back to article This'll be the next thing Trump crows about: Apple assembling servers on American soil

Apple boss Tim Cook and US president-elect Donald Trump aren’t exactly best buds. However, the iPhone maker could soon land the honor of a congratulatory tweet from the jumped-up telly celeb – after it revealed it is expanding its manufacturing in America. Two years ago, Apple announced it would build a $2bn data center in …

  1. Anonymous Coward
    Anonymous Coward

    What's old is new again

    Apple originally made their products exclusively in the US, and still designs them all here. And the current Mac Pro is already built in Texas. Plus, there are many Apple sites that have the capability to start manufacturing new products again, if they choose to do so. Not to mention that a data center is not planned, designed, and built within a two month period. So, casting this as a Trump mandated event is erroneous, to say the least.

    My iPhone is built in China, and I would gladly purchase one built in the US, but they don't make them here because the labor is still dirt-cheap in China. Until that changes, or Trumpy gets the US into a real war with China, I don't expect an American Made iPhone, and don't care too much anyway. It's the same phone here, or there. There's nothing different, other than the cost of the build, between a locally made device, and one from a cheap labor force like China. Eventually, humans won't even touch an iPhone until they unwrap it upon purchase. The robots are expensive, but they also don't steal demo phones to sell to the press or rival makers, nor do they get upset about their lives and jump out of the factory window. Let the humans do something else, I like robots to build my tech gear.

    1. BillG
      Mushroom

      Re: What's old is new again

      Apple loaned GT $350m to build glass-making factories in Mesa, Arizona, and Salem, Massachusetts, to secure a supply of glass for the iPhone. But in bankruptcy hearings, GT’s former COO Daniel Squiller claimed his company had fallen for a “classic bait-and-switch strategy" that had driven his company into the ground...As part of the loan agreement with Cupertino, GT had to commit to supplying glass almost exclusively to Cook & Co – although Apple had no obligation to buy any of it.

      Back in the day, if I remember correctly Intel used to do the same thing - loan out money to companies with the initial terms that the company had to be an exclusive supplier to Intel, and if the company went bust Intel took all their assets. Turned out that it was Intel's first offer - you could say "no" to those terms and counter with more friendly terms where you could sell elsewhere to keep the company alive. But too many companies were too intimidated by Intel to just say no.

      1. Anonymous Coward
        Anonymous Coward

        American made iPhones

        There are American made iPhones - if you consider South America, i.e. Brazil, to be part of 'America'.

        I have long said Apple would eventually make iPhones in the US - once assembly can be automated to the point that wages for those involved in the process become a rounding error. That won't create a lot of jobs though, which is something Trump misses with his "bring jobs back to the US" spiel. For example, the US produces more steel than it did during the height of the US steel industry's employment 40 years ago. It just does it with a quarter of the former workforce, and at a higher price because of that. If it could cut that workforce by 75% again, the wage cost for the workers might outweigh the shipping cost of bringing steel in from other countries and we'll make more here - but with fewer people employed in the industry.

        The situation is a lot more complicated than "bring jobs back to the US", but the angry white working man that voted him into office probably doesn't realize that.

        1. Blank Reg

          Re: American made iPhones

          Trump and others like to whine about China "stealing" manufacturing jobs, but the fact is about 80% of those lost jobs are lost to automation. The rest are lost to management sending the jobs overseas, you can't steal jobs no matter how many times Trump says it.

        2. billse10

          Re: American made iPhones

          "The situation is a lot more complicated than "bring jobs back to the US", but the angry white working man that voted him into office probably doesn't realize that."

          It's part of the same "we don't need experts" theme - the 'angry white working men' you refer to are "probably" not hearing the truth from the politicians, as it is far far easier to demonise others than explain a complicated set of circumstances (especially as some circumstances are the fault of the politicians doing the demonising). Both a recent election and a recent referendum could be used s Exhibit A for that ......

      2. Triggerfish

        Re: What's old is new again

        TBH that happens in a lot of manufacturing, have seen plenty of companies take onerous terms with large companies like dept stores and supermarkets in desperation for the business, only to realise they had basically indentured themselves to the company in the long run.

