it.

He was designing version 2.0 of his product which required re-tooling his factory when knock-offs of his version 1.0 product started appearing on the market made in China. Even though his product was patented, he could not stop them from coming in due to the costs of challenging them would exceed his entire profits from his first year.

Between the County, State of California, US regulations, CalOHSA, and other agencies, the delay in re-tooling his factory just to get approvals to make his version 2.0 product would take OVER A YEAR to change over. Ridiculous requirements.

His product also required FCC approvals where apparently his design and plans were LEAKED to China before he could get his own into production due to the delays! Again, it was patented. The Chinese knock-offs of 2.0 were on the market in TWO MONTHS. . . And he was still an estimated nine months from opening his new V. 2.0 assembly line in California! Sales of version 1.0 tanked. He was facing imminent bankruptcy...

His only solution to remain in business? He tracked down the Chinese assembler of the pirated knock off, and contracted with them to make his genuine product, which they were able to start making in just two weeks. No regulations to meet, no government hoops to jump through, no required forms to fill out, just provide the design and circuit spec sheets and they met the exact specifications to the letter, using his exact parts and met his requirements at 1/2 the cost, completely packaged and ready to sell.

He was very apologetic but he wound up laying off three-quarters of his California workers, transferred the other quarter to sales, warehousing and shipping, canceled his applications with the state and federal regulatory agencies, and closed his factory. He had no choice. There was no way he could compete with all the regulations blocking him from getting moving. He was very bitter about it.

He was exploring moving his business to Texas once he got enough capital.

84 posted on 09/05/2020 10:52:47 AM PDT by Swordmaker (My pistol self-identifies as an iPad, so you must accept it in gun-free zones, you hoplophobe bigot1)
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To: SeekAndFind
Ok, let me ask this because I really want to know... is CHINA the only skilled AND cost effective country that can make Smart Phones in Asia?

No. Smart phones are made in Korea, Indonesia, Vietnam, Malaysia, Japan, and now India. Many are hand assembled in small shops in the Chinese and Hong Kong entrepreneurial supermarkets where there are hundreds if not thousands of small businesses churning our inexpensive white-box phones. In fact the iPhone 11 Pro is now being assembled in India. iPhone SE has been assembled in Brazil.

So much for this China iPhone monolith slave labor myth. It hasn’t existed for years, if it ever did. The workers on the Apple assembly lines are individually hired and work for a Taiwanese assembly company, not Apple, and certainly not a Chinese slave labor organization.

That may not be the case for a Chinese sweat shop turning out T-shirts or Nike shoes, but it is for Apple’s assembly lines, because they are monitored by Apple employees.

China has actually become less and less “cost effective” as more and more of the workers have moved into the new middle class.

85 posted on 09/05/2020 11:09:23 AM PDT by Swordmaker (My pistol self-identifies as an iPad, so you must accept it in gun-free zones, you hoplophobe bigot1)
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To: SeekAndFind

China has Extraordinary Skills = In Bribery

Never owned an Apple product and never will


86 posted on 09/05/2020 11:11:55 AM PDT by Vaduz (women and children to be impacIQ of chimpsted the most.)
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To: SeekAndFind

It sounds like Tim Cook is mighty proud of the “Football Fields” worth of tooling engineers that he and Steve Jobs helped to create, while bleeding the United States dry.

Patriotism is not mandatory, but when you feed a beast like Communist China, you’re delusional if you can’t calculate the costs.

Yes, we have entitled brats for a work force. That’s by design. Where do we think they got so complacent? Universities are stocked with Marxist professors for a reason.

The question is, can it be turned around?


87 posted on 09/05/2020 11:30:55 AM PDT by Greenpees (Coulda Shoulda Woulda)
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To: SeekAndFind
My question is, why not diversify supply chains to India or Indonesia ( two countries you mentioned)?

As I have mention in several posts above, Apple has done so to several countries, and is doing more. However, many of the sub-assembly makers are also in China, so that is a consideration for many manufacturers and assemblers, especially when you take into account the “just-in-time” delivery of parts and sub-assemblies that is necessary in modern manufacturing and assembly to minimize multiple handling of such parts to minimize costs.

One of the problems to doing that is local regulations with plant ownership. For example, in India, they have a law that require Indian ownership of manufacturing, AND products that were sold in India had to be at least 50% made by India citizen owned businesses which precluded iPhones from even being sold in India, much less made there. Multinational corporations are not welcomed in India. Nor are franchises of international companies. Such rules limited what phones could even be sold in India. Consumers could find Indian manufactured Android phones, but not many internationally made Android phones, unless they were smuggled in. Getting Apple in took years of negotiating and involved getting the US government involved with diplomacy to resolve before Apple was even allowed to sell officially iPhones there. There were a lot of smuggled iPhones in India, though.

