Apple's $20 Billion Cash and a 21st Century Mission
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by
August 19th, 2008
"Superior ability breeds superior ambition."
- Star Trek, The Original Series: Space Seed
In order to realistically examine what Apple might do with its $20 billion dollars, one has to look at Steve Jobs' stated goals from the past plus the biggest threats to Apple in the future. Those two elements are good candidates for assessing how Apple might spend some of that money in the grandest sense.
First, there are other small potatoes things that Apple could do. For example, the idea that Apple should buy back some of its stock has been proposed by analysts. That would improve Apple's Earnings Per Share (EPS). Other analysts look at what company Apple might buy, but, again, the consensus seems to be that Apple would be distracted and slowed down by a large acquisition. Mr. Jobs likes to maintain the atmosphere of a struggling underdog, not a corporate giant like IBM. In addition, I'm thinking much, much bigger.
 Apple's Cash Runneth Over Credit: Todd Bishop's Microsoft Blog |
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Mr. Jobs' Goals
I went back and looked at some of the most high profile goals Steve Jobs has had is his career. Also, there is one significant unstated goal I'll get to below. Those high-profile goals are:- Move on to the Next Big Thing.
- Be like Sony should have been.
For example:
"If I were running Apple, I would milk the Macintosh for all it's worth -- and get busy on the next great thing. The PC wars are over. Done. Microsoft won a long time ago."
Steve Jobs, Fortune, Feb 19th, 1996
It was hard to find a direct quote about Sony, but I've read about it, and others recollect the quote as well.
I believe Mr. Jobs' most significant unstated goal is to prove, in the end, that his original and continuing vision for personal computing is qualitatively superior to that of Bill Gates. The problem in the past was that people like John Sculley and Michael Spindler almost pissed it all away before Steve Jobs could fully implement his vision.
In fact, Mr. Gates probably said it best about Steve Jobs' original vision for the Macintosh.
"To create a new standard, it takes something that's not just a little bit different, it takes something that's really new and really captures people's imagination, and the Macintosh, of all the machines I've ever seen, is the only one that meets that standard."
- Microsoft founder Bill Gates, 1983
In order to prove to history the validity of that original standard, Apple has to surpass Microsoft, eventually, in wealth and and influence, and that gives a further clue about Apple's accumulation of cash.
The Threats to Apple
Looking at wealth, however, without examining the potential threats is folly. As we've seen recently, in the short term, the potential poor health of Steve Jobs is considered a grave threat to Apple's continued success. However, from what we've learned, Mr. Jobs has some stubborn dietary habits, and for the sake of this discussion, I'll assume that he'll remain a vigorous and far from a portly elder statesman in the world of computers for the next 15 years.
Looking at Apple's success in the market place, with the surging Mac sales, the iPods and the iPhone, it's hard to find a company that can threaten Apple's emerging success. Only an ill-advised merger or acquisition could put a torpedo into Apple's full steam ahead approach.
A far more serious threat, in the long term, would be a disruption to Apple's manufacturing and supply lines due to factors beyond its control. For example, a confrontation between the U.S. and China over the environment, resources, or Taiwan would seriously impact Apple.
China is struggling mightily to recover its self confidence and stature in the world. The 2008 Olympics in Beijing are going a long ways towards doing that, and the U.S. knows that China and the U.S. are both partners and adversaries. At some point in the future, however, if that relationship were to sour over some larger issue, Apple, depending as it does on China for the manufacture of its iPods and iPhones, would be out of business.
Manufacturing in the 21st Century
How would Apple, with the correct application of a large sum of money, fulfill Mr. Jobs' grandest stated and unstated goals as well as deal with potential future threats to the company?
First let's look at Apple's current manufacturing process for iPods and iPhones. There is a healthy dose of automation, but in the final assembly, Apple depends on Chinese workers to hand assemble those products. Apple first came under fire in 2006 when the living conditions of workers at Foxconn's plant were revealed. Now that the demand for the iPhone 3G is expected to soar in 2009 worldwide, and Apple has asked for production to increase, those conditions could conceivably get worse.
Next, Apple loves healthy gross margins. It gives them the liberty to develop new technologies and yet steadily reduce prices to put the squeeze on the competition. That has ensured Apple's dominance in the MP3 player market, and it'll do the same in the smartphone market.
