I’m thinking that it’s about time. The reasoning on Rush is that it has something to do with Trump and the election. I’m not so sure though. I’ve posted about the issues that Foxconn has had with automation before.
I think that the problem is scaling and cost cutting, frankly. Along with factory and industrial culture. Rush was commenting about how in China the component manufacturers were essentially right down the street from the Foxconn plant and how that made it easier for Foxconn. I’m not sure that is actually the case.
“The only reason That Apple can’t sell more is that they can’t make them fast enough.”
The point which Rush inadvertently reiterated here:
Now, over at Apple. Folks, as I have deigned to explain, moving iPhone production to the United States, it would be as close to impossible — you could do it, but there’s no way an iPhone would cost the same price after you do it, and there would be constant shortages of them because it takes factories with three, 400,000 people to make these things at a clip that meets the demand. You know Apple is still behind on the iPhone 7 Plus? You go to an Apple store today, you still can’t find one. I have more of them in my slash closet back there than an Apple store has.
The demand for these things is such that there’s an imbalance, a supply demand imbalance, it may not reach equilibrium before the end of the year. If you go to the Apple online store right now and try to buy an iPhone 7 Plus jet black, they say three to four weeks to ship. That’s ship. They ship from China. That can take a week. Five weeks, maybe. Bye-bye Christmas. And they’ve got hundreds of thousands of people making these things. The jet black iPhone, the jet black case is a massive project to manufacture that, and the yield rate, I understand, is like 70%. It’s that precise on that particular model. But all the models are backlogged.
Now, to move all of that to the United States, I don’t think they can. I think what would happen, like the Mac Pro, the Mac Pro is actually built by a Singapore company that built a factory in Austin. And what Apple’s talking about, Foxconn is their manufacturer in China. Hon Hai Precision. The Anglicized name is Foxconn. And they’re talking about locating a factory here, but it would be Chinese technology that would just be located here to build the factory. I don’t have a problem with that.
I don’t think it’s so much fear as realization. From what I’ve seen the problem that Apple is having is scalability. Which is something that China has had problems with. And quality issues. A 70% yield rate is NOT a good sign. The problem is that the Chinese companies do not have the long experience with productivity improvement and automation that a US manufacturer takes as a matter of course. There’s a lot more to automation than just plunking any old robot down and expecting it to work. I also think that Foxconn has reached the end of what can be accomplished by trying to have ever larger masses of people on assembly lines.
Here in the US, the large assembly has sort of been rendered obsolete. At least for most things the plant structure philosophy has returned to a cell based rather than a line based manufacturing structure.
Once a product reaches a certain level of production the US tradition is make more of the widget with machines.
This dates back to the 19th Century and the reason is that labor in the US has always been expensive. So the US has a 200 year old culture of thinking in automation terms that just doesn’t exist in China. Foxconn’s problem is that the Apple stuff doesn’t have that culture and the related experience behind it because the latest Apple products were made in China from the start rather than a line started here and transplanted. You can get away with that for a toaster or some other thing where the product is mature. But with a new product like the IPhone was there may be problems as things scale up. In the beginning Foxconn could deal with the scaling problems by creating ever larger factories, but the problem with that approach was that there were no economies of scale. In fact I suspect that there were diseconomies of scale as every larger factories require ever larger support networks and people all in one place.
Thinking about automation isn’t just replacing people with a machine. It’s rethinking your entire process. For instance the woman deburring the Ipad cases on the video. Yes you could do that job with a robot, but you could also setup a tumblr line and run the cases through them. In order to do that you might have to rethink some aspect of the design. This the sort of thing you can do if the plant and the design team are close enough and speak the same language. A little harder when they are 5000 miles apart and two or three languages. That was just one small process on one part. For that matter, the woman herself may have better ways to improve the part, but the people at Apple will never know.
That’s the real reason, I suspect that Apple wants some production back here in the states. I think that after the efforts of Foxconn to install robots haven’t produced the kinds of production improvements that Apple wants, the people at Apple want at least some production closer to home so that they can see things themselves and work toward a program of constant improvement.
With this in mind, I don’t think that Foxconn would produce IPhones here in the US to make at a competitive price. Though I think that once the ball starts going to the way I think it will people are going to be surprised at just how cheap the phones can be made here. I think that Foxconn needs to have a plant here in the US to take advantage of the knowledge base that doesn’t exist in China. Foxconn needs to discover the right vendors, the right engineers, the right skills to move forward and for that they really need a fully operational plant that actually makes phones and IPads. Whether the plant is cost competitive doesn’t really matter because the focus will not be on cost, but testing process improvements that can then be replicated in China.
Now where should Foxconn set up their plant. My suggestions are either central Connecticut(Waterbury- Manchester) or Rochester NY(Syracuse-Buffalo). Both those regions are depressed and both have very deep experience wells of high tech manufacturing going back a century or more that’s just going idle for somebody to pick up. Both have world class engineering universities either in the city or close by. Also both are near fabs, machine centers, foundries and other potential vendors. Both have deep backgrounds in precision optics and metrology. And finally, both are centers of automation technology. Add the fact that both are near NYC and it’s deep Chinese culture and emerging maker culture and there’s no reason that a plant should not be set up somewhere close by. For what Apple and Foxconn need there really isn’t a better place than the Northeast in spite of the rusty look and terrible climate.
Apple and Foxconn have been having product delivery issues for some time now. The US is one of Apple’s largest markets and moving at least some assembly onshore makes sense. Especially as at least some of the vendors have plants in the US or are shipping stuff to China from the US. Add this to the fact that having a working plant here in the US will give Foxconn access to the latest assembly and robotics technologies as well as the experience in high tech technologies that exists here in the US and the decision is really a no brainer for both Apple and Foxconn. If it took the prospect of a President Trump to make them see the light then Mr. Trump has done a good thing even before inauguration. I think though, that the proposal is the result of the realization that the way thing have been done has reached the limits of what can be done the way things are done in China and that new approaches are needed. New approaches in manufacturing are something that the US has always been good at.