    2. Slx

      Re: What's old is new again

      I'm pretty sure I've an ancient Macintosh Classic made for the European Market in Ireland, not the USA.

      It was a skirting European tarrifs arrangement rather than taking US jobs, but Apple has had a Cork, Ireland base since 1980.

      It even carries the Irish Mark of Electrical Conformity, from the days before CE marking.

      1. Aitor 1

        Re: What's old is new again

        By made you mean they put it together in Ireland, with 90% of the value coming in boxes from Taiwan or China right?

        1. Slx

          Re: What's old is new again

          Actually, looking at the logic board most of the components are made in the USA, Japan and Korea.

          Processor: Mototola

          Other chips : VSLI Technologies, Philips and AMD.

          The memory seems to have been made in Korea but it's not branded on the chips.

          I can't see any chinese components at all.

          1. Doctor Syntax Silver badge

            Re: What's old is new again

            "Actually, looking at the logic board"

            I take it we're back to the Mac Classic. Is there any indication of where the board was assembled?

            Back in the day the UK govt - I think it started with them but seems to have become an EU thing - had the Great Idea: we must have a chip industry. So they came up with the wheeze of imposing a duty on imported components - that's components imported as such, not as parts of assemblies. This would make it cheaper to buy components from this great British chip industry that would come into being.

            If you actually looked at any board you'd see something like the Mac Classic - components from all over the globe. And even the marking on the packaging didn't necessarily reflect where the die inside it was made. It would have been hopeless to avoid duty on all the components to assemble a board by sourcing them locally because it would have required the UK or the EEC as it then was to be unique in being able to provide everything. However you could avoid the tax very easily by assembling the entire board overseas.

            Any effect that had was to reduce local assembly of boards so there was no home market for the wonderful new industry which consequently never sprung into existence. I never realised this nonsense was still in operation - and at an EU level - until I heard that Raspberry Pi had run into it when they decided to assemble boards here.

            If, as a government, you want to encourage manufacturing of any particular type of product, or manufacturing in general, it's a good idea to set about maximising the home market first. I'm not sure if it's an idea that's entered the minds of many politicians or would-be politicians.

        2. Kristian Walsh Silver badge

          Re: What's old is new again

          "By made you mean they put it together in Ireland, with 90% of the value coming in boxes from Taiwan or China right?"

          No, 90% of the value is created at assembly time. Before that, you just have a fulfilled bill of materials rattling around in a cardboard box. After that, you've a working computer that will stay operating and in one piece for a decade (Apple built them well in those days).

          For what it's worth, almost nothing was sourced from China in those days. Taiwan and Japan were the source of most "foreign" parts, then the USA (CPU and bridge logic - it was a Motorola part in these days; had it been an i386 or 486, it could have been sourced from Ireland). The rest was made by other suppliers in Ireland (casing, chassis, PSU, keyboards) or elsewhere in Europe (PSU, CRT, cables and connectors) - only lightweight, high value components were worth shipping from the Far East.

          Depending on vintage, the bare PCBs may have been populated on-site, as Apple ran a full PCB operation on site in Cork for several years in the 1990s - both for pin-through and SMT. That included a full diagnostic and repair group - in those days, a failed PCB was examined and fixed, not dumped. This was outsourced in the late 1990s.

          What has changed since then is the consolidation of multiple parts into single chips, reduction of passive components and moving parts, and the huge reduction in silicon part costs coupled with an equally dramatic increase in quality. Now you can automate production of a phone/tablet motherboard, test it before bringing it to the point of assembly, and if it fails, you return it to the supplier... who usually gives it a quick look over and then tosses it in the bin.

    3. Aitor 1

      Re: What's old is new again

      Labor is cheaper in Mexico than china.. yet it is cheaper to manufacture in China.

      Some things can be produced in the US at a similar price, as wages are not that an important factor after all in high price high margin products.

      As for robots.. they are not always cheaper than humans...

    4. Barry Rueger

      Re: What's old is new again

      My iPhone is built in China, and I would gladly purchase one built in the US, but they don't make them here because the labor is still dirt-cheap in China.

      I'd love to know just how much of the cost of an iPhone is actually labour. My suspicion is that it's actually the much reduced regulatory and environmental costs that make China so popular.

