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i-Device Manufacturing Unprofitable To China
N!NJA writes "One of my favorite facts of this past year was the proof that China makes almost nothing out of assembling Apple's iPads and iPhones. From the article: 'If you want lots of jobs and lots of high paying jobs then you’re not going to find them in manufacturing. They’re where the money is, in the design, the software and the retailing of the products, not the physical making of them. Manufacturing is just so, you know, 20th century.'"
As you can see the two largest inputs are materials and Apple’s own profit margin. Despite the machine being assembled in China it’s still true that the value of that labour is trivial: 2% or so of the cost of the machine.
So what? It's not like iPads and iPhones are the only devices they're making. In fact, China, Taiwan, Japan, Thailand and other Asian countries are making almost all of electronics in the whole world. They might only profit 2% of every device, but the sheer scale of the whole manufacturing industry more than makes up for that.
Besides, Apple's devices are notoriously known for having huge profit margin going to Apple, without actual technical or manufacturing reasons for that. It is, however, only true for Apple as every other manufacturer is actually also working on really thin profit margins. When taking into account every electronics company and not just Apple, this makes the Chinese manufacturers share comparatively much larger. Comparing it to Apple tells absolutely nothing.
We go from "solid jobs have gone to China" to "there are no jobs, enjoy irrelevance." Yay?
apple makes a shitload of money off these things.
I feel better about my Chinese assembled devices purchases.
GENERATION 25: The first time you see this, copy it into your sig on any forum and add 1 to the generation.
china's strategy is to employ as many people as possible to avoid idle hands etc.
They are not making these things out of the goodness of their hearts.
Palm trees and 8
Earth is getting saturated. Soon only India will be left as cheap labor. Soon after that, with markets like China, EU and the US, the Indians will be in the same position the Chinese are in now.
Will there ever be an expanding economy when there is no cheap labor left?
One of my favorite facts of this past year was the proof that China makes almost nothing out of assembling Apple's iPads and iPhones. From the article: 'If you want lots of jobs and lots of high paying jobs then youâ(TM)re not going to find them in manufacturing. Theyâ(TM)re where the money is, in the design, the software and the retailing of the products, not the physical making of them.
Sounds like someone that justifies few jobs versus the large amount of jobless.
The things that person fails to account for would be currency manipulation, government ownership of business, lack of freedom for those who do that manufacturing work, and less-than-honest accounting that is prevalent in China. Correct for those, then one can cut through the author's
If you want lots of high-paying jobs in the US and EU, kill every single guest worker program (fraud-ridden at any level), get rid of the ability to use length of unemployment (or employment) as a direct or indirect means of discriminating against the unemployed, and get rid of the tax and benefit dodges with second-class forms of labor (e.g. contractors, consultants). Finally, make it harder to not hire US citizens, within the US by making any tax cut follow the worker and is dependent on the length of time.
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the workers are paid like crap? You can't make a lot of money when you're paying a few cents to a dollar /hr. Raise their wages, add $50 bucks to the cost of iCrap and suddenly China's probably not doing so bad.
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Oops, meant:
The things that person fails to account for would be currency manipulation, government ownership of business, lack of freedom for those who do that manufacturing work, and less-than-honest accounting that is prevalent in China. Correct for those, then one can cut through the author's bullshit that they call "fact"
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
While less so for smart phones, Apple basically is the entire tablet market. This is because the tablet market is a faux market. It's not built upon any real need or demand. Rather, it's purely a marketing creation using elements of religion to trick foolish people into thinking they need to buy expensive gadgets that are useless and unnecessary.
Yes, Apple can sell millions of tablets, but this is only because they have a very gullible following that other manufacturers just don't have. This is why we've seen RIM, HP, and others try to get into tablet market, but fail pretty badly. These other companies just don't have the pseudo-religious following that Apple has, and thus don't have the demand for their products. Their customers are smarter, and realize that tablets just aren't useful.
When intelligent people want a portable computing device, they get a smart phone and/or a netbook. Tablets, on the other hand, give you the worst of both words. You don't get the portability and convenience of a smart phone, while you also don't get the keyboard and power of a netbook. You're stuck in this shitty middle area with all benefit on either side.
Apple fanatics, on the other, don't care about utility, but rather just the possession of expensive status symbols displaying Apple's logo. Indeed, this is an area where tablets are much better than phones or netbooks. There's a larger area to display the logo, a larger logo can be used, and the logo will be prominently displayed while holding or carrying the device.
So when you're considering the tablet market, don't forget to consider the big picture. Apple basically is the entire tablet market. There really aren't any competitors. But it's also not a typical market. It's a very convoluted one not built upon the more traditional and common factors underlying real markets caused by need and demand.
Their chart says Chinese labor earns 2% of each iPad sold, so about $10 per device. There have been millions of devices sold. Are we now claiming that fifty million dollars is trivial? And since it's such a small portion, Apple could easily double or even triple the wages without a major impact to their profit margin. And don't forget, that's just the iPad. Throw in the iPhones and the iPods, not to mention all the non-Apple devices. And then you have to account for all the support jobs... people who build and maintain the factories, or sell things to the workers. In the end, you have billions of dollars in wages fluttering out of the country every year, all in the name of enriching the executive staff.
I get why cheap trinkets need to be made overseas. But on objects that cost hundreds of dollars and have a profit margin north of 20%, there's no reason for it, except to make the rich richer while making the country poorer.
Why else would China give freedom for multinationals, but not give it to regular, unconnected individuals?
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
Before even factoring in Labor, I looked at the cost of Materials which I assume come mostly from... China.
I think that area would have a high profit margin. But assembling devices... I think the whole reason why the rest of the world can't compete against China in Assembly is because they do it for a loss..
