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i-Device Manufacturing Unprofitable To China 320

Posted by samzenpus
from the spinning-your-wheels dept.
N!NJA writes "One of my favorite facts of this past year was the proof that China makes almost nothing out of assembling Apple's iPads and iPhones. From the article: 'If you want lots of jobs and lots of high paying jobs then you’re not going to find them in manufacturing. They’re where the money is, in the design, the software and the retailing of the products, not the physical making of them. Manufacturing is just so, you know, 20th century.'"
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i-Device Manufacturing Unprofitable To China

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  • Why only iDevices? (Score:5, Insightful)

    by InterestingFella (2537066) on Monday December 26, 2011 @11:01AM (#38494302)

    As you can see the two largest inputs are materials and Apple’s own profit margin. Despite the machine being assembled in China it’s still true that the value of that labour is trivial: 2% or so of the cost of the machine.

    So what? It's not like iPads and iPhones are the only devices they're making. In fact, China, Taiwan, Japan, Thailand and other Asian countries are making almost all of electronics in the whole world. They might only profit 2% of every device, but the sheer scale of the whole manufacturing industry more than makes up for that.

    Besides, Apple's devices are notoriously known for having huge profit margin going to Apple, without actual technical or manufacturing reasons for that. It is, however, only true for Apple as every other manufacturer is actually also working on really thin profit margins. When taking into account every electronics company and not just Apple, this makes the Chinese manufacturers share comparatively much larger. Comparing it to Apple tells absolutely nothing.

    • Re: (Score:3, Insightful)

      by Attack DAWWG (997171)

      Haven't you figured it out?

      Mentioning iAnything causes Nerd Rage.

      Nerd Rage brings page views. Lots and lots of them.

      Page views bring profit!

      Who cares if the summaries are misleading or don't tell the whole story?

      • by Doc Ruby (173196) on Monday December 26, 2011 @11:18AM (#38494458) Homepage Journal

        No, the study explains that they studied Apple devices because 1: they're "iconic" and 2: they do offer strong data that argues against what the authors say are commonly believed myths of benefits from manufacturing jobs lost by the US to China.

        There's a good argument against this study, in that Apple's electronics are "iconic" but not the majority of sales even in their own markets, precisely because of the lower margins and more commodified products in the Android share of the market that better fits the Chinese manufacturing model.

        But to argue that you'd have to read the study. Instead you'd rather whine about nerd rage, Apple envy, and some made-up conspiracy to get page views. Congratulations! You're a self parody.

        • by wiedzmin (1269816) on Monday December 26, 2011 @12:38PM (#38495164)
          iPads are iConic? How iRonic! :P
        • by causality (777677)

          But to argue that you'd have to read the study. Instead you'd rather whine about nerd rage, Apple envy, and some made-up conspiracy to get page views.

          That an organization will further its own profits when it knows with confidence that there will be no penalty or backlash is emphatically not a conspiracy theory. In fact Slashdot's point of view could very well be that they are merely tailoring their service to meet the demands of what their users want to read.

          In fact this particular brand of profiteering happens often enough to have its own specific term: yellow journalism [wikipedia.org]. It is not difficult to find more examples of the theme. This common, well-do

      • by spaceplanesfan (2120596) on Monday December 26, 2011 @11:22AM (#38494490)

        Haven't you figured it out?

        Mentioning iAnything causes Nerd Rage.

        Nerd Rage brings page views. Lots and lots of them.

        Page views bring profit!

        Who cares if the summaries are misleading or don't tell the whole story?

        You mean iNerd, don't you?

      • Re: (Score:3, Interesting)

        by hairyfeet (841228)

        Bimbo Newton Crosby. These articles are nothing but trollbait, hell they might as well have trollface for the icon and the tag "U mad bro?". This is no different than " Will (insert Linux distro or FOSS in general) have a (insert massive fail or massive success) in (insert position)" or "Microsoft (insert buys company, kicks puppies) and thereby (insert horrible scenario) for the (insert web, country, or FOSS)".

        I hate to say it but Mikey 400 accounts is right, slashdot does equal stagnated. I remember when

    • Market share (Score:5, Insightful)

      by currently_awake (1248758) on Monday December 26, 2011 @11:25AM (#38494522)
      In Asia it is common practice to do things cheap or below cost until you wipe out the competition, then raise prices.
      • by mspohr (589790)

        I see lots of the cheap part but don't see much of the "raise prices " part. What prices have been raised?

