With the brick rumor information out of the way, now we can all speculate what this new Apple manufacturing means. Has Apple simply outsourced a rapid prototyping facility in Asia or is Steve Jobs fulfilling an 18 year old dream to move up the value chain in the production of computers?
In 1990, Fortune did a piece on Jobs' new production facilities in Fremont California for NeXT. It was, at the time,...
THE ULTIMATE COMPUTER FACTORY, Steve Jobs has built a Next workstation plant with just about everything: lasers, robots, speed, and remarkably few defects.
There was a great deal of effort put into the facility:
Until recently the 40-person manufacturing staff had more Ph.D.s than the group designing the NeXT machine.
But alas, the NeXT hardware didn't gain traction so the facility never really got to push out equipment as Jobs would have hoped. But, as the story goes, the NeXT software was eventually bought by Apple and became the basis for Apple's OSX.
Fast forward a decade and a half. Apple is firing on all cylinders and has $20 billion in the bank. People are speculating all over on what Apple is going to do with all of that money. Buy Adobe, Nintendo, Sony, etc, etc.
John Martellaro of the Mac Observer a few months ago came up with a brilliant idea. Apple should slide down the value chain a little and build its own plant for manufacturing components. His arguments:
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?
Obviously, there is a lot of negative thinking in this mentality. "It is cheaper to build in Asia." has been the mantra for the past few decades. Apple, however, has a history of thinking different. They went into building Apple Stores when the retail electronics market was heading south fast.
So where would Apple put such a factory?
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.
But building a plant would cost billions of dollars. And in case anyone hadn't informed Steve Jobs, the country is in a recession. Oh, Apple innovates out of recessions.
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.
OK, back to reality. What is Apple really about?
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.
An idea that is getting a lot of traction right now.