Companies do this all the time to kill off their competition... They sell the device for a loss or at break even.. and make it up with other revenue streams.. usually ones they aren't taxed on and where they can manipulate the prices.
The march of progress. Most of the people that perform useful work in society get compension that allows them the honor of continuing to exist. Parasites running companies with patents on letters of the alphabet ... well ... that is where the money is to be made.
Comment removed based on user account deletion
In Asia it is common practice to do things cheap or below cost until you wipe out the competition, then raise prices.
iOS app development unprofitable to developers:
http://mobileorchard.com/iphone-app-sales-figures-32k-vs-535/
If Pandora's box is destined to be opened, *I* want to be the one to open it.
Wrong.
The claim that we should abandon manufacturing and concentrate on "high value" jobs, like design and engineering is nonsense. The reason manufacturing is important is because it creates additional jobs beyond just those involved in a particular product. For example, the Samsung plant in Texas which created "only" 1100 jobs. What about all the machinery in that plant? It didn't magically appear out of nowhere. Someone had to design and build it. That's more jobs. Other companies supplied the steel, plastic and electronics that went into creating that machinery. That's more jobs. Other companies supplied those steel, plastic and electronics companies with various raw materials and equipment. That's more jobs.
The past couple decades have involved China trading a lot of cheap labor in exchange for Western technical know-how. China knows most of what there is to know by now about making gadgets. Eventually China could just create money for its own economy (by credit or printing it) and it could sell to internal markets and raise its material standard of living a lot. Export driven economies only have big value if you need imports. Although it is true that China does import stuff, so it will need to replace some of that with internal import replacing approaches, like Jane Jacobs wrote about (like solar energy instead of oil, or composites instead of metals) -- but aside from US food products, much raw materials come from other than the USA (like Australia or soon Africa). Although there remains a strategic military advantage for China in having Chinese products everywhere in the USA, so they may still do some of that. For example, most ascorbic acid (Vitamin C) in the USA comes from China. How much of it is really inspected? When is the last time you had something with extra vitamin C? That makes the USA's health very dependent on Chinese good will, as just one of many, many examples. Eastern minds typically grow up playing "Go", which teaches a very different way of "winning" (by encirclement) than Western Chess. Granted, the cost of this is that the average Chinese citizen has suffered a lower material standard of living for this sort of foreign policy (a cost that does not show up as "military" spending).
A 21st century issue: the irony of technologies of abundance in the hands of those still thinking in terms of scarcity.
... might be worth a lot to any country.
yeah because all the worlds manufacturing had just been bombed to hell. That was the entire reason the US automotive industry took off.
Works fine for groceries and many other companies. its all about volume. Sounds like capitalism is really starting to take root over there, at least the 'greed' component of it.
---- Booth was a patriot ----
Then let's not manufacture anything then. Let's all be designers. Because, you know, all these devices are going to magic themselves into existence.
Such is the logic of pointy-haired-bosses.
--
BMO
Germans enjoy high wages, robust exports, and (for Europe) low unemployment coupled with robust socialbenefits, and they have tons of factory jobs.
Exactly what further features would I need to browse wikipedia, check my email, the weather, or read a book, maybe play some music streamed over my media system? That's about all I do, and the only real reason I have a tablet is because it's a lot easier to do while lying on the couch or in bed, or sitting on the toilet.
Like I said, I could easily be satisfied with a sub-100 dollar product out of a close-out store. If you can think of something I'd want from a tablet, go ahead and tell me. I'll see if I can find it in the Market. Or tell me what things you'd like polished.
I'll be honest, I don't know of any, but my needs are simple. When it comes to car buying, I tell the dealer to give me a salesperson who will shut the fuck up when I say I don't want something and tell me what I want to know, which is usually far afield of the usual spiel. Half the time I'd probably be better off with a mechanic from the garage.
The only kind of artist Mr. Jobs was is a con artist. Neither good or bad. He learned his con from the pros: the charlatan gurus in India.
Every industrialized country has gone through this phase where subsistence farmers abandon their farms for difficult factory jobs. They don't like the factory jobs, but they like it better than subsistence farming.
They save a little bit of money, and produce children who wind up becoming educated and form the middle class.
To say that China's not profiting from these assembly plants is taking a very short-term view.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
I think this other Forbes article should explain a few more things:
http://www.forbes.com/sites/stevedenning/2011/11/18/clayton-christensen-how-pursuit-of-profits-kills-innovation-and-the-us-economy/
Sure.. China may not make that much. But if all of the manufacturing jobs came back to the US, that would be more jobs here. Granted, they'd have to pay the US workers more money, making the products more expensive and less competitive. But if all manufacturing came back to the US, then each company would be equally competitive and we'd have much higher rates of employment around here.
Obviously, this is a self correcting problem. Since eventually it will become just as expensive to pay chinese workers, the jobs will come back to the US. But it may take 100 years.
I'm not an economist, but the matter of "who's paying whom" seems significant when it comes to manufacturing jobs. Usually the money is flowing in from the outside. On the aggregate, then, that would seem to enrich the country doing the manufacturing. Obviously if you could train your entire populace to do something more lucrative (say, design) and then have your trading partners outsource that work to your country then you'd rake in even more money. However, one wonders whether that's feasible given the inherent variance in human ability. There will almost always be some portion of the population which, for whatever reason (lack of inherent ability, lack of education, poor choices, etc.) are unable to do much beyond manufacturing or other unskilled labor. For this group to be actively engaged in manufacturing seems like a "win" compared to, say, having them all be unemployed or performing some unskilled task (other than manufacturing) where the compensation comes from domestic sources (e.g. working as a maid).
