Apple Driving Supply Chain Capacity with $10.5 Billion Investment in Advanced Technologies

[MacRumors]

Back in October, Apple filed its 2013 10-K annual report with the U.S. Securities and Exchange Commission, offering some insight into how the company has grown over the past year. A section within the filing revealed that the company is investing a record $10.5 billion on advanced supply chain technology, and a new report from Bloomberg has offered a look at what Apple typically does with those expenditures.

Apple's investment will reportedly include the purchase of new machinery such as assembly robots and milling stations to place in the factories of its suppliers, which would help with the mass production of iPhones, iPads, MacBooks and more from the company's line of products, as Apple looks to seek advantages over the production tools in the factories of its rivals.

To get a jump on rivals like Samsung Electronics Co. and lay the groundwork for new products, Apple is spending more on the machines that do the behind-the-scenes work of mass producing iPhones, iPads and other gadgets. That includes equipment to polish the new iPhone 5c's colorful plastic, laser and milling machines to carve the MacBook's aluminum body, and testing gear for the iPhone and iPad camera lens, said people with knowledge of the company's manufacturing methods, who asked not to be identified because the process is private.

Apple has been seeking to expand its production efforts in numerous ways recently, as a report surfaced earlier this week that Apple and Samsung were looking to use an upstate New York factory belonging to semiconductor company GlobalFoundries to produce Apple's A-series chips. Apple has also struck a deal with GT Advanced to produce sapphire glass for its products, with Apple investing significant upfront money in facilities and advanced technologies to advance the process

Apple engineers often spend weeks at facilities in Asia making sure the parts and equipment they buy or make are working properly, people familiar with the work said. The company has hired robotics experts and its website has several job openings for engineers who can operate high-end manufacturing equipment. [...]

Apple's approach contrasts with other technology companies, which typically partner with contract manufacturers to handle much of the engineering work involved in getting a product made in large numbers, said Cormac Eubanks, product development director at industrial design firm Frog Design.

A push to expand its production technology and increase efficiency within the factories of its suppliers comes as Apple looks toward a busy next year with high demand for existing products such as the Retina iPad mini, as well as new product categories on the horizon.

A previous analysis of Apple's 2013 10-K annual report with the U.S. Securities and Exchange Commission revealed other interesting developments about the company's growth over the past year, including the growth of Apple's employee headcount and retail store count, along with the increased advertising expenses and real estate holdings. Apple's annual report usually contains a number of details about the company's operations, much of it targeted at investors and regulators, and addresses such topics as executive compensation, company investments, taxes, and more.

Article Link: Apple Driving Supply Chain Capacity with $10.5 Billion Investment in Advanced Technologies

 

[stu.h]

Supply and demand!

 

[dBeats]

I'll take $10billion in robots supported by high tech staff in the US over an army of underpaid workers in a country that could care less if they strive in life.

 

[Doomtomb]

Impressive.

 

[applesith]

Apple's logistics alone are very fascinating.

 

[SeanMcg]

Is there any surprise that Tim Cook is concentrating on Supply Chain issues? That is his strength.

On another note, more robots probably mean fewer people to take photos of products and post them to Gawker...or MacRumors

 

[AppleScruff1]

Quote:
That includes equipment to polish the new iPhone 5c's colorful plastic

Why does that statement make me cringe?

 

[pavelbure]

I'm making parts for a Apple order right now.

 

[hkenneth]

I'll take $10billion in robots supported by high tech staff in the US over an army of underpaid workers in a country that could care less if they strive in life.

So you are saying you'd rather those "underpaid workers", which is paid well in their standard anyway, lose their only jobs than have a chance to strive in life? Sometimes I just feel the logic of the westerners so naive...

 

[scbn]

Big Capital Expenditure means leading technologies down the road. Apple has to do this in order to keep a distance from the competitors.

 

[dBeats]

So you are saying you'd rather those "underpaid workers", which is paid well in their standard anyway, lose their only jobs than have a chance to strive in life? Sometimes I just feel the logic of the westerners so naive...

