Will Apple Bring a Larger Foxconn Presence to the U.S.?

In interview comments yesterday, Apple Inc. (NASDAQ: AAPL) CEO Tim Cook indicated that Apple would fire-up at least one U.S. manufacturing line next year. A natural candidate to do the work is Hon Hai Precision Industry Co., aka Foxconn, which currently employs more than 1.5 million manufacturing workers at its Chinese facilities.

The company also owns plants in California and Texas that employ about 3,000 workers. What Foxconn builds in those plants has not been revealed, and besides Apple, the Taiwanese firm also builds devices for Dell Inc. (NASDAQ: DELL) and many other brands.

Foxconn likely would want to expand its U.S. manufacturing capabilities to take advantage of recent moves by companies to bring manufacturing back to the United States. Variously called "reshoring" or "onshoring" or "insourcing," manufacturing costs in the U.S. are falling as labor costs and energy costs drop. In a recent study by the Boston Consulting Group, by 2020 U.S. manufacturing costs will be 5% to 25% lower than costs in Germany, Italy, France, the United Kingdom and Japan.

While U.S. costs will not match China's, Vietnam's or those of other low-wage countries, productivity in the U.S. makes up for a good deal of the lower costs overseas.

Apple is a very high-profile outfit, and if the company does bring manufacturing jobs back to the U.S., it will join General Electric Co. (NYSE: GE) and Caterpillar Inc. (NYSE: CAT), among others, that already have made some reshoring moves. And while Tim Cook's declaration that bringing manufacturing back to the U.S. is the right thing to do sounds patriotic and all, the real reason for bringing manufacturing back to the U.S. is that it is cost competitive and U.S. workers will give Apple more bang for its bucks.

Paul Ausick

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