        • by Bucky24 (1943328)
          Maybe competition hasn't been wiped out yet?
    • the sheer scale of the whole manufacturing industry more than makes up for that

      Err, I assume you're saying this in a Machiavellian, free market pirate sort of way (i.e., worth it for the manufacturing contractors), since volume production is a really crooked way to make money. Workers operating on razor thin profit margins don't make any more in a volume based system unless they multiply their workload. It also does a piss poor job of ensuring the economic security of a region in the normal way: wages are spread so thinly that they can hardly be entered back into the economy except i

      • Sure, the numbers work out, but the Walmart business model is only good for the Waltons: no one else.

        And the consumers of mass-produced goods, whose dollar goes a lot further and hence can consume* far more than they would otherwise be able to. Those consumers at Wal-Mart tend to be lower-class where even modest savings go a long way -- estimates are that discounters are 3-5% cheaper, amounting to billions in savings for the poor every year.

        I mean, have you ever actually visited a corner shop in a poor neighborhood? Those places get away with highway robbery prices -- 30% above even normal grocery shops an

    • by Guppy (12314) on Monday December 26, 2011 @01:24PM (#38495548)

      So what? It's not like iPads and iPhones are the only devices they're making. In fact, China, Taiwan, Japan, Thailand and other Asian countries are making almost all of electronics in the whole world. They might only profit 2% of every device, but the sheer scale of the whole manufacturing industry more than makes up for that.

      There's an appropriate quote by TSMC Chairman Morris Chang [forbes.com]: "You Americans measure profitability by a ratio. There’s a problem with that. No banks accept deposits denominated in ratios. The way we measure profitability is in 'tons of money'. You use the return on assets ratio if cash is scarce. But if there is actually a lot of cash, then that is causing you to economize on something that is abundant."

      • by Fnkmaster (89084)

        Correct - capital is overly abundant in China because the government has essentially been printing money to fuel economic growth. The problem is that this encourages massive amounts of malinvestment - Chinese companies doing things that are ultimately unprofitable simply to grow for its own sake. Well not just for its own sake - really, to generate more jobs, which gives the executives clout with the local party/government officials, allows them to extract political favors and raise their own pay because

        • Cash is abundant in China because America has been printing dollars and sending them tho China to buy stuff which cannot be manufactured profitably in America, cos America's business methods are cr*p.
    • They might only profit 2% of every device, but the sheer scale of the whole manufacturing industry more than makes up for that.

      That 2% figure is somewhat distorted. Here's something from a researcher at the same university as the other authors. Basically the 2% doesn't reflect currency manipulation that artificially deflates the numbers by 40%, it doesn't reflect externalized costs like pollution, it doesn't reflect governments supports like *free* factories, etc.

      http://www.americanthinker.com/2011/09/china_trade_policy_and_the_fallacy_of_idea-land.html [americanthinker.com]

  • by Anonymous Coward on Monday December 26, 2011 @11:05AM (#38494336)

    We go from "solid jobs have gone to China" to "there are no jobs, enjoy irrelevance." Yay?

    • by presidenteloco (659168) on Monday December 26, 2011 @12:53PM (#38495282)

      China's cheap labor advantage is only sustainable as long as their factory assembly workers are still more dextrous, faster, and cheaper than the prevailing robotics technology of the day.

      That is still the case, but for how much longer?

    • by cfulmer (3166) on Monday December 26, 2011 @01:02PM (#38495362) Homepage Journal

      Know anybody in the business of delivering milk or ice door-to-door? Know any fullers, coopers or blacksmiths? Those used to be considered solid jobs as well. Dynamic economies constantly create and destroy entire categories of jobs. Why be upset when manufacturing high-tech devices is no longer something that can be profitably done?

      • by Paul Fernhout (109597) on Monday December 26, 2011 @01:47PM (#38495776) Homepage

        With modern production methods, as well as trends like environmentalism, here is a need for less and less jobs overall as productivity goes up and demand grows more slowly than productivity.

        While thing were different in hunter-gatherer times, the rise of agriculture and industrialism led to a lot of work (because there was less land to support each person and expectations also rose). But then productivity continues to improve exponentially.

        Here are some examples. Five year old kids used to have to work in mines 200 years ago. Now they are sent to "school" often until their mid twenties or even longer. Work weeks used to be 80+ hours per week. Now work weeks are 35-40 hours plus paid vacations. People used to work until they died. Now in Europe many retire in their mid-fifties and live and eat and play for another three decades. People in their mid-twenties used to be the backbone of the economy. Now many educated 20-somethings in Europe have no jobs (and are rioting over that regularly like in Greece).

        Agriculture has gone from 90% of the workforce to 2% or so over the last two hundred years in the USA. US manufacturing went from around 35% to 16% over the past fifty years, while still making the same or more amount of stuff and at higher quality. That number continues downward.