Change hurts. But no country will change until their people make them change. As long as they can herd their people into "good enough" wages, they won't improve. I'm not being callous or cavalier, it's just reality.

 

[Vanilla35]

It looks like Apple keeps on trying to bring the labor home. <3

 

[Rocketman]

Given that the current batch of purchases includes a PARTICLE ACCELERATOR, I would say Apple is buying quite a bit of leading edge technology to make its consumer products.

Rocketman

 

[ElectronGuru]

Right or not, it's the same calculous that gave them the jobs in the first place. Straight US production giving way to straight China production, giving way to automated US production. Each step leaves someone behind.

But china is running out of excess capacity and prices are starting to rise there, so even a change as big as this won't hurt that much, on the individual level.

It looks like Apple keeps on trying to bring the labor home. <3

I'm waiting to see if the next mini is local production, before getting another imported iMac.

 

[Vanilla35]

I'm waiting to see if the next mini is local production, before getting another imported iMac.

While I appreciate your enthusiasm I think it is far off to see the iMac, and most of their other products for that matter, fully manufactured in the US within the next 5-10 years. The Mac Pro requires a rather intricate and skilled processes of manufacturing, and it appears they're looking at certain materials of construction within the US for some of their other products - which they didn't necessarily have to do within within the US. It's a good start though, and looks like steady progress to me. I hope America keeps getting more competitive. Unions are still a questionable approach though

 

[ChrisA]

So you are saying you'd rather those "underpaid workers", which is paid well in their standard anyway, lose their only jobs than have a chance to strive in life? Sometimes I just feel the logic of the westerners so naive...

You don't have to worry about unemployment of Chinese assembly line workers, Their economy is growing fast so there is still growth in demand. Soon most of the iPhones made in China will be sold in China. But before that happens there will be a labor shortage in China

 

[SeanMcg]

Change hurts. But no country will change until their people make them change. As long as they can herd their people into "good enough" wages, they won't improve. I'm not being callous or cavalier, it's just reality.

Again, who determines what is "good enough?" I agree with you that people must be the driving force for change in their country. While actual abuses may be easy to identify and bring to light, we must be careful not to assume that everyone has the same value system.

For example, I don't think it is out-of-bounds to say, objectively, that the Chinese people and the Greeks have very different attitudes towards work. There will be pros and cons on each side, and historical and cultural reasons for it all. I think it is fine to discuss those differences, as long as a priori assumptions about "good enough" are left behind.

The results of those discussions, easily spread these days, can encourage people to drive for change in their country.

 

[ChrisA]

Change hurts. But no country will change until their people make them change. As long as they can herd their people into "good enough" wages, they won't improve. I'm not being callous or cavalier, it's just reality.

If any country on Earth has wage growth it is China. The typical Chinese worker is happy to work any number of hours and save every prey. China has the highest savings rate in the world. Yes they make low wages but they save a higher percent of their pay. Every one of them is thinking about getting their kids into the best university even if that will realistically never happen.

The real problem is here in the US. For most people there has been a decline in wages. The median income has slipped downward. It's not an overall declide in the economy but an uneven distribution.

Historically uneven wealth distribution has been the cause of most social unrest, revolutions and what not.

If you look at distribution as measured by Gini coefficient using data from the CIA World Fact Book the US is fourth from the bottom amount developed counties with only Chile, Mexico and Turkey being worse. Top of the list is mostly the Northern European countries. The US is already one of the most divided counties with masses of poor people with no hope and the 1% controlling most of the wealth.

 

[Antares]

Quote:
That includes equipment to polish the new iPhone 5c's colorful plastic

Why does that statement make me cringe?

Perhaps because you really don't like colorful plastic?

 

[macs4nw]

Given that the current batch of purchases includes a PARTICLE ACCELERATOR, I would say Apple is buying quite a bit of leading edge technology to make its consumer products.

