Apple to return some Mac production to U.S. in 2013

NEW YORK/SAN FRANCISCO Fri Dec 7, 2012 1:34am IST

Customers gather outside an Apple store in Munich early September 21, 2012. REUTERS/Michael Dalder/Files

Customers gather outside an Apple store in Munich early September 21, 2012.

Credit: Reuters/Michael Dalder/Files

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NEW YORK/SAN FRANCISCO (Reuters) - Apple Inc (AAPL.O) plans to move some production of Macintosh computers to the United States from China next year, Chief Executive Tim Cook said in remarks published on Thursday, in what could be a important test of the nascent comeback in U.S. electronics manufacturing.

Apple makes the majority of its products, from Macs to the iPhone and iPad, in China, the world's factory floor for electronics. But like other U.S. corporations, it has come under fire for relying on low-cost Asian labor and contributing to the decline of the U.S. manufacturing sector.

Cook did not say which Macintosh products will be produced in the United States. But the effort is expected to go well beyond simple final assembly of devices, with Apple and unnamed partners building most or all of the components in the United States as well.

The company will spend more than $100 million on the U.S. manufacturing initiative, Cook said in an interview with Bloomberg Businessweek published on Thursday.

"This doesn't mean that Apple will do it ourselves, but we'll be working with people and we'll be investing our money," Cook said.

He told NBC's "Rock Center" program, in an interview to be aired later Thursday, that only one of the existing Mac product lines would be manufactured exclusively in the United States.

Apple declined to comment beyond the interview.

Cross Research analyst Shannon Cross said it made sense for Apple to bring some manufacturing back to the United States, because some components were already being produced here.

Also, while cheaper labor costs have been a key factor in encouraging U.S. manufacturers to move production to China, wages and other costs have risen sharply - particularly in the main coastal manufacturing centers. Labor costs, moreover, account for only a tiny portion of overall expenses: the research firm iSuppy says the total cost, including labor, for final manufacturing of an iPhone 5 is just $8.

Cross pointed to other potential benefits of U.S. manufacturing, including mitigating the risk of intellectual property theft.

Cook has said in the past that he would like to see more of the company's products assembled back home, but declining U.S. manufacturing expertise made that difficult. The company currently makes applications processors for the iPad and iPhone via Samsung Electronics in Austin, Texas, and sources glass for the same devices from a Corning facility in Kentucky.

MAKING STRIDES

Apple's shares rose 1.3 percent on Thursday, a day after they fell 6.4 percent - their biggest single-day loss in almost four years.

Analysts say the stock, which has been falling steadily since September, has come under pressure from investors worried about the rapidly intensifying competition from Google Inc (GOOG.O) Android products.

Samsung in particular has emerged as a formidable competitor, chipping away at Apple's dominance in the tablet market and leading the smartphone pack in China, where the U.S. company's smartphone market ranking fell to No. 6 in the third quarter from No. 4 in the previous three months, research outfit IDC estimates.

Samsung stock has climbed 8 percent since the end of September.

Apple's domestic manufacturing effort will likely buy the brand some goodwill at home, where the debate about off-shoring has heated up as the economy sputters along. Beyond the marketing boost, some analysts said Apple could blaze a trail should it prove that American manufacturing of electronics can be profitable.

"It seems to me like a nice time for Apple to do something," Gartner analyst Carolina Milanesi said. "If it can be a profitable business, and others follow, then Apple has shown the way."

Earlier this year, Google made waves when it announced that it would build its Nexus Q home entertainment streaming device - deemed by many analysts to be an experimental product - right in the heart of Silicon Valley. Google said it hoped to speed up innovation on the device and improve time-to-market.

And Lenovo - China's largest PC maker - this year said it will move a limited amount desktop and laptop computer manufacturing to North Carolina to be closer to the market. (Reporting by Nicola Leske and Edwin Chan.; Editing by Maureen Bavdek)

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