The solution to many of Apple's potential problems, the public relations disaster of indentured Chinese laborers, the threat of a disrupted delivery supply line*, and the ability of Apple to make inexpensive consumer electronics, reminiscent of Sony's heyday, well into the future is, you guessed, it, to build their own completely automated, computerized plant that can assemble these products without a human hand ever touching them.
Such a factory would be a significant challenge and an expensive one. But, hey, that's what we're talking about here. Big bucks spent and a Grand Idea by one of the most successful computer companies in history.
At first blush, one might think about a plant in Mexico or Canada, but that's old style thinking. It's based on the idea, again, that labor costs have to be kept low. However, in this case, the ongoing labor costs will be almost non-existent except for some managers, overseers, and some technicians to keep the production line running smoothly.
Also, when thinking about locating a factory, companies have traditionally looked at locations where electricity is cheap. Again, that's 20th century thinking. This time, Apple could seriously think about making its own electricity with renewable resources: wind and solar power. With enough power at its disposal, water exiting the plant could be as clean as that going into it.
There are a few places in the U.S. where the two come together in order to insure a steady supply of power. New Mexico comes to mind. Near Roswell N.M. (Elida) there is a single wind plant that's generating 120 megawatts. The southwestern U.S. is also the only place where solar power can be consistently relied on, and other candidates are locations in west Texas, Arizona and California with good access to the Interstate system.
Such a plant, run by robots and Macs, would be expensive to build. In the long run, however, the economic and political advantages of such a plant would be enormous. Apple would stop sending money to China and suffering from continuing scrutiny over labor conditions in a foreign country. The plant would become a poster child for modern, 21st century manufacturing. Imagine Steve Jobs taking the next president of the United States on a tour of a plant that makes its own electricity, cleans its own water and cranks out millions of iPods and iPhones each month. And sends power back into the grid on occasion to power our plug-in hybrids.
Could it be that Apple's acquisition of PA Semi is the first step in this line of thinking? Assembly is the first step, but eventually making many of its own components would further improve Apple's bottom line.
The Final Frontier
In the end, however, the real goal is to make exciting products that cost less to make than the competition could ever achieve. When combined with the next generation Apple products that use a gesture language instead of mice, Apple could surge far ahead of the competition and achieve Mr. Jobs' goals. Apple would be creating dazzling and beautiful consumer electronics that no one else on the planet can touch in price or technical vision.
An Apple factory (or two), in the right place, costing several billions would be a worthy endeavor for Apple and its cash. It would achieve the grandest goals for Apple's technical future, make a contribution to the planet and its people's well being and help insure Apple's financial and political security.
But, sigh, it's just an idea.
* Of course, the raw components still have to be flown in to the factory. It's no worse than what happens now.
John Martellaro is a senior scientist and author. A former U.S. Air Force officer,he has worked for NASA, White Sands Missile Range, Lockheed Martin Astronautics, the Oak Ridge National Laboratory and Apple Computer. During his five years at Apple, he worked as a Senior Marketing Manager for science and technology, Federal Account Executive, and High Performance Computing Manager. His interests include alpine skiing, SciFi, astronomy, and Perl. John lives in Denver, Colorado.
Hidden Dimensions Archives.
Observer Comments
I highly disagree. I think building an automated factory is a very bad idea. Instead, build factories in areas that support American notions of respecting human life. Legally enforce that endeavor by having the government lock out products made in countries that are abusive to people. Products made in Western countries are of higher quality.
Moreover, people need jobs. If they don't have them, they can't buy your products. Henry Ford recognized that a long time ago. People have forgotten that lesson, and now the american economy is suffering for it. The american dream for most americans is dead all in the name of so called free trade.
Employing people you sell products to is a way of supporting your community. Just because Apple could build such factories, doesn't mean it should.
Pumping any money into a manufacturing facility would be the biggest waste of cash EVER. Apple has already been burned by that before....read any of the Apple history books. Nobody is building manufacturing base any more, Asia is full of millions of manufacturers that can move quickly.
Yawn, if your grandest idea is that Apple should build a factory, your vision is clearly not focusing on what Apple is really about: inventing new products (or at least bundling innovative ideas from others better than the others could).
Building an automated factory in or outside the USA might be a component to deliver those products, but without the products, no plants will even be required.
Sounds like a possibility to me, with that kind of cash cushion, The Steve and his ingenious minions might point the way to a new wave of industry in the United States. Expect much promotion of the carbon savings from building it here. (And much criticism of American business schools, if it works.)
