After IBM and Google, it is now Apple's turn to announce it is bringing part of its manufacturing back to the United States.
Recent announcements from IBM and Google have revealed their intention to create more jobs in the United States. IBM will be bringing back Lenovo production from China, while Google is set to manufacture its Google Glass product mostly in Santa Clara, California. Now it is Apple’s turn, with the announcement of its plans to assemble the new Macbook Pro in the US. In his ‘State of the Union’ address in February, US President Barack Obama underlined that after shedding jobs for more than 10 years, US manufacturers had added around 500,000 jobs at home between mid-2009 and 2012. So is this the start of a general move by high-value-added technology firms to switch production back to home base? There is no denying that these latest announcements only cover a small percentage of each company’s production of certain very specific products and while this trend is still rather muted, these moves seem nevertheless to be a response to demands from some consumers for faster, more local and more personalized production.
Production skills coming home?
The main reason these firms are shifting part of their production back to the United States is to bring manufacturing nearer to all the other parts of the business, first and foremost to the company’s headquarters. In terms of logistics, when a firm has its production plant close to its distribution and product return centers, this should result in smoother and faster processes, especially delivery systems. An increasing number of customers are now calling for faster delivery and manufacturers need to respond to this demand. IBM recently announced it would bring back part of its Lenovo production to North Carolina. IBM Lenovo Corporation is headquartered in Morrisville, NC, and its distribution center is close by. A second reason, which Apple CEO Tim Cook mentioned in relation to the decision to assemble the new Macbook Pro in California, is the desire to repatriate manufacturing knowledge and skills relating to advanced electronic devices to their country of origin. This knowhow and these skills left the US many years ago, mainly in the direction of China.
More personalized products
It is clear that, for the moment, only a very small percentage of production is coming home. IBM CFO Robert Parker stressed that the new manufacturing facility in Whitsett, N.C. would only make certain niche products. Production of the remainder of the seven million Lenovo units produced each year will remain in China or elsewhere. This ‘onshoring’ process – bringing production back to base after many years of systematically offshoring it to low-cost countries – does raise some basic questions, the main one being pricing. However, products scheduled to be made henceforth in the US are items for which there is very specific demand, essentially more personalized products which also require faster time-to-market. Moreover, some customers, such as local authorities and universities, will only buy products that are made stateside. The low prices that result from traditional mass production are no longer the priority for a consumer segment who are looking first and foremost for more customized products. But if the firms are to achieve efficient customized home-based production, they may well need to update some manufacturing methods, essentially towards greater automation. This is a process which is already underway, especially in North Carolina.