        With computers and robotics (especially vision systems), more and more service jobs will come user the same pressures. We need to rethink our economics to account for this. For ideas on that, see writings by Marshall Brain, Martin Ford, or stuff on my website (essentially, a basic income of social security and medicare for all, an improved gift economy like Wikipeida and the blogosphere and GNU/Linux and Freecycle, improved subsistence like with 3D printers and agricultural robots, and better democratic resource-based planning).

      • by Stormthirst (66538) on Monday December 26, 2011 @01:55PM (#38495840)

        Several reasons:

        1) The aforementioned industries took decades to wind down. These days a manufacturer can up an leave in a matter of months, leaving the workforce no time to retrain, and which can decimate entire towns which for decades had been relying on that one manufacturer. And all because that manufacturer can produce their device for a dollar less.
        2) The aforementioned industries didn't take a degree costing tens if not hundreds of thousands of dollars to get. Typically it was on the job training, for which you got paid.

        The nature of capitalism requires a pyramid of people - the highest earners at the top, the lower wages at the bottom. If you ship all the lower wage jobs overs seas your system collapses.

    • by jfengel (409917)

      More or less, yeah. The jobs went to China because they were already irrelevant. Skilled producers always manage to out-produce unskilled ones, and we've reached the point where very little that you want can be produced by unskilled hands.

      The only thing left to produce is "intellectual" property, which (as Slashdot readers continually remind us) has no value, precisely because it doesn't take much work to spread far and wide. The goal has always been to reduce the number of hours needed to survive, and we

  • by A12m0v (1315511) on Monday December 26, 2011 @11:10AM (#38494370) Journal

    I feel better about my Chinese assembled devices purchases.

    • by Fastolfe (1470)

      Why? The company finding this unprofitable is still taking the money and spending it on (Chinese) parts and labor. This revelation makes no difference to the trade deficit.

  • by betterunixthanunix (980855) on Monday December 26, 2011 @11:11AM (#38494382)
    They are not making these things out of the goodness of their hearts.
    • by Doc Ruby (173196)

      Nor for the profit, according to the study.

      So what is the reason, as you say there is one?

      • I do not know, but the Chinese have plenty of other things that they need to be doing, so something is compelling them to produce consumer electronics and computers. Maybe they are installing special hardware that would allow them to selectively disable systems? Maybe some sort of surveillance equipment? Maybe they just like the idea of wielding that much power over the American economy, and want to get us hooked on Chinese manufacturing so that they can raise prices and profit later?
        • by Doc Ruby (173196)

          I think it's for the profit. The Chinese companies aren't able to make the carriers' profit, nor Apple's. I suppose they're not able to make the Korean or Japanese profit off memory, touchscreen and other cutting-edge components, or they would be. So they're profiting where they can: the manufacturing.

          It's a small profit, but that's all they can get. The electronics assembly labor market is global and evidently the most extremely competitive part of the entire supply chain.

      • by obarel (670863)

        Must be the goodness of their hearts then.

      • by michael_cain (66650) on Monday December 26, 2011 @12:12PM (#38494904) Journal

        So what is the reason, as you say there is one?

        Jobs. China still has on the order of 600 million subsistence-level peasants. Leaving those people in that state while a smaller number get comparatively richer working in the cities at manufacturing, construction, and related jobs is highly unstable. The government doesn't care about profits; it cares about creating enough jobs to continually employ more peasants.

      • by sFurbo (1361249)
        No, that is not what the study says (from my very cursory reading). It looks at how big a part of the final selling price goes to the physical manufactorers, not if the make a profit. Yes, I know, an errornous headline on slashdot is really shocking, but it seems to be the case here.
  • by G3ckoG33k (647276) on Monday December 26, 2011 @11:11AM (#38494388)

    Earth is getting saturated. Soon only India will be left as cheap labor. Soon after that, with markets like China, EU and the US, the Indians will be in the same position the Chinese are in now.

    Will there ever be an expanding economy when there is no cheap labor left?

    • by MickyTheIdiot (1032226) on Monday December 26, 2011 @11:13AM (#38494398) Homepage Journal

      Yes. We had an expanding economy between WWII and 1975 and people were actually getting paid to do the work.

      • Doesn't work anymore (Score:4, Interesting)

        by Anonymous Coward on Monday December 26, 2011 @12:08PM (#38494866)

        The big question is: by whom where they paid?

        Simple answer: by the employers they work for. That means that those employers had the money (by making a tidy profit) to actually pay their employees. How did they get that money? By selling loads of stuff. To whom? To consumers that got a lot of money by working...

        The big drive behind all this was the rampant growth of the population in those periods.

        Compare that to the current situation: population growth is stagnant (we're talking about people with money to spend, of course), which means a declining amount of purchases. Less money to be made by companies, so also less money to spend on employees. Which leads to even less spending.

        The whole problem about our economic situation is that our economy is based on (rapid, maybe even exponential) growth. Once that stops, you can expect severe cutbacks. The housing bubble is not the reason for the recession, it helped to postpone it for a couple of years.

        Watch this: The most important video you'll ever see [youtube.com] for a good explanation.

        • by Grishnakh (216268) on Monday December 26, 2011 @01:22PM (#38495524)

          Actually, you guys are missing a crucial element: between WWII and the 60s, America got rich rebuilding Europe. They weren't just selling loads of stuff to consumers, they were selling loads of stuff to a bombed-out continent full of more people. After Europe was rebuilt and didn't need America so much any more, things started going south in the US.

        • by Paul Fernhout (109597) on Monday December 26, 2011 @01:58PM (#38495864) Homepage

          That video by Albert Bartlett is misleading because it ignores how more people leads to more innovation -- like developing solar panels or fusion energy to replace fossil fuels, or developing space habitats to make more land for humans.

          But I agree with you about the economic issues as far as our current financial system. Both the housing bubble and the college bubble helped push back a problem related to rising productivity but flat real wages related to wealth concentration.
          http://www.capitalismhitsthefan.com/ [capitalismhitsthefan.com]
          http://www.globalresearch.ca/index.php?context=va&aid=5494 [globalresearch.ca]

          As I outline on my site ( http://www.pdfernhout.net/ [pdfernhout.net] ), mainstream economics assumes infinite demand (or at least, that demand will grow as fast or faster than productivity). But that assumption is becoming invalid, and so all of mainstream economics is suffering through a divide-by-zero error which most economists won't admit.

          See also:
          http://www.responsiblefinance.ch/appeal/ [responsiblefinance.ch]

          A fairly straight-forward solution is a "basic income", but there are other approaches and we will likely see a mix of them.

      • by Kjella (173770) on Monday December 26, 2011 @12:20PM (#38494988) Homepage

        The question is whether or not it will contract back to where it would have been had it not been for pumping up the economy for loans first. Just today I read an article about the wages offered in Spain and Italy now (source [google.com], in Norwegian so via Google Translate) and you practically can't get permanent employment anymore. They're being forced into intern or temp contracts which make minimum wage or less with little to no benefits.

        A salary of 1,000 euros a month is about to become an unattainable dream.

        That's $1300/mo or $15-16k/year, I think a minimum wage job in the US is around $10-14k/year. He was offered a 1-year contract for half that, $7-8k/year working 10 hour days. Another woman with a master degree says she makes 300 euro = less than $400 a month and yet:

        Among the 30 in our class, I am among those who make the best career.

        They can pretend what they want with the GNP figures but Europe is experiencing a really bad crunch now for those that haven't already got a permanent position - those are quite well protected, unlike in the US but the rest is going to hell. Same with the US, a lot of people aren't in the unemployment records simply because they're either trying to study their way through the crisis, have given up or don't get more benefits so they don't count in the statistics. And in a really bad crunch where the government should be trying to fire up the economy they're almost broke - in case of Greece, Portugal and Ireland really broke - and have to hit the brakes hard for a double crunch. I don't think we're at the bottom yet, it will get worse before it gets better.

    • The direction the USA is going (economically) trends to third world status and wages. Looks like a big circle to me (back to the beginning).
    • by nurb432 (527695)

      Will there ever be an expanding economy when there is no cheap labor left?

      There are always robots, which is the final end game for most of this stuff. But with no manufacturing staff left, your purchasing base goes into the toilet.

    • by alen (225700)

      Yes, we're going tO enslave aliens

    • by vlm (69642) on Monday December 26, 2011 @12:04PM (#38494834)

      Soon only India will be left as cheap labor.

      I can verify that some machine tool parts I have recent received were stamped as made in India. No punchline, none of that. For real.

      Quality, fit, finish, were all about the same as Chinese, in other words, technically meets the bare minimum, but not much more.

      Specifically some brazed carbide metal lathe cutting tools, and I believe a quick change toolpost for a lathe. I've heard they're starting to import Indian endmills (the thing that looks like a drill bit used in a milling machine).

      Indian manufacturing is apparently coming soon to a walmart near you? They do have the advantage of at least theoretically knowing English, and China is beginning its first real industrial slowdown/crisis, so it'll be interesting to see if India ascends.

      I remember, heck, I have stuff in my basement, from when imported machine tool components mean Polish as in Poland. Just after the berlin wall fell era, early 90s you couldn't buy an imported endmill that wasn't from Poland, or so it seemed at the time. Eastern Europe may yet rise again, possibly.

