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Manufacture This

The blog of the Alliance for American Manufacturing

But the company remains dependent as ever on overseas manufacturing.

Apple made a big splash on Wednesday afternoon when it announced that it expects to contribute $350 billion to the U.S. economy over the next five years, creating 20,000 new jobs.

The company also announced that it will up its Advanced Manufacturing Fund to $5 billion, open a new Apple campus in a yet-to-be-announced location, and invest more than $30 billion in capital expenditures in the United States over the next five years.

Almost immediately, some pundits jumped on the news as proof tax reform is working; others argued that Apple’s announcement was merely spin, pointing out that the company is actually slowing down its capital spending.

Here at the Alliance for American Manufacturing, we were most intrigued by Apple’s decision to boost its Advanced Manufacturing Fund. Indeed, there have been some successes from the fund, which launched last spring.

In December, Apple awarded $390 million to Finisar, a maker of optical communications components, to help “power some of Apple’s most popular new features” like Face ID and AirPods. About 500 new jobs will be created in Sherman, Texas because of the investment.

Apple also awarded $200 million to Corning in May 2017 to support “state-of-the-art glass processing” for Apple products, including for the iPhone.

These developments are positive, of course – we always welcome efforts to innovate and spur American job creation. But as we were last year, we remain skeptical that Apple’s announcement is anything more than a public relations stunt.

While it is nice to see Apple spending $5 billion on U.S. manufacturing, the truth is that the company could be doing a lot more. As The Wall Street Journal reported last year, Apple maintains a cash hoard of $250 billion – a figure that is greater than the market value of Walmart -- so this $5 billion investment, while nice and all, is just a drop in the bucket.

Plus, Apple remains hugely dependent on offshoring to create its product line – and the labor conditions at those overseas factories continue to fall under scrutiny. Just this week, Bloomberg reported that workers at Catcher Technology Co., an Apple supplier in Suqian, China, “stand for up to 10 hours a day in hot workshops slicing and blasting iPhone casings for Apple Inc., handling noxious chemicals sometimes without proper gloves or masks.”

As one worker told Bloomberg: “My hands turned bloodless white after a day of work.” That worker, by the way, makes just over $2 an hour.

Meanwhile, labor conditions continue to be poor at the infamous Langhua facility in China, which is operated by Foxconn. Apple promised to crack down after a wave of suicides took place at the sprawling factory in 2010, but as reporter Brian Merchant found in 2017, conditions hadn’t changed all that much. “It wouldn’t be Foxconn without people dying,” one worker told him.

And Apple’s dependence on overseas labor is actually only likely to increase. As Bloomberg noted, it now sells more than 200 million iPhones a year, up from 40 million in its 2010 fiscal year. It depends on its overseas suppliers to churn out product quickly and cheaply, under labor conditions that wouldn't fly here at home. 

So yes, we applaud Apple for increasing its investment in American manufacturing. But the company must do a lot more – like say, opening an American factory to assemble the iPhone, which would only increase the cost of the phone by $30 to $40 – before we see this as anything other than a splashy P.R. move.