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  • Could iPhones be built robotically in the USA?

    Posted by Michael Hiteshew on February 24th, 2016 (All posts by )

    What if someone were to apply the computer-controlled logistics system of an Amazon.com type business with robotic manufacturing? At Amazon, parts are stocked and retrieved robotically, inventories are updated, parts ordered, payments made, payments received, all with a minimum of human intervention. Humans manage the system, the system does the grunt work. Everything that can be automated is.

    Combine that with robotic assembly, robotic inspection, robotic test, robotic packaging and shipping, and it seems one could easily compete with China for manufacturing a product like an iPhone. If something seems obvious yet does not occur, then one has not accounted for some key thing.

    From my perspective, the key engine of economic growth is manufacturing; taking raw or less valuable material, applying know-how and capability, and creating something with greater net worth than the sum of its raw material worth. It is the foundation of wealth creation. And wealth creation is the foundation of a healthy economy, a high standard of living, social stability and opportunity.

    Are we so tangled up in taxes and EPA and OSHA regulations we simply cannot manufacture anything competitively in the United States any longer, even with robots? If so, what is the solution, realistically? Is it possible to reform the regulatory state or does it need to be discarded, starting fresh? Can the tax system be fixed or should it burned and rebuilt? What is required to get manufacturing back on track in the United States?

     

     

    26 Responses to “Could iPhones be built robotically in the USA?”

    1. TangoMan Says:

      Do a search on the topic of Dark Factories, that is, factories which are so automated that they don’t need people on the shop floor and can operate in the dark.

      Yeah, we could build the iPhone as you posit but that capital equipment would be expensive and cheap labor in China is a less expensive alternative to tying up a lot of capital in land and equipment and the freed capital likely has better returns when invested elsewhere.

      The rate of return calculation gives a pretty good argument regarding what direction Apple should take GIVEN THE EXTERNAL CONSTRAINTS and those constraints are outside the purview of Apple decision makers, those constraints are governmental and social and there are costs and benefits associated with those constraints. If society changes the constraints, then Apple’s calculations change.

    2. Robert Schwartz Says:

      They don’t want to create wealth in the United States. They want to impoverish, degrade, and humiliate the lower classes. When the lower classes are drug addicted, welfare dependent, and closed up in ethnic enclaves separated from other enclaves by poisonous racial hatred, they are easier to manage.

    3. Whitehall Says:

      Apple can also withhold the profits outside of the reach of the IRS. By creative accounting, most of the profit of making an iPhone can be allocated to the China factory and little to the R&D and distribution chains within the US.

      Yes, manufacturing creates wealth but I would go back to the wellspring of world-wide prosperity – energy. Without fossil fuels, hydro, and nuclear , we would all still be peasants, spending our days staring at the south end of a north bound mule.

      As much as fracking is a competitor to my business, nuclear, it has and will continue to benefit the US and its citizens greatly.

    4. Robert Schwartz Says:

      Tango: If Apple is so capital constrained, why is it holding $230 Billion in cash, at a time when the rate of return on cash is maybe 25 bips?

    5. TangoMan Says:

      Apple can also withhold the profits outside of the reach of the IRS. By creative accounting, most of the profit of making an iPhone can be allocated to the China factory and little to the R&D and distribution chains within the US.

      A corporation and a government are not equal participants in a death-battle. Corporations exist at the whim of government. Apple can withhold the profits outside the US because current tax law allows them to do so and government can change law and make life miserable for a corporation or extinguish a corporation. Anyone remember how GM shareholders had their wealth transferred to the UAW during the GM bankruptcy? I’m not arguing that this is common or should be expected, but if Apple ever got seriously on the wrong side of the government, in an actual no holds barred contest where the gov’t was willing to throw its weight around, Apple would do the bidding of the gov’t simply to survive. The law is ever malleable and judges are often rationalizers who use their legal training to explain why the law is being interpreted in a way that favors the outcome they like.

      If Apple is so capital constrained, why is it holding $230 Billion in cash

      I’m not arguing that Apple is capital constrained, I’m noting that every investment decision made analyzes the best use for the required capital, looking at internal rates of return and other metrics. Comparing cheap labor to setting up a US domiciled dark factory to produce iPhones likely results in cheap labor being the best method to use due to better alternative uses for capital with lower risk attached.

