Skip to content

OM in the News: How the iPhone Got Outsourced to China

December 31, 2016
A crushing work force begins arriving for the Apple early shift at 6:30 a.m., crossing paths with those leaving the late shift

A crushing Foxconn work force begins arriving for the Apple early shift at 6:30 a.m., crossing paths with those leaving the late shift in Zhengzhou.

Apple was late to China”, writes The New York Times (Dec. 29, 2016). In a bid to lower costs, some of the biggest American technology companies, including Compaq, Dell and H-P, began dismantling their domestic manufacturing in the 1980s and moving work overseas, largely to Asia. Not Apple.  Steven Jobs believed that software and hardware development had to be closely integrated.

Rather than close plants, Apple decided to build them — in Colorado, Texas and California. The plants were highly automated, with the walls painted white, just as Jobs liked them, and they were promoted as a symbol of American ingenuity. “This is a machine that is made in America,” Mr. Jobs trumpeted in 1984, after Apple opened a manufacturing facility in California to produce the Macintosh PC.

But by the mid-1990s, Apple began to embrace outsourcing under its new operations chief, Tim Cook (now CEO). Under Cook’s direction, Apple shifted business to Foxconn, then an up-and-coming Taiwanese contract manufacturer that had started to gain a following among big American PC brands. The partnership freed up Apple to focus on its strengths — design and marketing. Apple would come up with a new idea, and Foxconn would find ways to produce millions of units at a low cost.

“They have brilliant tooling engineers, and they were willing to invest a lot to keep pace with Apple’s growth,” said a former Apple executive. When Apple’s sales took off after the introduction of the iPod in 2001, Foxconn had the heft and expertise to meet the demand that accompanied each hit product. Foxconn’s factories could quickly produce prototypes, increase production and, during peak periods hire hundreds of thousands of workers. Now, some 350,000 workers assemble, test and package iPhones in the 2.2 square mile site— 350 a minute, 500,000 a day.

Classroom discussion questions:

  1. Everyone is talking about regaining manufacturing jobs. Can Apple reshore its manufacturing?

      2. What is Apple’s core competency? Foxconn’s?

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

The Blog

The latest news on and the WordPress community.

Supply Chain Management Research

Andreas Wieland’s supply chain management blog for academics and managers

better operations

Thoughts on continuous improvement: from TPS to XPS

%d bloggers like this: