Cost of iPod construction in China vs. US.

[snberk103]

As an American, I would happily pay 10% for Apple products if they were made in America.
...

I can't speak for you, but the evidence is that Americans in general wouldn't. The vast majority of American consumers make their buying decisions based on price. Hence the success of WalMart, Costco, or any other big-box retailer that offers the lowest prices, always at the expense of customer service and usually at the expense of quality.

And if you have ever shopped at a big-box store, then the evidence suggests you aren't so happy about it yourself.

Thanks for the great replies. I'm not so much interested in to what the costs are in R&D but rather just the apples to apples of building them in China vs. building them in the US.

Sounds like you have point you've decided to make, regardless of how nuanced the argument. Also, Apple is not the first US company to take advantage of overseas labour costs. I don't even know that they are the biggest.

I read something, sorry - no link, that argued that Apple could make their widgets and gadgets for cheaper in Japan, and maybe even Germany, if Apple went to a fully automated robotic assembly system. Those two countries have massive experience building things with virtually no people involved. The problem is that the cost to retool a robotic plant every 8 to 16 months for a new product release is too expensive. A human powered assembly line can be reconfigured in hours or days, because humans are so easily taught, are physically flexible (for example, a robot needs to be accurately placed within fractions of an inch in order to work - whereas a person's stool can have it's height changed by several inches and the worker can keep toiling away), and because humans are adaptable to changing conditions. Apple changes it's product line often enough that they find the flexible assembly line invaluable.

An earlier big loss of American jobs was when they allowed the Germans and Japanese to out-automate US assembly lines. Are you going to look at that?

Also, film, not essay.

Are you posting it to YouTube eventually?

 

[callmemike20]

This thread reminds me of the movie Anger Management with Adam Sandler and Jack Nicholson...

Buddy: Dave, tell us who you are?

Dave: Well, I work at x company and live a happy life.

Buddy: I didn't ask what you do for a living. I asked who you are.

Dave: I like sports and going to the movies.

Buddy: I didn't ask about your hobbies, Dave. I asked who you are.


I know that quote was completely messed up, but you get the point...

 

[wolfwill23]

I can't speak for you, but the evidence is that Americans in general wouldn't. The vast majority of American consumers make their buying decisions based on price. Hence the success of WalMart, Costco, or any other big-box retailer that offers the lowest prices, always at the expense of customer service and usually at the expense of quality.

And if you have ever shopped at a big-box store, then the evidence suggests you aren't so happy about it yourself.


Sounds like you have point you've decided to make, regardless of how nuanced the argument. Also, Apple is not the first US company to take advantage of overseas labour costs. I don't even know that they are the biggest.

I read something, sorry - no link, that argued that Apple could make their widgets and gadgets for cheaper in Japan, and maybe even Germany, if Apple went to a fully automated robotic assembly system. Those two countries have massive experience building things with virtually no people involved. The problem is that the cost to retool a robotic plant every 8 to 16 months for a new product release is too expensive. A human powered assembly line can be reconfigured in hours or days, because humans are so easily taught, are physically flexible (for example, a robot needs to be accurately placed within fractions of an inch in order to work - whereas a person's stool can have it's height changed by several inches and the worker can keep toiling away), and because humans are adaptable to changing conditions. Apple changes it's product line often enough that they find the flexible assembly line invaluable.

An earlier big loss of American jobs was when they allowed the Germans and Japanese to out-automate US assembly lines. Are you going to look at that?


Are you posting it to YouTube eventually?

I get that most Americans are looking for the cheapest deal. But I also feel that they may be changing their ways a bit as evidenced by WalMart not doing so well of late.

I don't really have a point I want to make as much as a question I'm looking to answer. But figuring out the cost difference between making iPods in China vs US is sort of the beginning and end of that question.

Interesting about the robot manufacturing. Looks like Apple is headed in this direction with the unibody design. Fewer screws means fewer laborers.

In investigation stage at this point which is why I asked the inital question - if that price difference between China and the US is literally in the ball park of $20 per unit, then I think I will move forward with the doc. If it's like $200 per unit, then that kills my question as the answer is a no-brainer.

Thanks again.

 

[senseless]

What happened to "free trade"? Is this really true?

One of the main reasons why nearly every company has moved production to China is that they have extremely high import fees, thus if you want to sell something to the masses in China (like cars, electronics etc), it will be cheaper to move the production there instead of paying those import fees. Of course labor is much cheaper too but considering that China has so huge population and thus great markets, no company wants to lose a market like that, and that is one of the reasons why they move the production there. This has been China's way to fight against unemployment, woo big companies that can employ tens, even hundreds of thousands of people.

This is what I've heard and read.

 

[wolfwill23]

What happened to "free trade"? Is this really true?

Yep.

http://www.economicshelp.org/blog/economics/chinese-currency-manipulation/

 

[snberk103]

...

In investigation stage at this point which is why I asked the inital question - if that price difference between China and the US is literally in the ball park of $20 per unit, then I think I will move forward with the doc. If it's like $200 per unit, then that kills my question as the answer is a no-brainer.

Thanks again.

It's fair to compare the two starting from zero. In Foxconn's case they have actually had build some new factories to assemble some Apple products.

So, start with the cost to purchase a few acres of serviced industrial land. It can't just any land, it's got to appropriate for a serious factory. Unless you are planning to cost out the price to build and service a company town then, then the land needs to be near a population of workers. It has to have access to rail/port and road (supplies in and product out). It's got to have power, water and sewer. And a building. A big honking building too. With enough googling you'll find the size of the Foxconn factory. Also, there will be figures online about overhead costs for American factories. I have no idea where you'd find the equivalent costs for a Chinese factory.