      • by Grishnakh (216268)

        I've seen plenty of stainless-steel wares made in India; it seems to be a specialty of theirs. SS plates, cups, bathroom accessories, etc. I've been told that's what they use for dinnerware over there, rather than glass and ceramic like we do. Don't have to worry about it breaking if you drop it.

        One big problem I've heard about with India, however, is its customs, that it's a giant PITA to import anything into the country (like eval boards to do software development on) or out of the country (like manufa

    • by trout007 (975317)

      When a star trek replicator is invented all manufacturing and agriculture will cease to exist. There will be no jobs required because there will be no scarcity. It doesn't make you poorer in real terms. People will be creative doing all types of design and art because that is what they want to do.

      The thing I always wonder about in such a world is how to allocate the few limiting resources left like personal performances. I guess a holodeck is close but if people really want to see someone in person what cou

      • by Grishnakh (216268)

        Keep on dreaming. Such technology, though I don't doubt that it's physically possible somehow, is far, far beyond today's technology. You're talking about manipulating things at an atomic or molecular level, and in a way that's somehow more efficient and faster than just making it the old-fashioned way. Even with replicators, there's a giant factor you're missing: energy. It takes energy to do such things, and in fact if early versions require enormous amounts of energy to make simple things, then they'

    • by JAlexoi (1085785)
      No, there will be a massive shift in wealth. Let's just hope it will not be accompanied by a world war, because the last N shifts like that had a massive wars associated with them.
    • by orlanz (882574) on Monday December 26, 2011 @12:48PM (#38495238)

      India? No, they are at the same state as China. China did it with GE, Walmart, Apple, Cisco, etc. India did it with Microsoft, Google, IBM, Accenture, Capgemini, etc.

      India is probably a bit ahead of China in progress. China is facing a major shift in its people's behavior, makeup, wealth, demands, and political orientation. India has basically passed or doesn't have the same issues. Don't misunderstand me, they both still have a long way to go, just that India is ahead.

      You want the next cheap labor? Look to where China is looking to meet their people's changing demand ... Africa. Even though the US provides more aid to Africa than any other country, African nations respect and look toward China more cause they feel their future is with them. It's a changing world.

    • by tsotha (720379) on Monday December 26, 2011 @02:09PM (#38495948)

      A third of the world subsists on less than a dollar a day. Our grandchildren will be long dead before there's "no cheap labor left". India isn't particularly cheap, by the way. Most of the manufacturing leaving China is going to places like Indonesia, Vietnam, the Philippines, and Guatemala. And then there's Africa, in which a whole lot of places are untouched by anything resembling economic development.

      Anyway, you proceed from a false assumption, which is that cheap labor drives an expanding economy. If that were true the world economy would have stalled with the end of slavery, which was ubiquitous well into the 19th century. Expensive labor means consumers with money to spend on cars and flat-screen televisions, as well as savings to invest in new ventures.

  • by sethstorm (512897) on Monday December 26, 2011 @11:12AM (#38494392) Homepage

    One of my favorite facts of this past year was the proof that China makes almost nothing out of assembling Apple's iPads and iPhones. From the article: 'If you want lots of jobs and lots of high paying jobs then youâ(TM)re not going to find them in manufacturing. Theyâ(TM)re where the money is, in the design, the software and the retailing of the products, not the physical making of them.

    Sounds like someone that justifies few jobs versus the large amount of jobless.

    The things that person fails to account for would be currency manipulation, government ownership of business, lack of freedom for those who do that manufacturing work, and less-than-honest accounting that is prevalent in China. Correct for those, then one can cut through the author's

    If you want lots of high-paying jobs in the US and EU, kill every single guest worker program (fraud-ridden at any level), get rid of the ability to use length of unemployment (or employment) as a direct or indirect means of discriminating against the unemployed, and get rid of the tax and benefit dodges with second-class forms of labor (e.g. contractors, consultants). Finally, make it harder to not hire US citizens, within the US by making any tax cut follow the worker and is dependent on the length of time.

    • Oops, meant:

      The things that person fails to account for would be currency manipulation, government ownership of business, lack of freedom for those who do that manufacturing work, and less-than-honest accounting that is prevalent in China. Correct for those, then one can cut through the author's bullshit that they call "fact"

    • by Doc Ruby (173196)

      I agree with you on all of those jobs policies, whether your criticism of Chinese Communism or of America's capitalism (or rather its anti-laborism).

      But how does that undercut the conclusions of the study or its Forbes presenter? The study says that the system gives the vast majority of profits to US business (Apple, iPhone carriers, and a little to other US ecosystem members). All of which is enabled by the economic policies you criticize. I'd say that reforming those policies to honest accounting (and pre

      • by timeOday (582209)

        The study says that the system gives the vast majority of profits to US business (Apple, iPhone carriers, and a little to other US ecosystem members)

        Actually it doesn't! Here is what it (the study, not the Forbes story) does say:

        After Apple, the next biggest beneficiaries in the iPad and iPhone supply chains are Korean companies such as LG and Samsung, who provide the display and memory chips, and whose gross profits account for 5% and 7%, respectively, of the sales price for the iPhone and iPad.