      1. Anonymous Coward
        Anonymous Coward

        Re: What's old is new again

        According to teardowns from people who specialize in knowing what stuff costs, about $8. If US workers were getting 10x what the Chinese ones were (i.e. $15-$20/hr) it would add about $70 to Apple's cost to make an iPhone.

        The bigger problem is logistical. Apple needs twice as many iPhones made in Q3 to sell the new model in Q4 as they need made in Q2 to sell in Q3. In China Foxconn can have those workers build other stuff instead. In the US, what are they going to do, lay off a bunch of people for half the year? Or will Foxconn have to make other stuff in the US to give those workers something to do? Apple might be able to absorb such a cost increase (not saying they would want to, but they are in a better position to do so than most CE companies) but who else is going to bite the bullet in re-shoring manufacturing and eating a much higher BOM? Many companies are barely making profit as it is, they couldn't afford a 1000% increase in contract manufacturing labor cost.

        1. Barry Rueger

          Re: What's old is new again

          Many companies are barely making profit as it is, they couldn't afford a 1000% increase in contract manufacturing labor cost.

          If the jump from $8 to $15 is enough to bankrupt a major corporation I'd say that there are significantly larger problems than outsourcing.

          Then again, when the local minimum wage went up by 35 cents an hour last year there were literally thousands of imaginary businesses that closed their doors.

    5. Mage Silver badge

      Re: What's old is new again

      Labour?

      It's not really to do with labour, but supply chains and out sourcing.

  2. Anonymous Coward
    Anonymous Coward

    Taxes

    "Crucially, Apple wants a tax break on the server components it will import prior to assembling the data center boxes."

    The way I understood a recent article in the Wall Street Journal, proposed tax code changes would prevent companies from taking a tax deduction on imported goods as expenses.

    My take is that if the deductions are allowed on domestically produced items but not on imported items - it is essentially a tariff on the imported goods. I imagine that would generate a lot of complaints to the WTO.

    1. Anonymous Coward
      Anonymous Coward

      Re: Taxes

      Yes, it is called a border adjustment tax (BAT) It is sort of a tariff but would be applied universally rather than just to China.

      I doubt Trump would care much about the WTO, he'll just invite other countries to go tit for tat on the US and do their own BAT. Since the US imports far more than it exports, the higher such a BAT the better off the US economy - at least to a point where it isn't unduly restricting trade.

      If they do that, I imagine the gaps between what is considered the import of "raw materials" or "components" rather than "finished goods" are where a lot of the lobbying and sweetheart deals will be found.

  3. goldcd

    I'm not sure plugging Chinese manufactured x into Chinese manufactured y

    a few thousand times, counts as a "skilled IT job"

    1. phuzz Silver badge
      Thumb Up

      Re: I'm not sure plugging Chinese manufactured x into Chinese manufactured y

      Well, if your server doesn't have any RAM, CPUs or harddrives plugged in, it's not really a server is it? So technically plugging in all those components is "assembling" the server, simples!

  4. Androgynous Cow Herd

    Wait...

    Apple builds servers?

    1. Anonymous Coward
      Anonymous Coward

      Re: Wait...

      Just those it needs in its datacenters - like most big companies datacenters are built now. It's not going to sell those servers to anybody. Basically, it's just asking not to pay taxes on the components needed. I wonder if I could ask it too on the next PC I'll build...

      1. Anonymous Coward
        Anonymous Coward

        Re: Wait...

        " I wonder if I could ask it too on the next PC I'll build..."

        To coin a phrase, "yes you can". Either that, or the law is an a$$ and treats one legal person differently from another legal person. That would crazy, almost like giving tax exemptions to politicians that 'ordinary' people can't have.

    2. Lotaresco

      Re: Wait...

      "Apple builds servers?"

      They used to, the Xserve range.

    3. Kristian Walsh Silver badge

      Re: Wait...

      No, they don't.

      Apple doesn't have the facility to make full-size systems anymore, and it certainly doesn't have the desire to tie up its contracted manufacturing capacity in making its own infrastructure when that capacity could churn out Apple-branded PCs at a much better margin. If each iMac you make brings in $500 of gross profit, you shouldn't swap that capacity over to making servers until you're sure it'll save you more than $500 over the cost of just buying those servers in.