When it comes to the U.S., I've always felt like it should endeavor to compete at all levels of the labor spectrum. Currently it is not competitive in sectors like manufacturing because the cost of unskilled labor is simply too high relative to countries like China. That's something that could potentially be addressed via government intervention (possibly in the form of wage subsidies). As it stands, the U.S. has basically "punted" on manufacturing. It seeks to employ its labor solely in white collar pursuits and servicing its own (very high) domestic consumption. Instead of assembling electronics, the unskilled in the United States flip burgers, work in retail, clean houses, work as nannies, etc. Basically they meet the demand of a highly consumer-driven economy. When that consumption dips, however, such as happened during the recent recession, you see massive job losses (and these concentrated among those with lower incomes).
Let's look at the issue from the other end: top down. If it's true that China doesn't make net revenue manufacturing stuff for the US, then the overall trade balance between the US and China would be neutral. But it's not, to the tune of $2e11 per year.
Verdict: argument is false.
We have a lot of Indian engineers at work. They usually go back every
year or two to visit. For the last couple of years they've all been saying
"It's really expensive back home. In fact most things are cheaper here",
here being the Eastern United States.
you don't make profit manufacturing you get people who can't design jobs to keep them from starving on the street. very useful to china with there high population.
It's just a cute story of one (unsuccessful) developer of a "cute" app. Yawn. Someone is apparently making around $2B in iOS app sales though.
"I love my job, but I hate talking to people like you" (Freddie Mercury)
A properly designed assembly line uses humans as supervisors and QA persons, not machines
I've worked on the old kind, where I actually manhandled truck rims, and it was an insanely expensive way to make them. The same time, Honda opened its assembly line for the old 305 twin engine: no humans did work! They made sure the machines worked properly.
If course, you needed to locate those lines where there were good (if expensive) machine designers, engineers and repairmen. For Honda, that meant the home islands. For certain other companies, it now means the USA and Canada.
--dave
davecb@spamcop.net
The big question is: by whom where they paid?
Simple answer: by the employers they work for. That means that those employers had the money (by making a tidy profit) to actually pay their employees. How did they get that money? By selling loads of stuff. To whom? To consumers that got a lot of money by working...
The big drive behind all this was the rampant growth of the population in those periods.
Compare that to the current situation: population growth is stagnant (we're talking about people with money to spend, of course), which means a declining amount of purchases. Less money to be made by companies, so also less money to spend on employees. Which leads to even less spending.
The whole problem about our economic situation is that our economy is based on (rapid, maybe even exponential) growth. Once that stops, you can expect severe cutbacks. The housing bubble is not the reason for the recession, it helped to postpone it for a couple of years.
Watch this: The most important video you'll ever see for a good explanation.
There's a good argument against this study's conclusions, in that Apple's electronics are "iconic" but not the majority of sales even in their own markets, precisely because of the lower margins and more commodified products in the Android share of the market that better fits the Chinese manufacturing model. The study probably has very different numbers for the overall market in which Apple's products compete but fail to win.
This situation is of course is exactly the same as has always been the case with Apple products, since the Apple ][+. Would you make the case on Chinese PC manufacturing using only the numbers from Mac manufacturing?
The Chinese companies aren't able to make the carriers' profit, nor Apple's. I suppose they're not able to make the Korean or Japanese profit off memory, touchscreen and other cutting-edge components, or they would be. So they're profiting where they can: the manufacturing. 2% profit on a premium-priced product selling hundreds of millions of units is pretty good. It's hardly "unprofitable to China" just because it's far more profitable to other countries.
It's a small profit, but that's all they can get. The electronics assembly labor market is global and evidently the most extremely competitive part of the entire supply chain.
--
make install -not war
We know that selling things at or below their cost is an aggressive and even offensive tactic. We counter these tactics locally by making them illegal. We counter these tactics internationally through the use of tariffs and import banning. It's interesting that for the moment, these methods only apply to finished and unfinished goods.
Costs of labor are subjective and relative at the very least and impossible to prove at the worst. Some people might say "this is a self-correcting" thing where eventually, the expenses will require increasing prices for labor. But I don't think that's the case in places like China and surrounding areas. In any case, the purpose of this "dumping" is to make it so attractive to outsource labor that local labor facilities and locations are abandoned. Once the buyers are hooked and have no other alternatives, they are then free to charge any price they wish after the competition is starved.
Throughout history there has never been money in being the laborer in mass production, except in modern U.S. and Europe, where those jobs are facing extinction. The money has always been in the non-labor side of things. I'm not talking about shareholders and executives, I'm talking about shift managers, QC managers, engineers, accountants, etc. A 1300 employee factory is going to have at least 1000 laborers and 300 non-laborers. This is why China has a booming middle-class and the U.S. has a shriveling middle-class. The average U.S. worker is simply over-qualified for line production work and in some logical parallel universe these people are working non-labor positions and are not only employed, but better paid.
I once took an excursion to Reddit, and later HN. Unlimited up/down voting sucks when dealing with a hive-mind.
It's a sad day here on Slashdot when a useless, emotionally-driven comment like Sponge Bath's is at "5, Insightful", while the comment with actual in-depth analysis and intelligent consideration of the facts is merely at "2, Insightful".
The GP's comment clearly targets devices from other, non-Apple manufacturers. But I guess acknowledging that fact would render Sponge Bath's "OMG YOU HATE APPLE!!!@1!@!" emotional outburst less relevant, and blatantly incorrect.
And lower-class or middle-class people who spend more money than necessary on expensive luxury items and impulse buys usually are considered to be financially foolish. Maybe that doesn't make such a person an "inferior human" as Sponge Bath here likes to exaggerate, but it does bring into question whether the demand is real (i.e. to satisfy a need to enable some productive task to be performed) or merely emotional (i.e. buying a product because it has the right logo on it).