        So, s

    • Re: (Score:3, Insightful)

      by m00sh (2538182)

      If you want lots of high-paying jobs in the US and EU, kill every single guest worker program (fraud-ridden at any level), get rid of the ability to use length of unemployment (or employment) as a direct or indirect means of discriminating against the unemployed, and get rid of the tax and benefit dodges with second-class forms of labor (e.g. contractors, consultants). Finally, make it harder to not hire US citizens, within the US by making any tax cut follow the worker and is dependent on the length of ti

  • by rsilvergun (571051) on Monday December 26, 2011 @11:12AM (#38494394)
    the workers are paid like crap? You can't make a lot of money when you're paying a few cents to a dollar /hr. Raise their wages, add $50 bucks to the cost of iCrap and suddenly China's probably not doing so bad.
    • by MickyTheIdiot (1032226) on Monday December 26, 2011 @11:14AM (#38494404) Homepage Journal

      Your comment fails because...

      It calls for the use of common sense.

      Please try again.

    • by sethstorm (512897)

      Or how about making them in the US - in factories located north of the Mason-Dixon line and east of the Mississippi River? Keep your $50 increase and they'd still make a profit.

      The problem also is that it'd not only be profitable common sense, but that it goes against two other, incorrect orthodoxies:

      1) If you manufacture in the US, that is the region you avoid.

      2) Manufacturing in the US makes any product's price jump into the stratosphere.

    • by sempir (1916194)

      the workers are paid like crap? You can't make a lot of money when you're paying a few cents to a dollar /hr. Raise their wages, add $50 bucks to the cost of iCrap and suddenly China's probably not doing so bad.

      Raise their wages...add $50 to the cost of iCrap and BINGO ...problem solved...NO MORE iCRAP...you're a fucking genius.

  • Their chart says Chinese labor earns 2% of each iPad sold, so about $10 per device. There have been millions of devices sold. Are we now claiming that fifty million dollars is trivial? And since it's such a small portion, Apple could easily double or even triple the wages without a major impact to their profit margin. And don't forget, that's just the iPad. Throw in the iPhones and the iPods, not to mention all the non-Apple devices. And then you have to account for all the support jobs... people who

    • If labor is 2% of the cost then they are doing pretty good when you compared to other areas.

      Consider that labor gets less than a dollar for a pair of $150 Air jordans. It just to be less than $.50, but who knows that those stats are now.

  • Many use this to bad mouth Steve Jobs for stealing or copying other companies' technologies, but it essentially boils down to this..
    Good artists may be able to imitate something, might even be able to downright replicate it,
    But when you're really good, you make it your own. You take that idea away from someone because your implementation is unique.
    You learn how to take the redeemable features, and add your own character to create something utterly new.

    But that cannot happen without practice.
    Practice allows

  • by rudy_wayne (414635) on Monday December 26, 2011 @11:29AM (#38494546)

    the design, the software and the retailing of the products, not the physical making of them.

    Wrong.

    The claim that we should abandon manufacturing and concentrate on "high value" jobs, like design and engineering is nonsense. The reason manufacturing is important is because it creates additional jobs beyond just those involved in a particular product. For example, the Samsung plant in Texas which created "only" 1100 jobs. What about all the machinery in that plant? It didn't magically appear out of nowhere. Someone had to design and build it. That's more jobs. Other companies supplied the steel, plastic and electronics that went into creating that machinery. That's more jobs. Other companies supplied those steel, plastic and electronics companies with various raw materials and equipment. That's more jobs.

  • by Paul Fernhout (109597) on Monday December 26, 2011 @11:29AM (#38494548) Homepage

    The past couple decades have involved China trading a lot of cheap labor in exchange for Western technical know-how. China knows most of what there is to know by now about making gadgets. Eventually China could just create money for its own economy (by credit or printing it) and it could sell to internal markets and raise its material standard of living a lot. Export driven economies only have big value if you need imports. Although it is true that China does import stuff, so it will need to replace some of that with internal import replacing approaches, like Jane Jacobs wrote about (like solar energy instead of oil, or composites instead of metals) -- but aside from US food products, much raw materials come from other than the USA (like Australia or soon Africa). Although there remains a strategic military advantage for China in having Chinese products everywhere in the USA, so they may still do some of that. For example, most ascorbic acid (Vitamin C) in the USA comes from China. How much of it is really inspected? When is the last time you had something with extra vitamin C? That makes the USA's health very dependent on Chinese good will, as just one of many, many examples. Eastern minds typically grow up playing "Go", which teaches a very different way of "winning" (by encirclement) than Western Chess. Granted, the cost of this is that the average Chinese citizen has suffered a lower material standard of living for this sort of foreign policy (a cost that does not show up as "military" spending).

