Time to get real--real world, that is. Drop the following articles into your sma

Question

Time to get real--real world, that is. Drop the following articles into your smart phone or bookmark them on your computer and read them over the week. Post a comment on one of them or add another link to something relevant. Thoughtful people all over the country are talking about these articles and discussing our future economic direction. This week, since we are talking about production, I want you to read an article that appeared in the New York Times: Apple, America, and A Squeezed Middle Class: How the US Lost out on iPhone Work.

Please also, find an article on the assembled-in-the-USA Motorola Moto X smartphone. Put the properly formatted article title in the subject line of your post and a clickable link to the article in the body of the post. In your post please comment on the following statement: “Apple must be greedy as it’s obvious companies can make money making things in the US as Motorola has proven.”

You may NOT re-use an article that has already been used by a fellow student so check the current posts before you do too much work on an article you’ve found.

Explanation / Answer

Apple must be greedy as it is obvious companies can make money making things in the US as Motorola has proven.

It evidently looks like Apple is being overtly greedy on its profits since companies like Motorola have successfully transformed a Nokia factory into a Motorola factory where the final assembly is carried out. So it may look like Motorola is on the way to operating its first factory in the US unlike heavyweights like US which operate from Foxconn city in Shenzen, China.

But a recent news have pointed out to the fact that Motorola may be forced to close its factory at Texas due to poor sales of Moto X coupled with the high operating costs of the factory. It would be moving its final assembly unit to Brazil or China or some other undisclosed location. Now this is the norm for most of the major electronics or manufacturing units in the world.

Apple has moved out of US for its manufacturing not necessarily because of the cheap labour available outside of the country, but because the cost of procurement and transportation of the components to the final manufacturing plant will be reduced considerably. Most of its ancillary units or suppliers are located outside of US, so the cost that will be incurred for moving the material to US will be much larger compared to that in some other Asian countries. Also another reason for their preference to set up factories outside US is that factories outside US now have the ability to scale up quickly since medium skilled labour is in abundance in countries like China, Taiwan etc. While US will probably require 9 months to recruit the entire workforce of a company, China will do it in just 15 days. Also the amount of flexibility and skill involved in the work require medium skilled labourers and not necessarily highly skilled engineers.

So in most of the cases, we can see companies preferring to set up bases in Asian countries since they have the options of a far more efficient supply chain and a flexible and huge work force who can scale up or down according to requirements. For eg, in Shenzen, due to a sudden change in the design of the screens to be installed on iPhone, people were forced to work from around midnight to get the product ready in time. Something like this would probably be unimaginable in a country like US. Also workers in China live in company dormitories or in barracks so that they can be utilized to work in the factory as and when needs arise. This helps these companies to gain a competitive edge over its US counterparts where laws and regulations regarding workers safety are too strict. Also most of the components that go into making the final product like the chips, electronic circuit board, and screens come from companies located in Asia. So the supply chain would be much more efficient and productivity increased if the final assembly or manufacturing of the final product takes place in those countries only.

For example, companies like GM and others faltered in the long run, since they could not cope up with the nimble-footed counterparts from these countries. Although US still produces some of the world’s best talents like engineers, scientists etc, but US is lacking very much as far as mid-skilled employees are concerned. Companies like Facebook, Google, and Twitter can grow exponentially without hiring too much since once a program or software has been created, they don’t need more engineers to scale up their operations.

But it is unlike in Apple or some product based companies, where the main innovation, design and marketing campaigns take place in US, but the final product is assembled and manufactured outside.

Now taking a comparative view even if, Apple starts producing its iPhones in US, they would still be making a sizeable profit, but as far as operational flexibility in terms of hiring and working conditions are concerned will be very much restricted. So most of the top end electronics or telecom manufacturing companies have started moving towards the lower cost producing countries. Even Motorola is looking to set up their factories for final assembly in Brazil or China or in some other undisclosed locations.

So it can probably be correctly inferred that with Motorola moving out of US for most of its assembly functions, most product based companies will look to set their base in countries like China, Taiwan etc. So it does not necessarily indicate that Apple is greedy since most of the other companies too are looking to move in this direction.

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