I know it's slightly off topic, but are we really so detached from reality that we actually believe that we have more jobs when profits are higher?
There's an optimal balance where profits are enough to motivate investors, but companies spend as much as possible on production. Profit is an inefficiency that has value only insofar as it keeps capital flowing in from investors, when needed. The idea that corporate ethics implies maximizing profit at the cost of all other business objectives has done quite enough damage to investors. If you bleed off too much profit, you destroy value for the investor overall. (In fact, if that profit isn't going straight to dividends or back into the business, which it usually isn't, then it's probably bad for the investor, even in the short run.)
I'm not one of these types that argues that America is going down the toilet because we lost manufacturing jobs, and we should freak out. But the argument that manufacturing is not as valuable to the economy because it's less profitable than being Apple is nonsensical. There are only so many Apple shares around, and their value depends on other businesses with solid value as well, which aren't as profitable but have other advantages.
China != the company that builds iPhones. China as a whole is making a whole lot more from iPhone production than the profit, which, according to the article, is quite reasonable anyway.
Likewise, America != Apple. Since Apple's profitability is so much higher, its value to America is proportionally lower, knowing that Apple's profit doesn't generally get spent proportionally in America. (Not that Apple isn't great or I'm not glad to have their jobs in the US. That doesn't happen because they're so profitable, though. It's just correlated with profitability, i.e., Apple is good at what they do, they make money, they can afford to bank a lot of cash, and they can also afford to hire the best people. Then, they use their cash and people wisely to do their business well, a virtuous cycle.)
Associating corporations and their profits with their home countries makes no sense, even if they operated entirely within their home countries. The purpose of corporations is to allow capital to flow freely, including across national borders. Corporations are only boons to countries to the extent that they spend money and pay taxes in those countries.
China's cheap labor advantage is only sustainable as long as their factory assembly workers are still more dextrous, faster, and cheaper than the prevailing robotics technology of the day.
That is still the case, but for how much longer?
Where are we going and why are we in a handbasket?
There is a dramatic difference between "job" and "no job", especially when you want to "buy stuff".
"This post is an artistic work of fiction and falsehood. Only a fool would take anything posted here as fact."
,,,stooge and planted clown. Gee whiz, dood, so you think offshoring all the jobs to China, i.e., offshoring the vast majority of American production assets and capital assets is a great idea, dood? So falling tax revenues, both federally and at the local level is a great idea, dood? This moron and their moronic post is truly beneath the level of intelligence at /.
There's 31% in "materials", 5% in "unidentified profits", and 15% in "distribution and retail". That's a lot of profit unaccounted for. I imagine a bunch of the bottom rung supplies are hiding for tax purposes their profits in material costs. Even the Apple profits should be decomposed by country for this comparison to make sense.
In addition, "materials" is not the same unit of measure as the country-derived components or "distribution and retail". One would need to decompose these missing parts as well to see who really is making the profit.
The thing to remember here is that manufacture is not just a cog in a machine. A Chinese manufacture could own its materials supply chain, a part of Apple, and the distribution channel for Apple products in China, meaning it could be getting a lot more profit from iPad sales than the pie chart suggests.
So what? It's not like iPads and iPhones are the only devices they're making. In fact, China, Taiwan, Japan, Thailand and other Asian countries are making almost all of electronics in the whole world. They might only profit 2% of every device, but the sheer scale of the whole manufacturing industry more than makes up for that.
There's an appropriate quote by TSMC Chairman Morris Chang: "You Americans measure profitability by a ratio. There’s a problem with that. No banks accept deposits denominated in ratios. The way we measure profitability is in 'tons of money'. You use the return on assets ratio if cash is scarce. But if there is actually a lot of cash, then that is causing you to economize on something that is abundant."
The decline of the USA is in no small part due to them having outsourced so much manufacturing elsewhere. It creates dependencies of various kinds and is more of a brain-drain than the financial idiots realise. Seriously, these are the "finance gurus" who have brought us the economic crisis - do we really listen to them for wisdom?
Design and innovation does not require much manpower. It provides jobs for thousands, but not for millions. Manufacturing feeds many more families, and supports many more people with technical know-how. Every company that has outsourced essential parts of its production chain has learnt painful lessons. Not necessarily so painful that it was all a bad idea - outsourcing can be profitable and the right approach. But like all the business "wisdoms" of the past 50 years, its advantages have been over-hyped and its shortcomings understated.
And, most importantly, business economics and macro economics are not the same thing and don't follow the same rules, and what is good in one context is not necessarily good in the other.
Assorted stuff I do sometimes: Lemuria.org
Let us assume the article is correct? So how does this help any industrialized nation?
The US has 300,000,000 people.
Apple employes 60,000 people... many of whom work in retail. Apple is perhaps the most successful innovative company right now.
I personally have great frustration with those who simply tout this 'high-end' job. The 'creative class' and all that crap. Okay great, there are these good jobs in innovation. I work in the field. I get it. But there's not enough to sustain 300,000,000 Americans.
There's only room so many innovative companies doing smartphones or consoles or operating systems or solar panels ... or whatever. Do you know what is special about design jobs? They only need a relatively small number of people do the design.
As other nations become prosperous, you'll have billions of reasonably educated people competing for these design jobs.
Right now, one might argue Silicon Valley is the epicenter of innovation. Great. And that operates in a state with about 35 000 000 people and an 11% unemployment rate.
Even assuming we had a super amazing education system in California that generated brilliant people capable of doing work... silicon valley is not hiring 3 500 000 people. Heck, I'm pretty sure we saw layoffs at many firms in the news. Some companies are hiring of course... in the thousands perhaps.
My point... innovation is great. It generates a few jobs. It makes some people rich. But it doesn't do crap for the 95% of the population. As a result, we shouldn't be so concerned with the innovation economy or any of that.