Rocketman

Impressive indeed! Tim appears to be making a lot of forward looking moves lately.

I know it takes more than logistics to keep Apple at the leading edge of consumer electronics into the future, but from a strategic and supply standpoint, reading these pages, I sometimes think Tim doesn’t get enough credit for the excellent job he’s been doing so far.

 

[phoenixsan]

Seems.....

like a sound logistical and economic decission to invest in more capable machinery and securing independence in components for future and actual products. Mr. Cook was considered a logistic and operations genius, back in the time when Mr. Jobs was in the helm.

Given the iProducts make the most of Apple revenue machine, its only logical to alocate resources to make the fabrication processes more capable/efficient....

 

[pianophile]

This is how manufacturing will return to the US

There won't be many new jobs, though. Aside from a few maintenance techs and the like, factories of the future will be completely robotic.

 

[greenmeanie]

At least those underpaid workers show up for work and don't live off a Welfare system like in the USA.
I am sure they are happy to collect a legit check every week.

I'll take $10billion in robots supported by high tech staff in the US over an army of underpaid workers in a country that could care less if they strive in life.

 

[dBeats]

There won't be many new jobs, though. Aside from a few maintenance techs and the like, factories of the future will be completely robotic.

I disagree. You need people to design, build, maintain, optimize, etc. We're no where near "robots designing robots" and we're barely at "robots making robots." These jobs are almost all high tech, high salary, and high quality jobs. Making another 100,000 burger flipping jobs isn't really useful in the long run. Making 1,000 engineers and specialist technicians not only helps 1,000 people, but improves the areas where these people live and work.

 

[spicynujac]

The real problem is here in the US. For most people there has been a decline in wages. The median income has slipped downward.

If you look at distribution as measured by Gini coefficient using data from the CIA World Fact Book the US is fourth from the bottom amount developed counties with only Chile, Mexico and Turkey being worse. Top of the list is mostly the Northern European countries. The US is already one of the most divided counties with masses of poor people with no hope and the 1% controlling most of the wealth.

If you are interested in this type of thing I highly recommend Robert Reich's new movie (labor secretary under President Clinton) called Inequality For All. It discusses wage inequality along with the fact that real wages have been dropping in America over the past 30 years, and the only reason things are not much much worse is a) Women entered the workforce in the 1980s and b) people took advantage of rising housing prices and mortgages in the 1990s to borrow against their home creating the artificial appearance of more wealth.

In 1978 the average worker earned 48K. Today same worker only makes $33k. Meanwhile many essentials such as food, energy, housing, transportation have gotten more expensive which translates into a far worse situation than our parents generation. This is not good.

Incidentally, and in an attempt to bring this back on topic, they showed where profits for the iphone go. Most people guessed most profits go to USA and China. In fact, most profits go to Japan and Germany, two strong economies who make some of the best products in the world, and have strong labor forces and strong public investment in infrastructure and education. These companies make most of the high end parts need to produce an iphone. The phone is designed by Apple in California and assembled in China by Foxconn, but these are 2 minor pieces of the whole puzzle, all things considered.

Another interesting part of the movie discussed how Amazon uses a fraction of the labor that traditional brick and mortar resellers would use to generate the same amount of sales (10% or less). Technology requires less labor. That doesn't mean it's "good" or "bad" but that is a fact. It's definitely good for consumers. Is it good for society as a whole? Hard to say.

----------

I disagree. You need people to design, build, maintain, optimize, etc. We're no where near "robots designing robots" and we're barely at "robots making robots." These jobs are almost all high tech, high salary, and high quality jobs. Making another 100,000 burger flipping jobs isn't really useful in the long run. Making 1,000 engineers and specialist technicians not only helps 1,000 people, but improves the areas where these people live and work.

FYI These are exactly the sort of jobs that will go to Japan and Germany, and other countries who invest in strong economies. Unless America changes its course, our service economy and weapons manufacturing will not carry us very far in the future.