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CEO Tim Cook says Apple will build some Macs in U.S. next year

Cook makes the pledge as Apple faces increasing criticism for working conditions in overseas manufacturing facilities run by its suppliers.

December 07, 2012|By Andrea Chang and Chris O'Brien, Los Angeles Times
  • Apple devices including the iPhone 4 and iPad 3 are built in overseas manufacturing facilities run by suppliers such as Foxconn.
Apple devices including the iPhone 4 and iPad 3 are built in overseas manufacturing… (Karly Domb Sadof, AP )

Bowing to pressure from consumer groups and government officials, Apple Inc. said it will bring some manufacturing of its computers back to the United States starting next year.

Chief Executive Tim Cook made the announcement Thursday in interviews with Bloomberg Businessweek and NBC, saying the Cupertino, Calif., company would invest $100 million to build some Macs domestically.

"We've been working on this for a long time, and we were getting closer to it," he told Bloomberg Businessweek. "It will happen in 2013. We're really proud of it. We could have quickly maybe done just assembly, but it's broader because we wanted to do something more substantial."

Cook made the pledge as the technology company faces increasing criticism for working conditions in overseas manufacturing facilities run by its suppliers, particularly those owned by Foxconn.

Quiz: What set the Internet on fire in 2012?

Foxconn is Apple's largest supplier and makes iPhones, iPads and other Apple devices at massive facilities in Asia that resemble small cities. It has been plagued by negative publicity because of worker suicides, brawls and strikes.

Apple has been working with a labor group in recent months to help improve worker conditions at Foxconn facilities. That has led to the supplier pledging to increase employee pay, reduce hours, enforce breaks and update maintenance policies.

Despite those efforts, Apple has been repeatedly asked why it doesn't build its products in the U.S. During one of the presidential debates, President Obama and Mitt Romney were asked specifically about how they would persuade companies like Apple to bring manufacturing back to the country.

Apple did not say which line of Macs would be involved or where in the country they would be made, but analysts said the scale and magnitude of Apple's manufacturing move was not expected to be major.

"The percentage of production likely to be shifted by Apple from Asia to the United States in 2013 is likely to be negligible, both for the company and for PC industry at large," said Craig Stice, senior principal analyst for computer systems at IHS.

"Apple's move appears to be a symbolic effort to help improve its public image, which has been battered in recent years by reports of labor issues at its contract manufacturing partners in Asia. However, given Apple's high profile in the market, the company's 'insourcing' initiative could compel other companies to follow suit and transfer production to the United States over the next few years."

Colin Gillis, an analyst at BGC Financial, predicted that bringing some Mac manufacturing back to the U.S. would be "immaterial to the stock and immaterial to the margins, but a good move for America."

"If there's anyone who can make it work, Tim Cook would be one of those people because he's operationally so strong," Gillis said. "It might be the start of a larger trend to bring manufacturing jobs back to America if he can do it cost effectively."

The news, revealed Thursday morning, boosted Apple's shares $8.45, or 1.6%, to $547.24 after a big decline the day before.

Cook, who noted that parts of Apple products are already made in the United States, including the glass of the iPhone, said the company would work with partner firms to manufacture a line of Macs in the U.S.

Apple made most of its products in the U.S. until the late 1990s. When co-founder Steve Jobs, after returning to the company for his second stint, hired Cook in 1998, Cook's mission was to overhaul Apple's supply chain and manufacturing. A big part of his strategy was to move most of that manufacturing overseas, particularly to China.

Cook told NBC that the main reason Apple outsourced much of its manufacturing was "not so much about price — it's about the skills."

"Over time, there are skills that are associated with manufacturing that have left the U.S.," Cook said in an interview on NBC's "Rock Center With Brian Williams," which aired Thursday night. "Not necessarily people, but the education system stopped producing them."

A clue as to whom Apple might partner with in the U.S. came this week, when Foxconn said it would be expanding its manufacturing facilities in the U.S.

"We are looking at doing more manufacturing in the U.S. because, in general, customers want more to be done there," Louis Woo, a Foxconn spokesman, told Bloomberg News.

Recent reports indicated that a small number of new Macs were already being made in the U.S., with some Apple users saying their new, ultra-thin iMac computers were shipped with "Assembled in USA" on them. Whether that's related to Cook's announcement is unclear.

Apple fans also got another piece of welcome news, when Cook again teased that Apple might be working on a long-rumored television set.

"When I go into my living room and turn on the TV, I feel like I have gone backwards in time by 20 to 30 years," Cook said in the NBC interview. "It's an area of intense interest. I can't say more than that."

andrea.chang@latimes.com

chris.obrien@latimes.com

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