by Brad Moon | December 7, 2012 12:16 pm
Just days after news began sweeping the Internet that new Apple (NASDAQ:AAPL) iMacs were mysteriously showing up at customers doors with an “Assembled in U.S.A.” sticker on the back, we have confirmation from Apple CEO Tim Cook that his company is indeed planning on moving some manufacturing back to the U.S. from China.
In his most comprehensive interview since becoming CEO in 2011, Cook told Businessweek that Apple intends to spend $100 million to bring one of Apple’s Mac lines back home next year. And while a $100 million investment and a single product line isn’t much, it is part of a growing trend.
As Cook pointed out in the interview, the iPhone’s CPU is made in Texas. Mind you, the plant is owned by bitter rival Samsung, but the workers are American. And if rumors about Intel (NASDAQ:INTC) possibly being tagged to take over iPhone and iPad CPU production turn out to be true, Apple will have shifted one of most high-value components in its mobile device to an American company — although the chips would not necessarily be manufactured in the U.S. at that point (Intel operates six American chip fabrication plants but also has factories in Mexico, Ireland Israel and China).
Cook also reminded us that the iPhone’s glass — the Gorilla Glass manufactured by Corning (NYSE:GLW) — is made in Kentucky. Specifically, it’s made at a Corning factory in Harrodsburg, where Apple’s business is credited with having kept the plant viable during the recession.
The big question, though, is what line will move to domestic production. Like we said, new iMacs have been showing up with “Assembled in U.S.A.” stickers — the sign that kicked off much of the hysteria earlier in the week. We know Apple already has a factory in Elk Grove California that once employed 1,500 workers and is currently used to refurbish iMacs. Itmay be temporarily taking some of heat off Foxconn (Apple’s Chinese manufacturing partner) by handling assembly during the launch phase.
Could that role expand? Cook was careful to make it understood that he meant manufacture and not simply assemble. Given the complexity of the new iMacs, that possibility seems like a stretch.
Cult of Mac has an interesting theory: Apple will keep iMac manufacturing in China — because of highly specialized manufacturing processes and the expertise of Foxconn’s labor force — while shifting production of its Mac Pro line exclusively to U.S. factories. This makes sense since the Mac Pro is the most expensive PC Apple makes and is sold primarily to business customers (therefore there’s more room to make up margins if necessary through price hikes). At the same time, the Mac Pro is much easier to manufacture than an iMac or MacBook.
On top of that, Foxconn has also been rumored to be investigating the possibility of moving some of its production to American Shores. According to The Verge, Foxconn has confirmed this. In fact, a Foxconn spokesperson said: “We are looking at doing more manufacturing in the U.S. because, in general, customers want more to be done there.” It sounds as though the “Made in U.S.A.” movement is building — and that companies are responding.
This brings up two questions for investors. First off, will producing Macs in the U.S. instead of China eat into Apple’s margins significantly (or will it be able to pass any resulting cost increases on to customers without impacting sales)?
And perhaps more importantly, does “Made in America” matter? Will a move toward bringing some jobs back home give Apple a sales boost (even across product lines still made in China)?
If the answer to the second question in particular is yes, then Apple is a more attractive investment now than it has been in some time. Several months of declining value were capped by a sell-off on Wednesday over news that Nokia (NYSE:NOK) had struck a deal with China Mobile to offer Lumia smartphones, the fact that Android tablet market share is increasing and thanks to Apple’s decision to not pay a special dividend before a 2013 rise in capital gains tax.
The stock had it’s biggest drop in four years, losing 6.4% on the day and shedding $35 billion in market cap. It’s recovered some of that loss, but is still trading below $548.
All that considered, Tim Cook’s old-fashioned “Made in America” media campaign — combined with a helping hand from the holidays — may prove to be enough to put the wind back in Apple’s sails.
Investors in the tech giant can only hope.
As of this writing, Brad Moon did not own a position in any of the aforementioned securities.
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