Saturday, August 27, 2011

Steve Jobs: American Manufacturing Icon at One of the Most Successful Manufacturing Firms in History

American manufacturing of computer equipment reached an all-time record high in July.
Following the announcement on Wednesday night of his resignation as Apple CEO, Steve Jobs has been receiving lots of well-deserved praise and accolades for his entrepreneurial genius at Apple, one of the most successful, profitable and valuable manufacturing firms in the history of the world.  That's right, we shouldn't forget that Apple, Inc. (NAICS Code 3341: Computer Manufacturing) is part of the American manufacturing sector , a sector that the Boston Consulting Group predicts is headed for a renaissance.  

Given Apple's escalating success under the leadership of Jobs, especially in recent years, perhaps Apple and Jobs have already helped launch the renaissance of American manufacturing.  And when we think of Steve Jobs, we should be sure to remember that at his core, he's an American manufacturing icon, genius and titan.  As much as we hear the never-ending media narrative that "America doesn't make anything anymore," or that "American manufacturing just can't compete globally anymore," Apple's success clearly demonstrates that the narrative is false.  

For example, Apple and its domestic competitors in the U.S. computer industry (Dell, H-P, Microsoft, IBM, Cisco, Intel, etc.) are all world-leaders, and collectively produced more output last month than ever before in history (see chart above of the Federal Reserve's monthly production index for computer and peripheral equipment).  And it's a remarkable fact that U.S. manufacturing output of computer equipment has doubled in less than six years since 2005, after doubling previously in just seven years.  So much for the claim that "we don't make anything anymore."

Bottom Line: When we celebrate the genius of Steve Jobs and the success of Apple Computers, we should remember  that we are also celebrating the success of American manufacturing.  Simply put, Steve Jobs and Apple prove that American manufacturing is not dying, but is very much alive and well.     

41 Comments:

At 8/27/2011 9:44 PM, Blogger PeakTrader said...

BLS data show they're high-paying jobs:

NAICS 334100 - Computer and Peripheral Equipment Manufacturing
BLS
May 2010

Employment 157,460
Mean annual salary $89,140
Mean hourly wage $42.86
Median hourly wage $40.73

 
At 8/27/2011 9:46 PM, Blogger Benjamin said...

Yes, but I have a question: Why does my Apple Notebook say "Made in China"?

 
At 8/27/2011 9:48 PM, Blogger Mark J. Perry said...

It was "assembled in China" (less than 10% of the value) but designed, marketed and sold in America.

 
At 8/27/2011 9:50 PM, Blogger PeakTrader said...

BLS Computer and Peripheral Equipment Manufacturing data "collected from employers of all sizes, in metropolitan and nonmetropolitan areas in every State and the District of Columbia."

 
At 8/27/2011 11:44 PM, Blogger NC said...

In the present regulatory and antiBusiness climate, it would be very difficult to produce an Apple Co today.

One of the founders of Home Depot recently stated that Sarbanes-Oxley Legal & Accounting compliance costs would prevent the creation of a Home Depot today.

 
At 8/27/2011 11:54 PM, Blogger PeakTrader said...

A plan to stimulate growth?:

Obama considering massive refinance program-report
August 25, 2011

President Obama is reconsidering a plan to allow millions of homeowners with government-backed mortgages the ability to refinance their mortgage at historically low rates.

Despite historic lows for mortgage rates, many borrowers are unable to refinance their high-rate mortgage because their credit history is blemished or they do not have enough equity in the home for the lender to make a new loan under today's stricter standards.

The plan could save millions of homeowners hundreds or even thousands of dollars every month, potentially unleashing consumers with extra money to spend on other items. That would boost the economy and create jobs as demand for goods and services increase, backers of the plan say.

From another article:

Such a proposal would meet opposition from investors in government-backed mortgage bonds, as well as the regulator who oversees Fannie Mae and Freddie Mac.

 
At 8/28/2011 2:30 AM, Blogger Boy on a bike said...

I think that people just don't think of making iPods etc as "manufacturing" - when they think manufacturing, they think old metal bashing industries like cars, machinery, ships, washing machines etc.

 
At 8/28/2011 7:23 AM, Blogger The Grouch said...