If China stops manufacturing, there are many countries willing to step in. Plus why would China single out Apple and not other PC companies. If you take that reseasoning, all the PC companies including Apple would be out of business. That's just stupid. China is not going to stop manufacturing. That's how it feeds its people. Think about Vietnam, Combodia, Africa. Those countries can be developed to do manufacturing. Who writes these articles!?!
"?When Bill Gates was asked what trend or development over the past 20
years had really caught him by surprise, his reply was, Kaleida and
Taligent had less impact than we expected?" InfoWorld, March 3, 1997
"?Apple continued to talk about Pink as if it were to be the future
Mac OS, but by 1993 or so it was clear they were no longer serious?"
--- Job's left Apple albeit forcibly in 1985 returning around 1997?
My thought,- Old habits of maniacal and complete OS domination die
really, really hard. Jobs directive at NeXT Computer was to save face
with not only Sculley at Apple but also the Microsoft / Intel
alliance. There was much bad blood here for a time if you think that
Intel based CPU's in a Macintosh was Steve Jobs dream you need very
deep rooted psychotherapy.
Jobs and six other loyal staff defected from Apple and were sometime
thereafter sued at the direction of Sculley for taking 'company
secrets' to Job's new venture NeXT computer because of the concepts in
the NeXTSTEP OS.
What was the secret..? The secret was 'Pink' that later morphed into
two directives one with Job's leadership at NeXT and one with Apple
under the leadership of Sculley's initiative then spun as Taligent.
Think of Pink and Taligent as parallel directives to an idea that
hatched with Job's that the Cola manufacturer Sculley couldn't
possibly grasp or comprehend. Thereafter Sculley spun the idea off to
Motorola and IBM as he could barely understand less manage the
implications and/or technical details of such a profound concept.
Clueless is maybe not the right word, but it is the only word that
comes to mind.
'Pink' was a primary OS that can allow any combination of operating
system personalities to run simultaneously on a single computer. One
has to take into consideration that this was several years prior to
the first release of OSX and the Mach Kernel. It was conceptual and
heavily dependent upon custom CPU design and microprocessor
architecture something IBM and Motorola's semiconductor units worked
on jointly.
What is the History of Taligent one might ask?
"?Taligent the name of an object-oriented operating system and the
company dedicated to producing it. Initially started as a project
within Apple Computer to produce a replacement for the Mac OS, it was
later spun-off into a joint venture with IBM in order to build a
competing platform to Microsoft Cairo and NeXTSTEP. Taligent was
dissolved in the late 1990s?"
"?As development dragged on, Apple eventually entered the AIM alliance
with IBM and Motorola (Apple, IBM and Motorola)?They also had
experience in microkernel design as a side-effect of their Mach based
Workplace OS efforts?" -- The stated goal of the alliance was to
challenge the dominant Wintel computing platform with a new computer
design and a next-generation operating system.
"?Pink was then spun off from Apple as a joint project known as
Taligent. The original Apple team was expanded with the addition of a
very small number of IBM engineers, as well as a new CEO from IBM, Joe
Guglielmi (apparently to the distaste of many of the Apple people)?"
"?In 1992, the earth shook: IBM and Apple clasped hands and pronounced
themselves allies. From this union sprang Taligent, a small Cupertino,
California, company that's now developing nothing less than a
universal operating system..."-MacWorld, 1994
Taken, rearranged / placed in no certain order from:
http://en.wikipedia.org/wiki/Taligent#cite_note-0
Taken from: http://finance.google.com/group/google.finance.327/browse_thread/thread/d29d7598deb04f07?hl=en#
You can't make iPhones and iPods using American workers. It costs too much and Apple wouldn't be able to sell them at $200. The bottom line is, the standard of living in the U.S. is vastly higher than in China, so you need to pay Americans more. You cannot employ Americans in most types of basic production line labor because you'd never be able to sell your product at a profit...... no profit, no product, no jobs. Yea it's not nice to think that a lot of Chinese workers get paid less than peanuts, but the sad truth is, they might be lucky to have a job at all.
If we were to actually block products from countries that are abusive to people, 90% of the things sold in Wal-mart would disappear! Don't get me wrong, I'm no fan of Wal-mart, but a LOT of people (ironically, for example, people who work at Wal-mart) depend on their low prices to save some money. I'm also not trying to defend countries with bad human rights records, but the US isn't exactly one to practice what you preach either (i.e. Guantanamo).