Then you have to make an assumption. How long does it take to assemble an iPod? From a labour point of view, this is the $64k question. For example, lets assume the Chinese worker is making $2/hour. (Most common figure I saw was $300/month. I think the Chinese factory worker puts in a 6 day week. So, I rounded up for benefits.)

The average American factory worker makes about $30/hr (I saw a census figure for $54,000/year, 5 day work week, rounded up.)

If it takes 15 minutes to assemble an iPod, then the cost of labour difference is about $7. If it takes and hour, then the difference is about $29. But this (wrongly) assumes that only the assembler's labour needs to be accounted for. You still need to add the labour costs of the management team (fore-person on up to factory manager), the HR department, the janitorial staff, the maintenance staff, the logistics and support staff ( the ones who bring the parts in, and take the product out). How many people, who never actually touch the iPod, need to be paid in order to assemble an iPod.

And that's just what is going on in the factory. The whole supply chain from the dock where the parts first arrive until the factory door need to be accounted for. So, assume the cost of moving a part from Japan to LA or Shanghai is the same (it's not obviously, but I'm keeping this simple) the difference in labour costs of the dock-workers is different. The labour costs of the truck/rail workers to take it from dock to factory is not the same in the two countries.

And then when the thing is assembled, all the labour costs of packaging it (oh, yeah... there is time putting the thing in that fancy minimalist packaging - also a done by factory workers) need to be part of the costs. And then the trip from the factory out to the delivery depots is a labour cost.

(only) $20 difference? I doubt it.

 

[CalBoy]

$20 difference? I doubt it.

There are also some additional costs that are imposed when offshoring manufacturing that need to be counter-weighed against cheap labor.

For example, shipping and logistics become more complicated and expensive when products are made half way around the world.

There is also a greater reliance on lawyers and other intermediaries to ensure the success of smooth operations that are needed in lesser quantities when products are produced domestically.

It's also not certain that the same man-hours would need to go into an iPod in both locations. Greater automation and quality assurance practices in the US might mitigate unit loss. These factors weigh against the Chinese side of the equation, which has a checkered past when it comes to quality assurance.

 

[snberk103]

There are also some additional costs that are imposed when offshoring manufacturing that need to be counter-weighed against cheap labor.

For example, shipping and logistics become more complicated and expensive when products are made half way around the world.

There is also a greater reliance on lawyers and other intermediaries to ensure the success of smooth operations that are needed in lesser quantities when products are produced domestically.

It's also not certain that the same man-hours would need to go into an iPod in both locations. Greater automation and quality assurance practices in the US might mitigate unit loss. These factors weigh against the Chinese side of the equation, which has a checkered past when it comes to quality assurance.

Yep, it's complicated. Which is actually the point I'm trying to make against those who would argue that Apple is "only" saving $5, $10, $20 per iPod. We don't know what the costs are, only Apple does.

 

[CalBoy]

Yep, it's complicated. Which is actually the point I'm trying to make against those who would argue that Apple is "only" saving $5, $10, $20 per iPod. We don't know what the costs are, only Apple does.

I think that has been the general tone of everyone trying to answer the OP's question. We're all just making educated guesses based on the limited knowledge we possess.

Although I am curious: was an iPod ever manufactured within the US?

 

[wolfwill23]

Thanks for the input everybody. I can honestly say that it doesn't put me any closer to where I was yesterday except to assume that nobody can truly answer this question except Apple.

Thanks again!

 

[callmemike20]

Thanks for the input everybody. I can honestly say that it doesn't put me any closer to where I was yesterday except to assume that nobody can truly answer this question except Apple.

Thanks again!

Apple can't even answer the question...

Businesses don't do as much research as you would think. Apple probably knows that its generally cheaper in China, so there was no point to plan for US manufacturing.

The only way you will get a good approximation of % increase is by doing the research yourself. Everything we are giving you in this forum can help you do that. Basically, you just have to go through the entire supply chain and find comparables in the US. THAT"S IT. There's no exact or educated guess % out there.

 

[Music_Producer]

Everything in the US is bloody expensive.. ok, maybe not gasoline. When I moved here from India I was shocked at how much businesses had to spend on their employees.

Salary, health benefits, dental, vision plans, insurance, 401ks etc etc. Geez, back home you just got paid for doing your job and nothing extra. Also, there are so many frivolous lawsuits here. Tripped while at work? Lawsuit..

This insanity of spending boatloads of money (don't get me started on salary of government employees) is destroying the country.. but oh well.

No wonder there's no manufacturing here anymore, and there won't be in the future either unless things drastically change.

 

[callmemike20]

Everything in the US is bloody expensive.. ok, maybe not gasoline. When I moved here from India I was shocked at how much businesses had to spend on their employees.

Salary, health benefits, dental, vision plans, insurance, 401ks etc etc. Geez, back home you just got paid for doing your job and nothing extra. Also, there are so many frivolous lawsuits here. Tripped while at work? Lawsuit..

This insanity of spending boatloads of money (don't get me started on salary of government employees) is destroying the country.. but oh well.

No wonder there's no manufacturing here anymore, and there won't be in the future either unless things drastically change.

Exactly. Some unions are good, but many just drive their own jobs out of the country.

 

[snberk103]

Deleted.. reread preceeding posts

 

[thelonelylimo]

I would love to this on every Apple product.

Designed by Apple in California
Assembled in the USA

 

[Rooskibar03]

You're forgetting the key reason an apple product couldn't be built in the US. I don't see the average american assembly line worker keeping his or her mouth shut about the new iPod,Phone,Pad they are building.

The workers at Foxconn live, eat, sleep, inside that controlled campus for a reason. Yeah we get leaks, but that would be nothing compared to what would happen in the US. How many people in the US would agree to the working conditions that the Foxconn people do?

My guess is they would have a hard time finding workers, even in this economy.