      So Apple does what everyone else does: specifies a server configuration to go into their datacentre, and then farms out the realisation of that design to a company that specialises in high-volume computer manufacturing. A few weeks later, truck trailers arrive with disk arrays, thousands of blades, and all of the chassis, cabling, switches and power management they go into, and they're then "assembled by Apple" on site.

    4. macjules

      Re: Wait...

      Used to, like they also used to make an operating system that worked.

  5. Barry Rueger

    Author of their own misfortune.

    "As part of the loan agreement with Cupertino, GT had to commit to supplying glass almost exclusively ... Apple had no obligation to buy any of it. GT would also have to pay a fine if it sold glass to anyone Apple disapproved of and the whole deal had a $50m charge if GT made the details of the contract public."

    I read this as the manufacturer being greedy or dumb enough to agree to a really one-sided deal, with a really bad contract that left them holding most of the risk and none of the control.

    As much as I might dislike Apple, it takes two to tango. If you're planning to dance you should be clear whether or not you're the one going backwards in high-heeled shoes.

    1. Anonymous Coward
      Anonymous Coward

      Re: Author of their own misfortune.

      If if was a level playing field, you could be right. Big and very big companies have too many advantages over smaller ones, and may be difficult to say no. Sometimes it's greed, sometimes you have no many choices.

      1. Triggerfish

        Re: Author of their own misfortune.

        As the above says the big buyers have a lot of power. For example I have seen dept stores in the UK change their payment terms from 30 dys to 120, starting from an abritary date that actually makes it closer to about 140, and expect the small business to absorb this.

        The small business is meanwhile in a fix, because the store has sent people to it's factories to make sure the manufacturing was to certain standards they decided on (NB some of these standards are bullshit), so the small business has invested in certain kit or whatever, maybe taken on more staff, and now a year or so down the line they are stuck with accepting the change in terms keeping the business and somehow having to manage cash flow, or potential losing the business, paying off extra loans, making staff redundant, because the operating costs are now hgher. They get caught by the sunk cost fallacy.

      2. Anonymous Coward
        Anonymous Coward

        Re: Author of their own misfortune.

        Re contract negotiations. I helped negotiate a special licence with a much bigger company some years ago. I think all parties understood it and the expectations and implications. The bigger company was then sold and the IPR concerned then sold on to another company who were a rival to mine. Unsurprisingly they interpreted the licence very differently from either of the original parties. Threats of legal action which were public depressed the market it covered and effectively killed it for both companies. Even if the licence was 100% watertight, legal costs would have made it unenforceable.

        "I'm bigger and can afford more expensive lawyers than you" often happens:-(

        1. Triggerfish

          Re: Author of their own misfortune.

          I've seen a company with a nice product that they started selling on their own website, be told during contract negotiations if they sell it on there (with their own brand packaging, not the buyers companies) then the contract would not be awarded, so the company ends up in a do we start to generate our own market or go for the sale?

          There's a lot of tactics that basically seem to come from buyers of these companies that really do not seem to do more than basically work towards making small suppliers their bitch.

  6. Mark 85

    Duties and taxes...

    If Apple pulls this off, than I can see a lot of businesses riding their coattails. Order components and assemble them here.. no duty, no taxes. As a consumer, I could probably see a case for buying a box of parts (basically a kit) and assembling it at home... I'd save some money on duties and taxes.

    Hmmm... maybe.. might just work but not in the way Trump envisions it.

    1. frank ly

      Re: Duties and taxes...

      Do you think that ordinary people would be allowed to do that in the way that ordinary people are allowed to have offshore identities and have their pre-tax salary payed into a foreign bank account?

  7. whoseyourdaddy

    If anyone bothers to look, parts on those circuitboards are so damn tiny, only robots can do the grunt work. Still have that pesky supply chain coming from the other hemisphere, including the robots...

    The bigger problem is the manufacturing know-how is owned by Foxconn manufacturing engineers.

    "Here's your (green) card."