Looks like someone already beat me to this comment..... Apple is a great engineering and design company, but manufacturing seems to be subcontracted out to other companies, many of them overseas. As of 2007, the following manufacturers had a hand in the iPhone:

Software and design Apple USA
Assembly Foxconn?, Quanta, Unknown Taiwan
TFT-LCD Screen Sanyo Epson, Sharp, TMD Japan
Video processor chip Samsung Korea
Touch screen overlay Balda Germany
Bluetooth chip Cambridge Silicon Radio UK
Chip manufacture TSMC, UMC Taiwan
Baseband IC Infineon Technology Germany
WIFI Chip Marvell USA
Touch screen control chip Broadcom USA
CMOS chip Micron USA
NOR Flash ICs Intel, SST USA
Display Driver chip National Semi, Novatek US, TW
Case, Mechanical parts Catcher, Foxconn Tech Taiwan
Camera lens Largan Precision Taiwan
Camera module Altus-Tech, Primax, Lite On Taiwan
Battery Charger Delta Electronics Taiwan
Timing Crystal TXC Taiwan
Passive components Cyntec Taiwan
Connector and cables Cheng Uei, Entery Taiwan

 
At 8/28/2011 9:41 AM, Blogger PeakTrader said...

Apple Reports Third Quarter Results
(Full-time employees - 46,600)

July 19, 2011

The Company posted record quarterly revenue of $28.57 billion and record quarterly net profit of $7.31 billion.

“We’re thrilled to deliver our best quarter ever, with revenue up 82 percent and profits up 125 percent,” said Steve Jobs, Apple’s CEO.

Apple sold 20.34 million iPhones in the quarter, representing 142 percent unit growth over the year-ago quarter.

Sold 9.25 million iPads during the quarter, a 183 percent unit increase over the year-ago quarter.

Sold 3.95 million Macs during the quarter, a 14 percent unit increase over the year-ago quarter.

Sold 7.54 million iPods, a 20 percent unit decline from the year-ago quarter.

Steve Jobs: “Right now, we’re very focused and excited about bringing iOS 5 and iCloud to our users this fall.”

 
At 8/28/2011 10:00 AM, Blogger PeakTrader said...

High Cost Of Living Shrinks Silicon Valley's Sizable Paychecks
Aug 2nd 2011

The cost of living in Silicon Valley well exceeds other metropolitan areas.

Tech workers in Silicon Valley earn an average $92,300 a year, their counterparts in New York City only require $74,800 to match the same standard of living.

Tech workers in cities in other regions, such as Dallas and Philadelphia, require just roughly half of those in Silicon Valley to live just as well.

Taxes also take a bigger bite out of California workers' paychecks, with those earning annual salaries in excess of $46,776 paying 9.3 percent in state income taxes.

 
At 8/28/2011 10:11 AM, Blogger Rufus II said...

Well, isn't that just special. Meanwhile our population - employment ratio has dropped from 58.4 in July, 2010 to 58.1% in July 2011. BLS

How much Federal Income Tax did Apple pay last year? And, How Much of their Cash is sitting in Overseas Banks?

I'd say, if Apple has one more good year like this one we'll be in a full-fledged Depression.

 
At 8/28/2011 10:19 AM, Blogger PeakTrader said...

Big Government = High Prices + High Taxes (and fees, fines, fares, tolls, tuition, etc.).

 
At 8/28/2011 10:21 AM, Blogger Rufus II said...

Cal Coolidge, and H. Hoover kept the guvmint nice, and small. How'd that work out?

 
At 8/28/2011 10:30 AM, Blogger PeakTrader said...

Rufus, it worked out to faster improvements in living standards, over a 50-year period during the Industrial Revolution.

Neither too small nor too big are best for society.

 
At 8/28/2011 10:36 AM, Blogger Rufus II said...

:)

Heckuva try, PT. I gotta give you that.

(you actually made me smile for the first time this morning. Now, I'm going to take a nap.)

 
At 8/28/2011 11:07 AM, Blogger PeakTrader said...

It made me smile to hear a politician in Washington say "We tinker with the economy at the margins."

 
At 8/28/2011 11:30 AM, Blogger morganovich said...

mark-

i completely agree with your assessment that nearly all the value of apple products is created in the US, but i'm not sure i'd call them a "manufacturing" company.

they have very deliberately stayed away from high capital, low margin businesses like manufacturing.

that is why they have been so successful.

apple is not a manufacturer. they are a platform company.

this same trend has been going on in most of us technology.

cisco and ibm are the same was.

so are most of our high tech smeiconductor companies like PMC sierra who design telecom IC's, but do not own any fabs.

(intel is a notable exception as they are pushing the technology curve too hard and have needs to specific and proprietary to outsource fabrication)

but, andy grove aside, these are not manufacturing companies. they are post manufacturing companies. they create the value (and make the profits) but are successful because they left manufacturing, not because they participate in it.

 
At 8/28/2011 11:38 AM, Blogger morganovich said...

rufus-

this endless "no businesses pay taxes" kick of yours is getting a bit stale.

you could have found out in 20 seconds on yahoo what apple paid in income tax last year, and they you would know that they paid a 25% tax rate on their pretax profits (over 4.5bn in taxes).

hoover kept government small?

what are you smoking?

coolidge, sure, but hoover?

he took federal spending from 3% of GDP to 13%. then FDR went nuts and took it into the 30's.

remember how that solved the depression?

yeah, me either.

it deepened the depression and hindered recovery. it was a terrible policy.

we got lucky and were bailed out by the rest of the world's industrial base being destroyed in WW2.

barring a krugmanesque alien invasion, it's hard to see how we get saved this time.

back then we were a big net creditor. we started this one already deep in debt.

 
At 8/28/2011 12:06 PM, Blogger Buddy R Pacifico said...

Is Apple a manufacturer?

This is how the company describes its manufacutring efforts in its latest 10Q report:

"Substantially all of the Company’s iPhones, iPads, Macs, iPods, logic boards and other assembled products are manufactured by outsourcing partners, primarily in various parts of Asia. A significant concentration of this outsourced manufacturing is currently performed by only a few outsourcing partners of the Company, often in single locations."

So, manufacturing is not the category that this firm fits. Is it the leading designer and marketer of innovation in the world? Yes.

A mantra of Steve Jobs that resonates is:

"Stay hungry. Stay foolish."

 
At 8/28/2011 12:57 PM, Blogger Mark J. Perry said...

1. Business Summary of Apple, Inc.: Apple Inc., designs, MANUFACTURES, and markets personal computers, mobile communication and media devices, and portable digital music players.

2. Apple's NAICS codes are:

334111 - Electronic Computer MANUFACTURING.

334119 - Other Computer Peripheral Equipment MANUFACTURING.

So I would say by any standard measure of American industries, Apple (and IBM, H-P, Dell, Intel, etc.) are manufacturing companies.

 
At 8/28/2011 1:17 PM, Blogger Mark J. Perry said...

Note: Even if Ford outsourced all of its assembly to Mexico and Canada, it would still be a manufacturing company.

 
At 8/28/2011 1:22 PM, Blogger Buddy R Pacifico said...

Is the definition of Manufacturing summed up as controlling the design and making of physical products?

If so, then Apple is a manufacturer.

It is interesting that the new Apple CEO, Tim Cook, was responsible for selling Apple's manufacturing facilities and going to outsourcing of production.

 
At 8/28/2011 1:26 PM, Blogger aorod said...

The real value is in the apps. Parts can be bought anywhere.

 
At 8/28/2011 2:15 PM, Blogger Rufus II said...

Well, since you're going to be condescending about it, Morgan, I took your advice. This is the first thing that popped up.

In its fiscal year 2010, ending in September, Apple reported income of $18.5 billion and paid $2.7 billion in income taxes, or about 15 percent.

Linky-poo

Look, my whole argument is "to lower the Corporate Tax Rate."

Perhaps if the Corporate Tax Rate was something reasonable (say, 15%) Companies such as Apple might do a little manufacturing HERE. We need the jobs.

 
At 8/28/2011 2:23 PM, Blogger Rufus II said...

My guess would be Hoover didn't increase spending, but that GDP Plummeted halfway through his term.

 
At 8/28/2011 3:31 PM, Blogger juandos said...

"My guess would be Hoover didn't increase spending, but that GDP Plummeted halfway through his term"...

Well rufus you might want to take a glance at this Cato piece: THE GROWTH OF THE FEDERAL GOVERNMENT IN THE 1920S

 
At 8/28/2011 5:10 PM, Blogger Rufus II said...

Juandos, that is an excellent link; Thank you.

You gotta be careful with "history," don't you?

I was a little surprised by this paragraph:

Finally, Table 1 shows that in percentage terms, the Hoover administration undertook a massive increase in federal spending after the 1929 stock market crash and the onset of the Great Depression. From 1929 to 1933 (the final Hoover budget), nonmilitary federal expenditures increased by 259 percent. Total expenditures increased by a more modest 188 percent during that period because military expenditures were, in 1929, more than half of the federal budget. In percentage terms, growth in federal spending in the Hoover administration far outpaced the growth during FDR's administration.