Small countries with a few million people like Singapore or Sweden can try and sustain their economies off of innovation, but any large nation... be it the US or China or India will never be able to.
The private sector of these countries will be composed of manufacturing, farming, call-centers, service workers... If you can't design an economic system to work for them, it won't.
Stop living in your little bubble in academia or silicon valley with this religious belief in growth and innovation...
and start looking at the numbers.
It is about getting control of all of the rest of that. Look carefully at how many cheap knock-offs of iphone there are. In fact, look at all of the totally ripped-off clones of western goods are coming from China. The issue is that China is building up loads of engineering, design, etc companies because they have access to the cheap manufacturing. And the time is coming, soon, that China gov. owned companies will destroy Apple, HP, Dell, IBM, GE, Westinghouse, Sony, Samsung, etc.
Combine that with the fact that China is massively building up their military AND showing that they are ALL TOO HAPPY to use them, well, China's cold war with the west is in full swing while the fools around the west buy the BS.
I prefer the "u" in honour as it seems to be missing these days.
With modern production methods, as well as trends like environmentalism, here is a need for less and less jobs overall as productivity goes up and demand grows more slowly than productivity.
While thing were different in hunter-gatherer times, the rise of agriculture and industrialism led to a lot of work (because there was less land to support each person and expectations also rose). But then productivity continues to improve exponentially.
Here are some examples. Five year old kids used to have to work in mines 200 years ago. Now they are sent to "school" often until their mid twenties or even longer. Work weeks used to be 80+ hours per week. Now work weeks are 35-40 hours plus paid vacations. People used to work until they died. Now in Europe many retire in their mid-fifties and live and eat and play for another three decades. People in their mid-twenties used to be the backbone of the economy. Now many educated 20-somethings in Europe have no jobs (and are rioting over that regularly like in Greece).
Agriculture has gone from 90% of the workforce to 2% or so over the last two hundred years in the USA. US manufacturing went from around 35% to 16% over the past fifty years, while still making the same or more amount of stuff and at higher quality. That number continues downward.
With computers and robotics (especially vision systems), more and more service jobs will come user the same pressures. We need to rethink our economics to account for this. For ideas on that, see writings by Marshall Brain, Martin Ford, or stuff on my website (essentially, a basic income of social security and medicare for all, an improved gift economy like Wikipeida and the blogosphere and GNU/Linux and Freecycle, improved subsistence like with 3D printers and agricultural robots, and better democratic resource-based planning).
A 21st century issue: the irony of technologies of abundance in the hands of those still thinking in terms of scarcity.
Why does Slashdot article summaries don't show the domain name of the link, like in the comments? For example, if I post something like Awesome Site then you see the domain name and can decide if the site is worth your time. Good that I normally watch the URL where the link goes before clicking on it, otherwise I would waste another 5 minutes.
China makes almost nothing out of assembling Apple's iPads and iPhones [forbes.com]
http://www.mueller-public.de - My site http://www.anr-institute.com/ - Advanced Natural Research Institute
Do not blame them. Blame the retailers esp. the big box and distributors. The deserve the vast majority of the blame. They are the ones ignoring western goods and bringing in chinese goods.
I prefer the "u" in honour as it seems to be missing these days.
They might only profit 2% of every device, but the sheer scale of the whole manufacturing industry more than makes up for that.
That 2% figure is somewhat distorted. Here's something from a researcher at the same university as the other authors. Basically the 2% doesn't reflect currency manipulation that artificially deflates the numbers by 40%, it doesn't reflect externalized costs like pollution, it doesn't reflect governments supports like *free* factories, etc.
http://www.americanthinker.com/2011/09/china_trade_policy_and_the_fallacy_of_idea-land.html
is the way to go
when Nazi Germany had no real economy, they simply imported millions of slave laborers.
this made their economy grow quite a bit.
we could increase our prison industries complex, driving down wages. this will produce more 'growth' in 'revenue' for the corporations who profit from the system.
oh wait, 'growth', as in ordinary people being able to buy food and go to the doctor? well, thats kind of a quaint idea isnt it?
so that the healthcare costs are not part of the costs of labor. Also outsourcing does not work that well anyways just look at software that outsourced people code alot of the time it sucks.
skills learned on the Manufacturing level help out on the Design and innovation level and with outsourcing you end up losing that.
It's obvious that low skill manufacturing jobs pay less than high skill design jobs.
"Foxconn posts $943 million net profit for first half of 2011". That's not bad. Hon Hai (Foxconn's parent) continues to grow each year. They've just entered the solar panel industry.
Apple's shit works and the users don't have to fuck with them to get a reasonable experience.
I know that statment is going to piss a load of Android fanbois off a great deal but that is reality.
Yeah, the Apple world is a walled garden and there is no freedom like there is with Android. In reality and to most users they don't give a damm. They want stuff that works and works well.
I am hoping that when ICS settles down a bit and the first slew of bugs get sorted that someone will take android and make it work like IOS. I don't mean in functionality but give me a walled garden where I can't easily load malware from the AppStore etc. Give me a phone where I can remove every app I don't want to use. If I cancel my Facebook account, I want to be able to remove the FB app. My HTC phone does not allow me to do that. Why? What reason can HTC (it is unclocked and there is no carrier shit on it) have to locking the FB app into the phone. Yeah I can remove it but I have to root the phone.
Seriously, the whole idea sounds like something the Morons would've come up with. To make a profit you have to sell something. But if you can't manufacture it, what product do you have to sell? What good are your designers if you've got nobody to turn your design into an actual product? What good are your retail stores if you don't have an actual product to put on their shelves? And if you outsource, what do you do when your manufacturing partners realize they've got you over a barrel and start demanding premium prices?