    6. David Foster Says:

      Motorola Moto is made in the US; this article asserts that manufacturing costs are $5/unit higher than for iPhone.

      http://bgr.com/2013/08/28/moto-x-teardown-bom-iphone-5/

    7. Whitehall Says:

      TangoMan,

      The same argument holds for media companies. I’ve long held that the media KNOWS they exist at the sufferance of Big Government – which means progressives.

    8. CapitalistRoader Says:

      I don’t know specifically how Apple manufactures their products in China but there’s lots of automation in Chinese factories. Yeah, the EPA and OSHA are big factors when deciding where to put manufacturing facilities but especially in highly automated factories engineering talent is a big cost. And China has been cranking out lots of very good engineers for a few decades. For seasoned engineering talent figure $40K all-in salary in the PRC vs. $110K in the US.

    9. Pouncer Says:

      I accepted a buyout from a “Montgomery Ward” style retailer just a few years back. The vision, policy and strategy of the company changed to largely “waterfall”-oriented management — a cascade of increasingly specific commands from headquarters down to the lowest level employee — between the 1990’s and the early 2010’s. As such a great deal of effort was invested at my (HQ) level of management exploring and testing any new way to shave a penny out of a dollar of doing business.

      Last November I worked among the lowest-level employees as a seasonal “Peak” employee at a world-class on-line retailer. There was essentially NO management. It’s as if the entire local “company” sized unit was being commanded by corporals; with phone support once in awhile from a staff sergeant in another state. From my industrial engineering / business analyst perspective, all the processes were completely wonky and sub-optimal. But those processes were constantly in flux. A new process was introduced between November and January — without advance notice, or training, or preparation for new supplies (like correctly sized pallets, for instance. As anyone with warehouse experience might guess, having a new and “wrong” pallet introduced into floorspace, racks, etc causes major headaches.)

      The end of my analysis was — the corporate level decisions were profitable. NO CAPITAL and very little operating cash was diverted to overhead, everything was rented and spitballed, baling wired and held together with the cheapest possible methods, for just long enough to deploy the next, newer, idea.

      So I conclude Apple is in a similar mindset. A bunch of human beings can be re-directed to a new task much more nimbly than a robotized factory can be re-optimized for a new size device or different collection of raw material.

    10. Grurray Says:

      Foxconn is the Chinese manufacturer for Apple. A few years ago after being condemned for mistreating their workers and with wages rising, they said they were going to replace 3/4 of their workforce with automation. They currently aren’t anywhere near close to doing it because the robotics aren’t precise enough. The technology is good for large things like cars and appliances, but they haven’t gotten there yet for precision electronics.

    11. DirtyJobsGuy Says:

      Why focus on Apple? Consider a simpler example shovels. The Ames shovel company has been in existence since colonial times when it was illegal for them to make metal tools. Only wooden shovels could be made in the British colonies. today their high end line will sell you a well made shovel with a 15year warranty for $35 all made in USA. Their lower end product uses cheaper Chinese made blades that are fitted to USA wood handles in US. About $20 in Wal Mart. Low first cost is really important in lots of markets.

      It simply is easier to do a low end facility in China where all the margins are lower and the volume is higher.

      That said the big advantage for Apple is if they need a new facility in china it can get done in record time. In the USA it can often take years to get the building permits, EPA reviews, local tax deals etc. Not a great deal if you are in a market where life and death depend on speed to market. (Look at Keystone Pipeline for the extreme case). If you want to bring manufacturing back to US then you have to make a commitment by pre-qualifying local sites, reigning in the green monster to react to actual issues not causes, and control the endless OSHA/HR iterations.

      Don’t blame the Chinese for our failings. It is not all due to low wages.

    12. Michael Hiteshew Says:

      Grurray Says: They currently aren’t anywhere near close to doing it because the robotics aren’t precise enough. The technology is good for large things like cars and appliances, but they haven’t gotten there yet for precision electronics.

      Grurray, see the update on this post.

      DirtyJobsGuy Says: That said the big advantage for Apple is if they need a new facility in china it can get done in record time. In the USA it can often take years to get the building permits, EPA reviews, local tax deals etc.

      So your impression is that the regulatory regime has so gummed up the works it’s simpler just to go elsewhere. But we’ve been assured as each of these regulations is put in place that’s it’s cost will be so small as to be negligible! And in some cases, nuclear power for example, I believe the permitting process is designed to be so expensive and painful as to dissuade anyone from even attempting it. Goal achieved! So let’s just burn coal and oil instead. Problem solved. Oh, wait…

    13. PenGun Says:

      Pouncer, what is a correctly sized pallet? I spent a long time in the trucking business and pallets are sized to fit the transport method used. They are 4′ wide so 2 go in an 8’6″, OD, space. The various pallets one will find at any business are built to fit trucks and trains. I suppose, in site stuff, can benefit from some sizing to fit product, but you will have to put it on a standard size pallet to ship it.

