Supply Chain Matters has featured prior commentaries concerning GT Advanced Technologies a now defunct Apple supplier that incurred a sudden bankruptcy filing in the fall of last year. A series of new product focused events regarding the ramp-up volume production of an advanced form of sapphire glass led to the supplier’s decision to seek bankruptcy protection.
Included in this unfortunate series of events was a 1.3 million square foot production facility near Mesa Arizona that was slated by GT Technologies to be utilized for volume production. With the bankruptcy proceedings, Apple has now inherited this facility.
Supply Chain Matters has taken Apple somewhat to task, in not being more proactive and meaningful in its prior 2012 commitments to move more of its ongoing manufacturing efforts back to the United States. We have openly challenged Apple to make good on such a commitment as reflected in our commentary of July 2014. Apple CEO Tim Cook at the time indicated to NBC News that the non-availability of important required skills was the most significant factor in Apple’s consideration for shifting any higher volume production back to the U.S.
We were therefore again somewhat disappointed to read of the news that Apple now plans to invest $2 billion in the building of a command data center at the GT Technologies facility in Arizona. According to business media reports, Apple expects to start construction in 2016, after GT Technologies clears out of the facility. Upwards of 700 total manufacturing jobs are lost. The tradeoff will be 150 data center staff employed at what is sure to be a state-of-art lights out advanced data center. According to a prior report by The Wall Street Journal, the state of Arizona had previously provided $10 million in incentives to make way for the manufacturing facility. Not so for the current re-use.
Now some readers may obviously challenge our viewpoint with the argument that Apple’s business model and ongoing obscene profitability is more about growing online services and electronic content distribution emanating from its millions of installed iPhones, iPads and Macs. Yes, that argument has meaning. But, Apple’s management team, under pressure from U.S. based consumers with increased awareness of holding global corporations accountable for their social responsibility and manufacturing sourcing practices, made that increased U.S. commitment to appease such concerns, albeit a couple of hundred million dollars in scope.
Thus, our disappointment is that a $2 billion investment could well have been applied to a state-of-the art manufacturing assembly facility or to supporting a component supplier’s efforts to source additional production in the U.S. Or, Apple could have elected to invest a significant sum in training and preparing U.S. based manufacturing talent.
When a company like Apple is deservedly ranked number one on nearly every researcher’s top supply chain listing, the ranking comes with a high bar of expectations. We all expect Apple to set world class benchmarks in many supply chain capabilities including supplier and social responsibility as well as balanced sourcing of supplier and manufacturing capabilities.
Thus, we will not back off from our prodding of Apple.
As we declared in July: “There is no question that Apple has the financial resources and the public relations savvy to make a U.S. production and supply chain sourcing effort far more meaningful, impactful and visible.”
From our lens, the decision to re-purpose the Mesa Arizona facility was another opportunity lost to make good on a prior public commitment.
Then again, China and Asia based production affords Apple far more inherent flexibilities including increased margin pressures on suppliers while demanding the ultimate in scale-up and scale-down flexibilities.
When, if ever, will this consumer electronics giant increase its investment in U.S. production capability?
Readers weigh in- What’s your view?