Being a plumber isn't a glamorous job. It means dealing with the dirty, stinky messes most people don't want to deal with. But it's got an upside: you'll never lack for work because everybody needs a plumber sooner or later and there's a lot more "everybodies" out there than there are plumbers. Most customers, after the first attempt or two at haggling and calling around about rates, will figure out that they're not in a strong bargaining position here. And the ones that don't? Well, they're ankle-deep in sewage but unlike you they're not getting paid for it.
The Nazi didn't have slaves in the millions. The Brits did, the Spaniards did, Portuguese did, the French did, the Americans did. The Nazis? No. From where?
I don't want to go an question the validity of the numbers that Forbes is throwing around here, but they don't exactly make sense to me. How can the cost of manufacturing be so low? If it's only 2% of the cost of a device anyway, why would you want to outsource it? The labor to make a $400 ipad is... $8? Really?
So China's not cheap enough?
So maybe we've found an excuse for America's title of having the worlds largest prison population, "we", that is corporations can exploit them as a captive "slave labor" population, one with no rights, little safety regulations and the ability to take any measures to assure compliance (the US gov says that torture is OK now).
Made in USA, Whoopee!
I killed da wabbit -Elmer Fudd
Yea, that's never happened in the United States. Ever. Never ever ever!
Something is wrong with that claim, since for instance Germany gains 750,000 fulltime jobs from manufacturing cars. It becomes 5 million if you also count associated jobs. In total there are 28 milion fulltime jobs in that 3rd world country.
Manufacturing is quite a good business if you stay out of sheep retail crap like assembly of iPhones.
The USA is still the largest manufacturing country in the world based on the value of good produced. With only 8% or so of the population engaged in making stuff.
It's because the US makes things like airliners, heavy earth movers, CPUs and so on.
China resembles right now the history of germany 100 years ago.
a) introduce social security to enable a stable induatiralized society
b) dump into markets with low price, low quality (thats what "mage in germany" stood for in the 19 century in england)
c) increas the inductry and develop science and technology based on this financial grounds.
I hope and firmly believe they will skip the "lets kill a significant part of the population phase".
The point is: you can not lure r&d into the country without having production there. Produce, learn, then invent.
Since they raised the wages to a crazy high $0.35 an hour, it's no wonder.
China's cheap labor advantage is only sustainable as long as their factory assembly workers are still more dextrous, faster, and cheaper than the prevailing robotics technology of the day.
That is still the case, but for how much longer?
I don't know, but where I live (North Western North America), there are companies that use production lines to manufacture electronics. They have very accurate part placement machines that can place say 1500 resistors onto a printed circuit board per hour. Likewise capacitors, transistors, inductors, chips, etc. There are occasionally errors, setting up a line costs quite a bit, and they want quite a bit of money to set up a line, and usually the line has to run several thousand pieces for them to look at you, but its been happening for quite a long time. They usually have at least 4-5 lines running at any given time. Usually they aren't as complex as iPads, but tv remotes, calculators, garage door openers, clock radios, and other electronic gadgets usually cost less, and are needed in great supply too.
Or, am I responding to an Apple zealot who has no use, or understanding, of evidence and logic?
Maybe you are right, I don't know, but please specify some numbers, of iPad sales vs sales of Vizio tablets, Acer Iconias, Samsung Galaxies, HTC Flyers, Dell Streak, B&N Color Nooks, Amazon Kindle Fires, and all other major tablet makers.
I am sure you must have that information, otherwise, how could you assert that Apple basically is the tablet market.
I've always liked Macs, hell I got my first virus on a Mac in 1989! But they have always been too pricey, and not enough software. The current OSX era has shown better value and better app availability, but in this case I still go with PCs.
HOWEVER...I just got an iPhone 4S. I'm on Sprint and had the same Treo for 5 years, so I treated myself. Other than the odd way of transferring files to it, it works great. It is well constructed also, a nice solid feel. I'll enjoy using it for the next two years. And after that, I might actually just go to an extremely simple phone, or some type of ruggedized phone like a Motorola Defy.
Eastern minds typically grow up playing "Go", which teaches a very different way of "winning" (by encirclement) than Western Chess.
Oh please, this is nonsense armchair cultural psychology. Nobody plays Go because it's highly abstract, requires skill and dedication, and takes a long time to get through a game. You're much more likely to see Chinese people playing Xiangqi ("Chinese chess"), a game that is recognizably chess-like in form and play.
It's in your preferences, bro.
Where does the author think he is going to get his toys and gadgets without manufacturing? Where does he think the ores will be processed into refined metals and machined/cast/forged/etc to make the machinery necessary to make iphones/ipads/droids/etc, to say nothing of the parts themselves?
An information economy needs manufacturing to survive
The headline is inaccurate. "Unprofitable" does not mean "does not make a lot of money" it means "does not make money" or "losing money". This is not substantiated by the article, which just points out that labor is only 2% of the cost of an iDevice. When you factor in design, parts, logistics and marketing, this is hardly surprising. The same factories that make iDevices make lots of other things, many of which aren't nearly as good, as valuable, or as popular as iDevices. What distinguishes these things from one another are, in some cases, the parts, but more often the design and the software, which are not done in China.
The summary also seems to take a weird, almost "Apple is exploiting China" angle, when the point of the Forbes story is that those trying to make political hay out of the "bring manufacturing jobs back to the US" idea are barking up the wrong tree, because these jobs are not lucrative, no matter where they are.
What's missing from the Forbes article is any historical perspective-- what percentage of the cost of a Ford Model T, for instance, was labor? Was it 2%, or much higher?