It was an interesting link.

 
At 8/28/2011 5:46 PM, Blogger Ron H. said...

"Well, since you're going to be condescending about it, Morgan, I took your advice. This is the first thing that popped up.

In its fiscal year 2010, ending in September, Apple reported income of $18.5 billion and paid $2.7 billion in income taxes, or about 15 percent.

Linky-poo
"

An opinion piece? What's the source? You have to do better than that.

"Look, my whole argument is "to lower the Corporate Tax Rate."

What happened to "Make them pay!"

"Perhaps if the Corporate Tax Rate was something reasonable (say, 15%) Companies such as Apple might do a little manufacturing HERE. We need the jobs."

But you quoted that opinion piece, claiming that Apple paid 15% tax. If that's a "reasonable" rate, why don't they manufacture in this country already?

Articles like the one you linked to should make you laugh, as it did me. The whole idea of taxing corporations at all, is a cruel political trick to make you think you are paying a smaller percentage of the total tax, and you have fallen for it completely.

Corporate taxes are ultimately paid by three groups: Consumers, as higher prices; stockholders, as lower dividends and lower stock values; employees in the form of lower wages or higher unemployment.

There is no other source.

Eliminate all corp taxes & watch that money held overseas come flying in. See jobs created. See prosperity.

Quit whining about a bad joke that's been played on you by your masters in Washington.

 
At 8/28/2011 6:10 PM, Blogger Craig said...

It was "assembled in China" (less than 10% of the value) but designed, marketed and sold in America.

That's all well and good -- and I'm not one of those who thinks we don't make anything here anymore. Nonetheless, we must, somehow, force the Federal government to balance its budget, cut regulations and taxes on capital and stop the Fed from inflating the currency.

The assembly may not be much, but it could be done here, too.

 
At 8/28/2011 7:37 PM, Blogger juandos said...

"The assembly may not be much, but it could be done here, too"...

Hmmm, are you sure about that craig?

Consider this item and this item also...

 
At 8/28/2011 8:54 PM, Blogger morganovich said...

mark-

you are citing a bunch of codes and calling the map the terrain.

can you name for me a product that apple manufactures?

they design, they write code, and they market and sell, but the don't manufacture anyhting.

they don't make plastic housings, chips, screens, motherboards, nada.

they are a platform company.

there is not a single part of an airbook, ipod, or iphone that they manufacture.

that NAICS code is 25 years old.

apple looks nothing like that anymore. they sued to make their own stuff, it almost drove them under, so they outsourced all of it.

"Note: Even if Ford outsourced all of its assembly to Mexico and Canada, it would still be a manufacturing company."

so, you're saying that even if a company doesn't manufacture anything, it's a manufacturing company?

does that make an architect a manufacturer?

your definition is far too inclusive to be meaningful.

apple doesn't even make sub assemblies.

they provide a design, outsource 100% of components and assembly, then handle sales and marketing.

making the TFT screen is manufacturing.

designing the device it goes into is not.

 
At 8/28/2011 9:01 PM, Blogger Mark J. Perry said...

NAICS was just revised and updated in 2007 to reflect changes in the industrial composition in the economy. Apple manufactures lots of consumer and computer products, check its website for a list of its durable, manufactured goods. Assembly make take place elsewhere, but it's a manufacturing company but all commonly accepted standards and measures of industry classification.

 
At 8/28/2011 9:08 PM, Blogger morganovich said...

rufus-

you should try using real sources.

http://investor.apple.com/secfiling.cfm?filingID=1193125-10-238044&CIK=320193

it's not like SEC documents are difficult to access.

p46

apple paid 4527 mn in income tax on 18540mn in net income.

your "linky poo" has bad information.

4527/18450 = 24.53%. the actual rate on operating income is more like 25%. the 155mm in investment income is not nesc taxable in the current period (unrealized gains).

if you do not wish to be condescended to, perhaps you should consider actually checking the fact before you make your arguments.

looks like juandos covered hoover for you.

"Perhaps if the Corporate Tax Rate was something reasonable (say, 15%) Companies such as Apple might do a little manufacturing HERE. We need the jobs."

apple doesn't do any manufacturing now. it's not a tax issue, it's an ROIC issue.

returns on design and sales of iphones are excellent.

returns on building a fab to make g7 flat panel screens are negative.

returns to assembly are 3%.

it's just never a business they are going to go back into.