    God please don't let my kids grow up to be supply chain herders...

  8. Voland's right hand Silver badge
    Devil

    Tax Dodge once more

    The idea of a foreign trade zone is that it is a transit destination for goods allowing companies to improve logistics and/or perform assembly and manufacturing specifically for exports in a reduced tariff environment.

    Declaring your datacenter a foreign trade zone beats the Irish "not registered here" dodge by all accounts in terms of creative accounting. What's next? Move HQ to the moon for tax purposes or declare Steve Job a CEO again as it is more tax efficient to have a dead one?

    1. AMBxx Silver badge
      Unhappy

      Re: Tax Dodge once more

      Apple can probably afford to buy a small country. Then just create an Embassy where the manufacturing is done. Technically it's foreign land.

    2. Stoneshop
      Thumb Up

      Re: Tax Dodge once more

      declare Steve Job a CEO again as it is more tax efficient to have a dead one?

      It's just a step up from spending a year dead for tax reasons.

      1. Anonymous Coward
        Anonymous Coward

        Re: Tax Dodge once more

        where does seven years' canoeing fit in to this scenario? Just wondering ...

  9. Mage Silver badge

    assemble its own servers

    Really?

    Apple servers are still a thing?

    Presumably it involves buying someone's basic rack mount unit, adding RAM, adding HDD / SSD etc, adding switches, adding OS (Linux?) etc. Not actually really building servers. Just assembling the final configuration.

    1. Lotaresco

      Re: assemble its own servers

      "adding OS (Linux?) "

      MacOS Server still exists.

    2. macjules

      Re: assemble its own servers

      Ah, but 'Assembled in California' has cachet. More so than 'Built by minions in China, Brazil and any other place we can get labour on the cheap.'

    3. Voland's right hand Silver badge

      Re: assemble its own servers

      assemble its own servers

      It is cheaper to build your own then to buy for Cloud if you are someone the size of Apple.

  10. Ralph B

    Made in the USA?

    > It appears unlikely that anyone’s going to be proudly sporting a Made in America sticker on their iPhones, iPads or Watches any time soon.

    Currently the (tiny) by-line on the iPhone is "Designed by Apple in California. Assembled in China.". It's not made anywhere!

    I guess that reflects the international sourcing of components, but also Apple's wish to disassociate itself from a lot of what goes on in the rest of the USA.

    If Apple ever does move production, sorry, assembling to the States, I think the new text will more likely read "Designed and assembled by Apple in California" rather than give credit to any of the rest of Trumpland.

  11. TRT Silver badge

    "effectively taking credit for decisions he had no part of."

    And there was me thinking Trump didn't have the makings of a politician.

  12. Huns n Hoses

    Tax break?

    My company is much smaller, but also tired of those pesky import duties.

    Can we get the same exemptions please?

    1. Mystic Megabyte
      Gimp

      Re: Tax break?

      To get you started I'll buy two pairs of your finest lederhosen :)

  13. prl99

    The information I've read about this non-story, and I did not vote for the Trumpster, is that Apple already manufacturers and assembles its servers and computer racks at its existing computer centers. What Apple is wanting to do is manufacturer them at the empty GT plant in Mesa, Arizona, then ship them to each of the computer centers. All they're doing is centralizing the manufacturing, which makes sense and usually costs less. Trump had nothing to do with this. It is being done because Apple needs to control as many aspects of its iCloud infrastructure as it can so our corrupt FBI and NSA can't intercept hardware from overseas, as well as from within the US, to plant surveillance hardware.

    Just so all of you not located in the USA understand, more people voted for Clinton than for Trump. It just happens that we're still using a two century old method of electing our President (electoral college), which has failed to elect the candidate with the most popular votes (general election) more than once. The disparity happens when conservative states (Republicans) have too many electoral votes compared to liberal states (Democrats). It gets worse in the Senate where each of the 50 states gets two senators, making it very difficult for Democrats to get a majority. The worse thing is that so many Americans are willing to turn back the clock to a time where the white man ruled and everyone else was a second class citizen, including women.

    1. Mystic Megabyte
      Stop

      Civil war coming to a country near you soon?

      Sponsored by Putin's pawn :(

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