I seriously do not recognize the existence of such concept as "profit" in an environment where all revenue is always reinvested in future production. "Profit" can be clearly defined when someone places money into something, gets more money out of it, destroys it and runs away. This works very well for kids' lemonade stand (complete with "destroys and runs away" part), or a company that pays dividends while keeping its stock value constant, however it's completely meaningless in anything more complex.
Contrary to the popular belief, there indeed is no God.
the value of that labour is trivial: 2% or so of the cost of the machine.
Labor and natural resources are THE ONLY costs of production -- everything can be traced down to either of those, including development (divided by the number of units produced). Basically, whatever does not grow on trees (natural resource) is made by a human (labor). It is not necessarily a human working for the company that sells the product, but if someone is paid for it, there has to be a human.
The price, of course, may be higher than cost -- and that can be used to calculate the "profit" that I have mentioned in my previous comment if not the mandatory reinvestment part (company like Apple would not be able to produce anything if it stopped investing in future development and production).
Contrary to the popular belief, there indeed is no God.
The reason manufacturing is important is because it creates additional jobs beyond just those involved in a particular product
Wrong. The reason manufacturing is important is because it makes the stuff. No designer has a job if the product they design stays on the computer. Design is important, too, but the real goal of an economy ought to be to make the stuff... the more stuff there is, the more stuff there is to go around.
Can you be Even More Awesome?!
Advances in robotics would eventually take away the cost advantage... now... if someone smart enough to get the Chinese to assemble their own job killers in their own factories. :-) The shipping costs will eventually become a bigger factor too.
On the profit margin thing... Actually it doesn't matter... when you have lots of mouths to feed... who cares about the margin, it provides someone with wages with which they can buy food/clothing/shelter. In the US, where these concerns have taken a backseat, the margin takes precedence. But in China, where the focus is to feed a billion people... a smaller margin is fine. It is all relative... IMHO
And I like that quote about "you can't deposit a ratio".
I don't understand why people think they want manufacturing jobs .. for fucks sake it's redundant and repetitious .. yet you people grow up wanting to be a mindless drone for 8+ hours of the day? Seriously. Heck, if I was king .. manufacturing jobs would likely be banned in accordance with being against human rights or something .. robots would have to do it all. People can own shares in companies instead.
If you hate working retail, you'll REALLY hate working in manufacturing.
Unlike Capitalism, Globalization is Zero Sum.
Casteism
New robots/machines are most likely to appear in existing factories. And when a manufacturing company builds a brand new factory, it's likely to pick a location near existing factories. Plus it's not only about cheap labor but also about fewer regulations and more economic freedom in general.
First, it is wrong to assume China does not benefit from manufacturing electronics at very low cost. Even a 150 dollar per month wage is much better than what a Chinese peasant can typically make. In their home villages, they typically have two hectares or less land. They are so poor 150 dollars is a lot of money to these workers ! It is also safe to assume these workers get much better medical treatment in the cities of the eastern coast than they could get in their remote villages. All the stories about "worker exploitation" might be true if compared to western workers, but certainly completely wrong as compared to the living standards of Chinese peasants.
Secondly, in some European nations and Japan there are large numbers (dozens of millions) of formally trained workers who produce highest-quality products, which command very high prices whereever there is money available to pay for them (that is, everywhere except North Korea and Burma). If workers are well-educated in their profession, they are much more valuable to their employers than "trained on the job" workers. America's workforce is comprised of a high percentage of the latter workers, and it is evident that they don't have a serious edge over their Chinese counterparts. So their jobs move to China. The jobs of fomally trained (three year of company+state school vocational training) German workers have so far been not transferred to China in significant numbers. Actually, German industry is doing extremely well, especially because Chinese companies need so many tool machines, instruments, specialty chemicals and so on. Also, Chinese consumers are already wealthy enough to buy millions of high-quality, high-price German cars.
I would also like to note that the clearly idiotic practices in the New York financial markets have hurt American manufacturing tremendously. Chinese finance is under the control of the state, as it should be. Their success speaks volumes.
Just because America has fscked up their own finances and their own industry does not mean the rest of the world has done so too. South Korea and Germany are doing very well in manufacturing. Also, Chinese wages will explode in the next few years and their population will dramatically age. That means their relative competitives will go down.
Regarding your War Rhetoric, America is clearly the single most belligerent country on the globe at the moment. China has had some border battles in the past, but they have never ventured out into another continent to conquer a complete country. Not in the last 500 years. Maybe it is time for you to look through the propaganda of the mainstream media, well-fed by CIA and the Weapons Industry.
They profit, just indirectly. By helping to reduce what's left of America's brain power to iDevice operating, drooling idiots, they're eliminating the competition. So yeah, they're playing a long-game, and you are looking at short-run profits. It's like all the money the US Army spent buying and storing blankets to give to Native Americans, with free special BONUS, SMALL POX! :^) It cost the army lots up front, but the US, thanks to the Army's action, reaped benefits in free land later.
People in the west, anymore, seem to have developed REAL short memories to match their sub-minute long attention spans. The people running the countries that will one day overtake us are older, and have very long memories, and are besides Olympic Champion-Grade Grudge-Carriers. They don't forgive, and they don't forget. And we (or our parents) really pissed them off, and now we've gotten to be almost helplessly dependent on them. This is going to get ugly when they get tired of us, and want their environment to be clean and livable too. Then they'll be the ones outsourcing things for a fraction of what it costs to make there to elsewhere, and we'll be left with... well, we can still grow food, so maybe we'll be okay, but... if they ever stop needing the fruit of our arable land, we're pretty much done.
Given that the wages for the iPad are only 2% of the cost (and that includes the manf. profit, etc.) it's clear that Apple could double the wages of those building their devices with little or no impact to their bottom line. IF by "magic" they could bump the pay to the employees without the owners of the factories taking their cut.