"Products made in Western countries are of higher quality." ..... no, they're just more expensive 
. A lot of high quality products (especially electronics) come from Asia. Those iPhones look pretty darn high quality to me.....
And what about cars? Ford and GM cars break down much more often than Toyotas. If you've ever listened to CarTalk radio, people call in with Fords, GM's, Saturn's all the time, but rarely Toyotas.
I also want to point out that if Apple did ever build a non-automated plant in the U.S., it might not be your proto-typical Americans working in the plant anyway....
The American Dream isn't dead. This is still the best country to come to if you want to make a nice home for your family and create a better life for yourself. But you'll probably have to work a little bit harder for it than you might have 50 years ago.
You can't make iPhones and iPods using American workers. It costs too much and Apple wouldn't be able to sell them at $200. The bottom line is, the standard of living in the U.S. is vastly higher than in China, so you need to pay Americans more. You cannot employ Americans in most types of basic production line labor because you'd never be able to sell your product at a profit...... no profit, no product, no jobs. Yea it's not nice to think that a lot of Chinese workers get paid less than peanuts, but the sad truth is, they might be lucky to have a job at all.
If we were to actually block products from countries that are abusive to people, 90% of the things sold in Wal-mart would disappear! Don't get me wrong, I'm no fan of Wal-mart, but a LOT of people (ironically, for example, people who work at Wal-mart) depend on their low prices to save some money. I'm also not trying to defend countries with bad human rights records, but the US isn't exactly one to practice what you preach either (i.e. Guantanamo).
"Products made in Western countries are of higher quality." ..... no, they're just more expensive . A lot of high quality products (especially electronics) come from Asia. Those iPhones look pretty darn high quality to me.....
And what about cars? Ford and GM cars break down much more often than Toyotas. If you've ever listened to CarTalk radio, people call in with Fords, GM's, Saturn's all the time, but rarely Toyotas.
I also want to point out that if Apple did ever build a non-automated plant in the U.S., it might not be your proto-typical Americans working in the plant anyway....
The American Dream isn't dead. This is still the best country to come to if you want to make a nice home for your family and create a better life for yourself. But you'll probably have to work a little bit harder for it than you might have 50 years ago.
I hope John is right and Apple does something bold on a grand scale that goes beyond the PC realm. A 'green' automated factory would be an amazing step in a great direction for American business and the world at large. The R+D, construction and maintenance of this style facility would be a boon to the US job market. Not to mention all the ancillary employment that would come from getting the excess power and clean water generated by such a factory system out into the 'grid'. Great line of thinking and a discussion that will be continued for a while to come. How about building it on the moon? No, really...
Before Motorola built assembly factories in China, they had automated phone manufacturing in Illinois. It was cheaper to go to China, because automation is not as flexible as humans, particularly if you have a short product cycle like phones.
Also, semiconductor plants match your goal of high automation with a skilled technical work force. Guess what? Many of those are moving overseas too, especially to Asia.
Tue Aug 19, 2008 10:25 am Subject: I think it will be in Roswell
"There are a few places in the U.S. where the two come together in order to insure a steady supply of power. New Mexico comes to mind. Near Roswell N.M."
Okay look at the design of the first Airport, looks like a flying saucer. Then there is the lampshade iMacs, they resemble the machines in War of the Worlds. There is clearly space alien technology in Apple products, technology that was introduced to Earth at Roswell in 1947
Seriously John you may be on to something. Apple always seems to be a few technology jumps ahead of the competition.
Why not have everything hand made? Why not have workers fill dump trucks using shovels the way I've seen in Nigeria? Why not get rid of computers and do accounting by hand? Why not use a hammer instead of a nail gun? Or a small paint brush instead of a sprayer or roller? Why not build web pages by writing html by hand rather than using DreamWeaver?
Employing people for the sake of employment and with no eye to efficiency not only makes no sense, but is not economically sustainable.
Yes, people lose jobs when they are replaced by automation, but ultimately the population moves to a higher skill level and accomodates. And the standard of living goes up.
QuoteSir Harry Flashman wrote:
"There are a few places in the U.S. where the two come together in order to insure a steady supply of power. New Mexico comes to mind. Near Roswell N.M."
Okay look at the design of the first Airport, looks like a flying saucer. Then there is the lampshade iMacs, they resemble the machines in War of the Worlds. There is clearly space alien technology in Apple products, technology that was introduced to Earth at Roswell in 1947
Seriously John you may be on to something. Apple always seems to be a few technology jumps ahead of the competition.
I believe that what Martallero proposes is in-line with Sir Harry's logical extrapolation from the existing facts. This clearly begs the conclusion that Apple is in the process of cloning SJ finally bringing about Lucas' prediction of the clone war era.
Apple is probably executing this master plan as we type...
I felt like I was reading OMNI magazine there for a minute. Optimistic, futuristic, humanistic and all within reach of a forward thinking eccentric executive at a highly creative widely admired company.
It's as if the impulse to create has been steered to a dead end. There is perhaps another way, a better way.
Tue Aug 19, 2008 11:06 am Subject: Willy Wonka redux
Yours is a very Brautiganian vision (poem: "All Watched Over
by Machines of Loving Grace"). Further, some of us are
reminded of Roald Dahl's classic...
from the 1971 film:
Willy Wonka: How did you like the chocolate factory, Charlie?
Charlie Bucket: I think it's the most wonderful place in the whole world!
Willy Wonka: I'm very pleased to hear you say that, because I'm giving it to you.
_________
later, from the 2005 remake:
Narrator: In the end, Charlie Bucket won a chocolate factory. But Willy Wonka had something even better, a family. And one thing was absolutely certain - life had never been sweeter.
Tue Aug 19, 2008 11:33 am Subject: Don't forget his father
QuoteGuest wrote:QuoteSir Harry Flashman wrote:
"There are a few places in the U.S. where the two come together in order to insure a steady supply of power. New Mexico comes to mind. Near Roswell N.M."
Okay look at the design of the first Airport, looks like a flying saucer. Then there is the lampshade iMacs, they resemble the machines in War of the Worlds. There is clearly space alien technology in Apple products, technology that was introduced to Earth at Roswell in 1947
Seriously John you may be on to something. Apple always seems to be a few technology jumps ahead of the competition.
I believe that what Martallero proposes is in-line with Sir Harry's logical extrapolation from the existing facts. This clearly begs the conclusion that Apple is in the process of cloning SJ finally bringing about Lucas' prediction of the clone war era.
Apple is probably executing this master plan as we type...
Steve Job's biological father was Syrian which I think means he came from the Sirius star system. And we are currently in the Dog Days of Summer which is in reference to the rising of the star Sirius just before dawn.
Okay enough joking around this morning, I need another cup of my "meds" (coffee) and get some work done. Chat will you all this afternoon.
I'd log in again, but unfortunately TMO still has not fixed the log in issue. I'm really just sick of trying at this point. Why TMO has this issue but iPO does not amazes me. Yes, I've reset the the TMO cookies, and I've deleted my own TMO cookie file and logged in again, but the reality is - it just doesn't work. I tried again just now. I'm beginning to think TMO just does not care about it.
I presume I'm not the only one who's experienced this or who feels this way.
Tue Aug 19, 2008 11:40 am Subject: Guests
Quotegeoduck wrote:
Some very interesting comments.
I really wish some of you "Guests" would register. Take credit for your intriguing ideas. Put a name to your insights. A lot of people just skip over Guest posts, which for many of the posts above is really too bad.
I think that view guest posts is turned off by default in the forum preferences. Now that means we can skip over the trolls, but as our Geoduck points out we might miss some good stuff.
QuoteGuest wrote:
I'd log in again, but unfortunately TMO still has not fixed the log in issue. I'm really just sick of trying at this point. Why TMO has this issue but iPO does not amazes me. Yes, I've reset the the TMO cookies, and I've deleted my own TMO cookie file and logged in again, but the reality is - it just doesn't work. I tried again just now. I'm beginning to think TMO just does not care about it.
I presume I'm not the only one who's experienced this or who feels this way.
Not by a long shot. The TMO login/cookie/forum DB/whatever issue has been annoying as he!! for a couple of years now. It does seem to be much worse with Win-IE, which I'm now forced to use at work, but even on Safari at home it's still not working right. [/OT-Rant]
Tue Aug 19, 2008 12:53 pm Subject: Location
John you got me thinking about location, Adelanto California. I drive by there several times a year and it some advantages over other locations. All the links below are satellite views from Google Maps
1. The town is the home of the old George AFB which is now the Southern California Logistics Airport. It has a long runway that can probably take the big cargo planes.