    14. Pouncer Says:

      Hi PenGun,

      From a logistics perspective, the pallet meets the needs of the carrier and customer. So a 31.5 by 47.25 inch pallet for shipping to customers in Europe, say. Or 48 x 40 in. for a grocery chain in the US.

    15. Jonathan Says:

      If Apple built a new factory in the USA it probably wouldn’t be in California. However, there are US states that might welcome the business.

    16. David Foster Says:

      Here’s a Forbes article on this topic:

      http://www.forbes.com/sites/timworstall/2013/09/25/if-apple-brought-iphone-manufacturing-to-the-us-it-would-cost-them-4-2-billion/#47e516778e29

      They attribute most of the difference to taxes.

    17. TangoMan Says:

      But we’ve been assured as each of these regulations is put in place

      We usually see this is malicious prosecution cases but the “process is the punishment” with these long reviews and burdensome regulations, furthermore, they provide a sinecure for economically useless leftists in government.

      BTW, news yesterday was that Foxconn bought Japan’s Sharp Corporation. They’re moving up the ladder.

    18. Anonymous Says:

      Then we should set our sights on eating their lunch. Competition is good.

    19. Grurray Says:

      Michael, apparently the rest of the phone is more difficult to automate. The handling of the exterior housing, screen, lens, etc require more care than internal components. Rather than robots cranking them out in the factory of the future, it looks more like this – from that Moto factory – with a thousand people standing around doing it by hand. They actually ended up closing this factory. Even at the low pay they were offering, it wasn’t competitive with Chinese kids working around the clock.

      Now I guess that doesn’t answer the question in your title – Could it be done? Maybe not fully automated, but one thing that comes to mind is something David has written about before, telerobotics, where one person controls the movement of a whole bunch of robots. If it’s good enough for surgery I’m sure it could be made to work for a smartphone.

    20. Bill Brandt Says:

      A generation ago HP built a plant in Roseville CA that automated the manufacture of terminals – took it back from overseas.

    21. Whitehall Says:

      Dirtjobs Guy,

      Interesting story about Ames shovels and shovel-ready projects.

      One of the most famous construction jobs 19th century America was the Transcontinental Railroad.

      It needed a lot of shovels! So who do you think became president of the Union Pacific Railroad, the firm building from East to West?

      The owner of the Ames Shovel Company- Oliver Ames! His brother was also a congressman who, as one might expect, was a proponent of the railroad.

    22. CapitalistRoader Says:

      Grurray, robotic wire and die bonding have been the standard for almost 45 years:

      https://www.youtube.com/watch?v=-udkv51BUA8

      Very small assemblies require very precise movements. There are manual stations that use a human operator and microscopes but its extremely slow and obviously expensive.

    23. Grurray Says:

      It’s very precise because the range of movement is constrained to moving only in 3 axes for very short distances. For robots to replace people assembling smart phones, they need to be 6 axis such as these assembling a computer mouse.

    24. Grurray Says:

      Here’s another possibility – Sawyer the robot.

      I get to industrial/manufacturing expos from time to time and a couple years ago I was at one and got to play around with the previous version of this robot called Baxter. Real simple operation. How it works is you move the arm wherever you want it to go. The robot “records” it and then performs the exact same movement.

    25. MCS Says:

      The biggest issue is the business risk for Apple. Everything they sell is made in China. I am convinced that the situation in China is going to be very ugly in the near future.

      While I have no doubt that Apple control of the design, when they outsourced the manufacturing they lost control of the knowledge to put all of the pieces together. If they wanted to move their production from China, and they should, the people that know all of the little details it takes to produce these in such huge quantity don’t work for Apple. There is no magic involved, just a lot of time and effort.

      The question is whether Apple could rebuild its manufacturing somewhere else before it went broke. The recent decline in Apple stock from a rumor that iPhone sales might be slowing down slightly doesn’t bode well.

    26. David Foster Says:

      When looking at the manufacturing of iPhone (or anything else), it’s important to consider the entire supply chain, not just final assembly. Here’s a piece on where iPhone components come from:

      http://betanews.com/2014/09/23/the-global-supply-chain-behind-the-iphone-6/