88 posted on 09/05/2020 11:33:52 AM PDT by Swordmaker (My pistol self-identifies as an iPad, so you must accept it in gun-free zones, you hoplophobe bigot1)
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To: ChinaGotTheGoodsOnClinton
I think Apple’s gets labor for free because they help the Chinese government track down government critics,

Apple doesn’t get its labor free. It’s not under contract with the Chinese government. Apple has a contract is with two Taiwanese companies, Foxconn and Pegatron. Where do you guys get your information that is so wrong??? Do you just make it up? Taiwan is NOT part of the Chinese mainland and is, in fact, a separate country that just happens to have some factories and assembly plants on mainland China. Foxconn Technology Group is a subsidiary of HonHai Precision Industry Company, Ltd., headquartered in Taipei, Taiwan. It is a multinational corporation with plants around the world. It trades on several stock exchanges as FoxConn. It is not owned by the Chinese Communist Party.

Pegatron Corporation is also a Taiwanese business with plants in China and elsewhere in the world. Pegatron primarily assembles CE for numerous brands, producing notebooks, netbook computers, desktop computers, game consoles, handheld devices, motherboards, video cards, LCD TVs, as well as broadband communication products such as smartphones, set-top boxes and cable modems. For Apple Pegatron produces iPads. It is ALSO not owned by the CCP.

For the most part, Apple works with and supports the FREE CHINESE... who PAY their almost 2 million employees.

89 posted on 09/05/2020 11:53:42 AM PDT by Swordmaker (My pistol self-identifies as an iPad, so you must accept it in gun-free zones, you hoplophobe bigot1)
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To: SkyDancer

Sorry. Not an apple fan by any stretch but I gave up using my HP computer and now strictly rely on my iPhone for 99% of all internet usage. They are the best in my opinion.
Extremely easy to use.


90 posted on 09/05/2020 1:27:19 PM PDT by Vaquero ( Don't pick a fight with an old guy. If he is too old to fight, he'll just kill you.)
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To: SkyDancer

Ps. My current phone is many years old now. When it goes I won’t buy a China made phone.


91 posted on 09/05/2020 1:29:34 PM PDT by Vaquero ( Don't pick a fight with an old guy. If he is too old to fight, he'll just kill you.)
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To: Vaquero

I use a Walmart flip-phone from TracPhone - $9.99 and I hardly use it; basically for checking in - I’m not a yakker.


92 posted on 09/05/2020 1:33:47 PM PDT by SkyDancer (~ Pilots: Looking Down On People Since 1903 ~)
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To: SkyDancer

I sometimes don’t know how to use my iPhone as a phone. I use it as my everyday computer. I’ve dropped calls. It rarely rings.


93 posted on 09/05/2020 2:08:10 PM PDT by Vaquero ( Don't pick a fight with an old guy. If he is too old to fight, he'll just kill you.)
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To: SeekAndFind

That’s Apple’s call. Other companies make then all over Asia.


94 posted on 09/05/2020 2:12:32 PM PDT by discostu (Like a dog being shown a card trick)
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To: SkyDancer

and everyone of those apps has some form of spying capability that sends data to the Chinese government.


95 posted on 09/05/2020 2:14:55 PM PDT by txnativegop (The political left, Mankinds intellectual and political hemlock)
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To: SeekAndFind

At the cheap wages they pay the Chinese.


96 posted on 09/05/2020 3:07:52 PM PDT by BiteYourSelf
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To: aquila48

very good assessment of the currant situation. China has been kicking our asses; not because they are so much brighter or work so much harder, but because we have been hobbling our tech industries and dumbing down our education system for the past fifty years. We hog-tie our manufacturing while China’s been pushing and driving theirs.


97 posted on 09/05/2020 3:58:01 PM PDT by Segovia
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To: Shadow44
I'd like to see Apple CEO Tim Cook reincarnated a hundred times as a Chinese factory worker.

Then another hundred times as an American who can't work in his field because men like Cook love 'motivated' labor forces... Then last as an American after World War III when apple gizmo code assisted with destroying his country.

98 posted on 09/05/2020 4:04:00 PM PDT by GOPJ (NOW WE KNOW WHY BLACK NFL PLAYERS MOVE OUT OF THE 'BLACK COMMUNITY' ('cause blacks live there))
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To: BiteYourSelf

RE: At the cheap wages they pay the Chinese.

See Post #57 above. The wages Apple pays workers are ABOVE China’s average.


99 posted on 09/05/2020 4:31:32 PM PDT by SeekAndFind
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To: SkyDancer; Vaquero

RE: I use a Walmart flip-phone from TracPhone

I bet it’s also made in China. Walmart is notorious for selling products made in China.


100 posted on 09/05/2020 4:34:31 PM PDT by SeekAndFind
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