2. Close to truck routes including I-15, I-40, I-10, Hwy 58 that links to I-5
3. Close to rail transport.
4. Cheap land, or relatively cheap for Southern California
5. In the midst of a high tension powerline grid.
6. There is a solar power generating station at Barstow/Daggett, which is maybe 20 miles away. This is a system where mirrors focus on a water tower to generate steam.
7. Another solar power generating station at Four Corners (Highways 395/58. This one is long tubes along the focal point of wide curved mirrors that rotate to follow the path of the sun.
8. Wind turbines to the southeast between Cabezon and Palm Springs as well as wind turbines to the northwest between Mohave and Tehachapi.
QuoteGuest wrote:
I'd log in again, but unfortunately TMO still has not fixed the log in issue. I'm really just sick of trying at this point. Why TMO has this issue but iPO does not amazes me. Yes, I've reset the the TMO cookies, and I've deleted my own TMO cookie file and logged in again, but the reality is - it just doesn't work. I tried again just now. I'm beginning to think TMO just does not care about it.
I presume I'm not the only one who's experienced this or who feels this way.
Thanks for the note. To answer your chief concern: we do care. When we created the comments-to-phpBB bridge, persistent logins worked flawlessly. Unfortunately, phpBB made a change a few point revisions back that significantly changed the way these work and, unfortunately, made it near impossible to solve this problem with the way TMO serves pages (iPO is different). Not everyone is plagued by this, but you're definitely not the only one: I suffer from it too, and it drives me crazy.
Stephen Swift (and I, but mostly Stephen) has spent countless hours debugging this and while I think we understand what's going on, the only fix is to fundamentally change the way TMO serves pages. And that change is coming in the next quarter. Until then, we'll try a few more bandaids to squash this, but likely won't have a 100% fix until we just revamp the article pages here at TMO.
-Dave
Quote
I believe Mr. Jobs' most significant unstated goal is to prove, in the end, that his original and continuing vision for personal computing is qualitatively superior to that of Bill Gates.
...
In order to prove to history the validity of that original standard, Apple has to surpass Microsoft, eventually, in wealth and and influence, and that gives a further clue about Apple's accumulation of cash.
The author, IMO, has identified what motivates Steve Jobs and concisely stated what he needs to do to satisfy that ambition.
When Apple went public, Steve (and others) joked that Apple was going to buy Xerox and/or IBM.
I'm not sure if automated US factories are are the best way for Apple to spend their cash cache.
Though, I remember Steve gushing over the Fremont plant and Apple's JIT manufacturing process...
...so, it's a possibility!
Dick Applebaum (posing as guest)
QuoteDave wrote:QuoteGuest wrote:
I'd log in again, but unfortunately TMO still has not fixed the log in issue. I'm really just sick of trying at this point. Why TMO has this issue but iPO does not amazes me. Yes, I've reset the the TMO cookies, and I've deleted my own TMO cookie file and logged in again, but the reality is - it just doesn't work. I tried again just now. I'm beginning to think TMO just does not care about it.
I presume I'm not the only one who's experienced this or who feels this way.
Thanks for the note. To answer your chief concern: we do care. When we created the comments-to-phpBB bridge, persistent logins worked flawlessly. Unfortunately, phpBB made a change a few point revisions back that significantly changed the way these work and, unfortunately, made it near impossible to solve this problem with the way TMO serves pages (iPO is different). Not everyone is plagued by this, but you're definitely not the only one: I suffer from it too, and it drives me crazy.
Stephen Swift (and I, but mostly Stephen) has spent countless hours debugging this and while I think we understand what's going on, the only fix is to fundamentally change the way TMO serves pages. And that change is coming in the next quarter. Until then, we'll try a few more bandaids to squash this, but likely won't have a 100% fix until we just revamp the article pages here at TMO.
-Dave
Dave,
Thanks for the information and candor. Now I know, and that is half the battle. Not knowing coupled with the login craziness just about put me off of TMO altogether. I'm looking forward to the solution.
Tue Aug 19, 2008 4:54 pm Subject: High cost, high risk, what return?
I think Apple is smart enough not to put all their eggs in one basket. A global manufacturing market where competition forces prices to stay low and technology to be upgraded frequently at the manufacturer's expense will always be cheaper and much more flexible than operating your own plants.