  • 2% profit is bad?? (Score:5, Insightful)

    by nurb432 (527695) on Monday December 26, 2011 @11:35AM (#38494586) Homepage Journal

    Works fine for groceries and many other companies. its all about volume. Sounds like capitalism is really starting to take root over there, at least the 'greed' component of it.

  • Then let's not manufacture anything then. Let's all be designers. Because, you know, all these devices are going to magic themselves into existence.

    Such is the logic of pointy-haired-bosses.

    --
    BMO

  • by bill_mcgonigle (4333) * on Monday December 26, 2011 @11:46AM (#38494690) Homepage Journal

    Every industrialized country has gone through this phase where subsistence farmers abandon their farms for difficult factory jobs. They don't like the factory jobs, but they like it better than subsistence farming.

    They save a little bit of money, and produce children who wind up becoming educated and form the middle class.

    To say that China's not profiting from these assembly plants is taking a very short-term view.

  • thoughts (Score:5, Interesting)

    by buddyglass (925859) on Monday December 26, 2011 @11:55AM (#38494758)

    I'm not an economist, but the matter of "who's paying whom" seems significant when it comes to manufacturing jobs. Usually the money is flowing in from the outside. On the aggregate, then, that would seem to enrich the country doing the manufacturing. Obviously if you could train your entire populace to do something more lucrative (say, design) and then have your trading partners outsource that work to your country then you'd rake in even more money. However, one wonders whether that's feasible given the inherent variance in human ability. There will almost always be some portion of the population which, for whatever reason (lack of inherent ability, lack of education, poor choices, etc.) are unable to do much beyond manufacturing or other unskilled labor. For this group to be actively engaged in manufacturing seems like a "win" compared to, say, having them all be unemployed or performing some unskilled task (other than manufacturing) where the compensation comes from domestic sources (e.g. working as a maid).

    When it comes to the U.S., I've always felt like it should endeavor to compete at all levels of the labor spectrum. Currently it is not competitive in sectors like manufacturing because the cost of unskilled labor is simply too high relative to countries like China. That's something that could potentially be addressed via government intervention (possibly in the form of wage subsidies). As it stands, the U.S. has basically "punted" on manufacturing. It seeks to employ its labor solely in white collar pursuits and servicing its own (very high) domestic consumption. Instead of assembling electronics, the unskilled in the United States flip burgers, work in retail, clean houses, work as nannies, etc. Basically they meet the demand of a highly consumer-driven economy. When that consumption dips, however, such as happened during the recent recession, you see massive job losses (and these concentrated among those with lower incomes).

  • by Waffle Iron (339739) on Monday December 26, 2011 @11:56AM (#38494770)

    Let's look at the issue from the other end: top down. If it's true that China doesn't make net revenue manufacturing stuff for the US, then the overall trade balance between the US and China would be neutral. But it's not, to the tune of $2e11 per year.

    Verdict: argument is false.

  • A properly designed assembly line uses humans as supervisors and QA persons, not machines

    I've worked on the old kind, where I actually manhandled truck rims, and it was an insanely expensive way to make them. The same time, Honda opened its assembly line for the old 305 twin engine: no humans did work! They made sure the machines worked properly.

    If course, you needed to locate those lines where there were good (if expensive) machine designers, engineers and repairmen. For Honda, that meant the home islands. For certain other companies, it now means the USA and Canada.

    --dave

  • There's a good argument against this study's conclusions, in that Apple's electronics are "iconic" but not the majority of sales even in their own markets, precisely because of the lower margins and more commodified products in the Android share of the market that better fits the Chinese manufacturing model. The study probably has very different numbers for the overall market in which Apple's products compete but fail to win.

    This situation is of course is exactly the same as has always been the case with Ap

  • by erroneus (253617) on Monday December 26, 2011 @12:15PM (#38494934) Homepage

    We know that selling things at or below their cost is an aggressive and even offensive tactic. We counter these tactics locally by making them illegal. We counter these tactics internationally through the use of tariffs and import banning. It's interesting that for the moment, these methods only apply to finished and unfinished goods.

    Costs of labor are subjective and relative at the very least and impossible to prove at the worst. Some people might say "this is a self-correcting" thing where eventually, the expenses will require increasing prices for labor. But I don't think that's the case in places like China and surrounding areas. In any case, the purpose of this "dumping" is to make it so attractive to outsource labor that local labor facilities and locations are abandoned. Once the buyers are hooked and have no other alternatives, they are then free to charge any price they wish after the competition is starved.