 
At 8/28/2011 9:15 PM, Blogger morganovich said...

mark-

they don't make the components, and they do not do the assembly.

so where is the manufacturing?

please name for me one specific product that they actually make themselves.

please identify for me the location of even one apple manufacturing facility where they produce products for consumers.

it's all foxconn etc.

if they don't ever actually build anything (except maybe prototypes) i don't see how you can call them a manufacturing company.

 
At 8/29/2011 12:36 AM, Blogger OBloodyHell said...

>> Yes, but I have a question: Why does my Apple Notebook say "Made in China"?

Because, Benji, as Dr. Perry notes, it doesn't matter how many times he explains the term means less in an IP & Services economy (to translate it) than it does in a manufacturing economy, you Still Refuse To Get It.

He's been over this a half dozen times in the last year or so. Yet you still think those three words matter far more than they do.

 
At 8/29/2011 12:50 AM, Blogger OBloodyHell said...

BoaB -- that's one way to look at it. As I note above -- we're not in a manufacturing economy any more. We're the world's first IP & Services economy. All significant future wealth will be derived from providing IP and Services, and margins on manufacturing will get slimmer and slimmer until there is no real money to be made unless you're a huge conglomerate doing the job. This mirrors what happened in Ag over the last century+, with the "small farm" mostly pushed out of existence (and would long since have been phased out were it not for price supports and the like). In the end, 3-5% of the nation's population will be behind the production of all the nation's mfr goods, just as 3-5% of the us pop is involved in the production of its food.

That's a piece of the dislocation here, as more and more of the population needs to be retrained to get out of mfring. These stupid calls for more mfr jobs are wrongheaded in the extreme, they attempt to prevent/deny a process that is already underway. It started in the 70s and created the Rust Belt, eased off, and now it's entering the home stretch.

Manufacturing is D-A-Y-E-D -- *dead*.

>>> An opinion piece? What's the source? You have to do better than that.

No he doesn't.

That's the Dufus Way.

Link to "anything that says what he wants to believe, take it as Gospel".

If he wanted to claim there was no racial tensions in the USA, and he found an article on the American Nazi Party's website that said that, he'd link to it.

That's the Dufus Way.

 
At 8/29/2011 12:54 AM, Blogger OBloodyHell said...

>> so where is the manufacturing?

In the profits, dude. Where does your company's income come from...?

If it's manufacturing, it doesn't mean jack if you don't do it yourself and hire it out.

If I own a dozen gas stations, yet never set foot in one of them that I own, what is my "profession"? Steel magnate?

I make my money in selling gas.

That I don't work behind the counter is irrelevant.

 
At 8/29/2011 7:37 AM, Blogger methinks.. said...

nice article.. good analysis..
i also found a career graph of steve on this link.. http://fossbytes.blogspot.com/2011/08/steve-jobs-resignation-letter-tim-cooks.html

 
At 8/29/2011 8:35 AM, Blogger morganovich said...

o bloody-

"so where is the manufacturing?

In the profits, dude. Where does your company's income come from..."

this doesn't even make sense.

lots of companies (including apple) make profits without any manufacturing.

ask a law firm if they need manufacturing to make profits.

apples profits are so strong because they DO NOT manufacture.

mark would have us believe that if i buy a lego set and pay your company to put it together into a castle then sell the final castle myselfthat i am in manufacturing.

i think that's an overly inclusive definition.

lego is in manufacturing. you are in assembly (also arguably manufacturing). but what have i manufactured?

nothing. i came up with a design and provided sales and marketing. my business will have higher ROIC that either your or lego's, just as apple far outstrips sharp's TFT business or foxconns assembly.

just selling finished goods is not the same thing as manufacturing.

by your apparent definition (as exemplified by your total non sequitor of a gas station example) then wal mart and home depot are in manufacturing.

if you own gas stations, you are in retail, not the oil business. that's why gas stations are counted in retail sales, but oil rigs are not.

 
At 8/29/2011 7:52 PM, Blogger juandos said...

Hmmm, the only one I thought was the real genius was Wozniak...

Technically very, very proficient and clever...

Made a bunch of money and hopped off the train to spend it while he was young enough to enjoy it...

 
At 10/05/2011 2:02 PM, Blogger MNight75 said...

You are all arguing about if Apple is a manufacturing company or not, who cares. The part that bothers me is the assertion that this is American manufacturing. If they aren't paying Americans, in America to actually build and or assemble the little parts, then they are not American Manufacturing jobs. The correct headline might be, American Manufacturing company makes billions by shipping it's jobs over seas.

 

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