JIT manufacturing and distribution can't afford any disruptions in the chain. When would you re-tool to take advantage of new technology? In the global market while one plant upgrades you can still get components from a second plant or one of their many competitors.
What happens when demand is too low? Redundant capacity, even highly automated, is expensive. How about when demand outstrips your capacity? Then you're back to outsourcing and using whatever systems the marketplace uses to make products.
I can see an area where having your own plant might work and that's a product like the Sony PlayStation 2 that has remained mostly unchanged for years. Even so it's an all eggs in one basket scenario where the risk is very high that something will cause disruption to the supply chain. Plus Apple isn't the kind of company to leave any product on the market for more than a year. OK, the 1st generation Mac Pro languished for 16 months, but hopefully that kind of thing never happens again.
The only other reason I can see for having your own plant is to maintain secrecy regarding new products, but Apple seems to be doing a good job with that already.
The Mac has become a generic machine with the only differentiation being the OS. It has been milked for all it's worth. The next big thing will be a class of machine that will be a fruit of the PA acquisition. It certainly will not be a manufacturing plant. It will be a massively parallel processor that will do your nails.
Jobs as in work wil be there - in recycling the iPods and the iPhones, when consumers invest in the newest modell.
Very best from Tony.bugge@hotmail.com
It might be worth Apple's time and money to have some capacity here, transportation costs aren't likely to decline, the People's Republic is not the most stable, protectionism is regaining popularity.Relying on an ill-paid work force in execrable conditions doesn't look like a long term strategy, more like fueling the next revolution. The Steve may have something completely different in mind, short term, a Mac OS that gets more mileage out of multiple processors than that other OS, long term, an iPhone-like device that is a phone when you need to talk, a music/ video player and a general purpose computer, wirelessly connecting to a keyboard, mouse and display.
Please, such straw men as calling them indentured not only shows ignorance of the facts, and Apple's policies about employee treatment, but pretty much indicates a lack of understanding of what it really is.
Second of all, it's 25 billion.
Last of all, does he think you can build a factory to make such products with just managers, overseers (isn't that redundant?) and technicians to keep the lines running.
Okay, but who's going to build the tools to make this lines? That's expensive? Seems like someone doesn't understand manufacturing.
Look at where henry ford's company is today- on the brink of going bye-bye because Ford & GM hired too many people, and pay them way too much, for what little is required. If American car companies used more automation, then products would be of higher quality with lower price tag.
If a machine take the place of human, that means a blind untrained monkey could do it as well. Anyone with a pulse, because machines can't think, just run a routine of procedures. Auto workers just follow a series of steps over and over again as cars come down the line. That requires no thinking, problem solving, or judgement. That is why there are so many mistakes because the worker mind becomes so disengaged that if fails to notice mistakes due to the lack of mental input required which would sustain attention.
Most of US autoworkers are way overqualified for their job requirements. It's such a waste, and now worker protection very likely lead to Ford and GM going away, which means now nobody has a job.
Giving jobs for the sake of jobs is the so inefficient and harmful in the long-run. Replace the workers with machines, then let those workers design the machines and formulate the processes and production line layout. Those tasks require critical thought and judgment that machines can't do. That would boost the tech level and living standards in society.
If we want to protect American jobs in inefficient areas, then let's also tax oil companies who make so much money and use it to subsidize gas prices so big oil isn't getting rich off the overage consumer. That way, gas will be artificially cheap allowing us to demand more, and Oil companies will have less incentive and cash flow for expanding production and supply. Sure it will work, reducing supply and increasing demand always works out in the long-run.
John,
I always enjoy reading your comments. You bring a wealth of mature thinking to the sea of off-the-cuff garbage normally being written these days.
I think you may be on to something. Apple cannot afford to rely on a country like China that opposes human rights and is always one misstep away from being on our government's embargo list. If political tensions escalated, Apple is suddenly out of business. It's alarming that most of the people commenting here can't understand that. Building a modern, world-class robotic plant would be expensive but Apple needs to invest their money into SOMETHING. You make excellent points. This scenario alleviates a lot of issues Apple faces: bad marks by the green movement, dependence on a country half-way around the world with glaring problems, logistical issues and a solution to their huge bankroll.
Thanks for seeing the big picture and sharing it with us.
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