In the real world this still means that Apple could easily allocate $$ for assembly line employee Perks (bonuses, extended health care, funds for education, etc.) Or basically as an element of the contracts to build IOS devices Apple could insure that those building the computers can earn something closer to a sustainable wage.
Apple more than any company should commit fully to the triple bottom line.. the lack of such is nothing more than the toxic legacy of Mr. Jobs and (and company).
You have to remember though, that there is a huge offer of human beings and it only seems to expand. Add to that the fact that humans are incredibly capable and adaptable super computers, you can see this trend going on for a long time.
One interesting example is the way in which they use people to input captchas in order to allow their bots to spam.
"Science can amuse and fascinate us all, but it is engineering that changes the world. " - Asimov.
..that A) the vast majority of German workers either have a three-year vocational training or a higher education degree under their belt, B) German unions don't kill the cow they milk C) many CEOs are engineers as opposed to finance people D) we did not fsck up our financial system as comprehensively as the US did.
There are gravel pits in Africa where big rocks are made small by hand. When the owners are asked why they don't simply buy a crusher and dispense with all the people, the answer is the same. People are cheaper.
Soon enough these organ donors will have so little value they will be harvested for their minerals and fatty oils in mechanized support of an idyllic 1%.
Also good for the environment.
Eastern minds typically grow up playing "Go", which teaches a very different way of "winning" (by encirclement) than Western Chess
Er, chess also originated in the 'east', specifically India, before being brought West around the first millennium.
"..One hosts to look them up, one DNS to find them, and in the darkness BIND them."
Apples costs are about 50% for marketing alone. I can't prove it, but look around you and then you price what it will cost you to post the same amount of information in every city in the country.
The manufacturers do make money, and their children are going to get university educations. The next generation of inventors and new products are going to come from their children. Why do I say that? Because these kids see what is wrong with current manufacturing and how it can be further improved.
The outsourcing of manufacturing also outsources university graduates and prevents some locals from having enough financing to complete a bachelor degree.
Leslie Satenstein Montreal Quebec Canada
but how will people without jobs buy your product?
The truth is probably much more mundane than you are making it up here. There is no such thing as the vast conspiracy you are making up here. Rather, China and the US complement each other quite well. China has cheap labour in masses while America has lots of electronic and software designs which must ultimately be transformed into working widgets. China could do exactly nothing in Computers and Mobile Phones without America. All the designs and core elements are mostly from America.
Actually, it would be much easier for America to move smartphone and PC production to Vietnam, Malaysia, Thailand and even the north African Maghreb states, if China generated serious problems. Replacing America is much tougher; maybe they could partially replace American designs with Nokia's or Sony's, but certainly not in the computer business, where Wintel still holds the monopoly.
China's objective has been to industrialize with the fastest possible speed and to bring as many peasants into anything remotely looking like a "modern" job as quickly as possible. It's not a big conspiracy, it is just their desire to get out of the shit of subsistence farming.
Yes, but as a human gets more skilled and capable, he wants more pay. You simply cannot pay CEO salary to all your manufacturers and laborers, its basic economy. So if you can't offer them more money, and these "skilled" people have the option to work in an office or work hard labor in your factory, which are they going to pick? Human motivation seeks to minimize physical labor. In the long run, it WILL be replaced by robotics entirely. We just still have a ways to go.
GCS/MU/P d- s:- a-- C++++$ UL++ P+ L++ E+ W++ N o K- w--- O M+ V- PS+++ PE Y+ PGP t+ 5- X R++ tv+ b++ DI++ D++ G+ e++ h-
Foxconn is investing ~$1 billion to expand a plant to increase iDevice manufacturing, and is expecting a ROI of ~$20 billion by 2013. That sounds like plenty of money to me.
The lack of manufacturing jobs isnt about GDP, Americas GDP is not lower now but unemployment is. Its the lack of low paying jobs that has caused the increase in unemployment.
Profits don't help employees at all.
Of course I havnt read all of the posts. And admittedly, this may sound a bit "conspiracoy theorist". However, does anyone consider the advantage of one country becoming the only country that makes EVERYTHING? Remember the articles about China being the only country producing rare earth minerals? It has gotten so that China is the only country that makes many things. Money is not the only profit.
While it's only 2% of the revenue of the i-Device, it pays over 1 MILLION people a living, middle class wage in China. Foxconn (i-Device maker) employs over 920k directly (wikipedia). They also get components which are also China made, not to mention how the wages stimulate local economies. Foxconn has supply chain requirements which effectively requires payment of living wages. Without i-Device, several million jobs would be lost.
This also doesn't factor in how China forces Foxconn to effectively bring prosperity to poorer parts of China. There are many parts of China where people are under-employed and Chinese govt effectively dictated to Foxconn to create factories to train worker, to bring wealth to stimulate local economy (building factories, employing people, etc) and every few years kicking them further inward while the local govt run factories take over the trained employees to make mature products and fulfill internal demand
China is all about the 8% growth, without i-Device, and foreign input, it simply would not be possible. The local corruption is too inefficient to maintain the growth.
I've worked in manufacturing for a very long time. A few years of that were spent in the automotive sector with razor-thin margins. The fact is that you have some products that you make very little on but sell a lot of. These products, as we said "pay the light bill" because they bring in a steady stream of predictable revenue. It was the newer, lower volume products that had a higher margin on... But the business couldn't be supported without them.
In my opinion, the same thing is true for an economy on the whole. We need the manufacturing jobs (or, perhaps, jobs requiring lesser skills) to pay the bills (taxes, consumerism) even if they don't have "enormous value". Our current economic situation shows what happens when those kind of people crunched... Stagnation for most of us, although in this case the people at the top are doing quite well.