  • Throughout history there has never been money in being the laborer in mass production, except in modern U.S. and Europe, where those jobs are facing extinction. The money has always been in the non-labor side of things. I'm not talking about shareholders and executives, I'm talking about shift managers, QC managers, engineers, accountants, etc. A 1300 employee factory is going to have at least 1000 laborers and 300 non-laborers. This is why China has a booming middle-class and the U.S. has a shriveling

  • There is a dramatic difference between "job" and "no job", especially when you want to "buy stuff".

  • ,,,stooge and planted clown. Gee whiz, dood, so you think offshoring all the jobs to China, i.e., offshoring the vast majority of American production assets and capital assets is a great idea, dood? So falling tax revenues, both federally and at the local level is a great idea, dood? This moron and their moronic post is truly beneath the level of intelligence at /.
  • There's 31% in "materials", 5% in "unidentified profits", and 15% in "distribution and retail". That's a lot of profit unaccounted for. I imagine a bunch of the bottom rung supplies are hiding for tax purposes their profits in material costs. Even the Apple profits should be decomposed by country for this comparison to make sense.

    In addition, "materials" is not the same unit of measure as the country-derived components or "distribution and retail". One would need to decompose these missing parts as well
  • by Tom (822) on Monday December 26, 2011 @01:24PM (#38495552) Homepage Journal

    The decline of the USA is in no small part due to them having outsourced so much manufacturing elsewhere. It creates dependencies of various kinds and is more of a brain-drain than the financial idiots realise. Seriously, these are the "finance gurus" who have brought us the economic crisis - do we really listen to them for wisdom?

    Design and innovation does not require much manpower. It provides jobs for thousands, but not for millions. Manufacturing feeds many more families, and supports many more people with technical know-how. Every company that has outsourced essential parts of its production chain has learnt painful lessons. Not necessarily so painful that it was all a bad idea - outsourcing can be profitable and the right approach. But like all the business "wisdoms" of the past 50 years, its advantages have been over-hyped and its shortcomings understated.

    And, most importantly, business economics and macro economics are not the same thing and don't follow the same rules, and what is good in one context is not necessarily good in the other.

  • by scamper_22 (1073470) on Monday December 26, 2011 @01:29PM (#38495586)

    Let us assume the article is correct? So how does this help any industrialized nation?

    The US has 300,000,000 people.
    Apple employes 60,000 people... many of whom work in retail. Apple is perhaps the most successful innovative company right now.

    I personally have great frustration with those who simply tout this 'high-end' job. The 'creative class' and all that crap. Okay great, there are these good jobs in innovation. I work in the field. I get it. But there's not enough to sustain 300,000,000 Americans.

    There's only room so many innovative companies doing smartphones or consoles or operating systems or solar panels ... or whatever. Do you know what is special about design jobs? They only need a relatively small number of people do the design.

    As other nations become prosperous, you'll have billions of reasonably educated people competing for these design jobs.

    Right now, one might argue Silicon Valley is the epicenter of innovation. Great. And that operates in a state with about 35 000 000 people and an 11% unemployment rate.

    Even assuming we had a super amazing education system in California that generated brilliant people capable of doing work... silicon valley is not hiring 3 500 000 people. Heck, I'm pretty sure we saw layoffs at many firms in the news. Some companies are hiring of course... in the thousands perhaps.

    My point... innovation is great. It generates a few jobs. It makes some people rich. But it doesn't do crap for the 95% of the population. As a result, we shouldn't be so concerned with the innovation economy or any of that.

    Small countries with a few million people like Singapore or Sweden can try and sustain their economies off of innovation, but any large nation... be it the US or China or India will never be able to.

    The private sector of these countries will be composed of manufacturing, farming, call-centers, service workers... If you can't design an economic system to work for them, it won't.

    Stop living in your little bubble in academia or silicon valley with this religious belief in growth and innovation...
    and start looking at the numbers.

  • by WindBourne (631190) on Monday December 26, 2011 @01:42PM (#38495724) Journal
    It is about getting control of all of the rest of that. Look carefully at how many cheap knock-offs of iphone there are. In fact, look at all of the totally ripped-off clones of western goods are coming from China. The issue is that China is building up loads of engineering, design, etc companies because they have access to the cheap manufacturing. And the time is coming, soon, that China gov. owned companies will destroy Apple, HP, Dell, IBM, GE, Westinghouse, Sony, Samsung, etc.
    Combine that with the fact that China is massively building up their military AND showing that they are ALL TOO HAPPY to use them, well, China's cold war with the west is in full swing while the fools around the west buy the BS.

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