Apple’s US production shift not a trend: brokerage

Staff writer, with CNA

Mon, Dec 10, 2012 - Page 14

Apple Inc’s decision to partially shift production back to the US is unlikely to trigger a trend of technology supply chains shifting their production bases due to the small scale of Apple’s move, HSBC Securities said on Friday.

Jenny Lai (賴惠娟), head of equity research at HSBC Securities Taiwan, said the announcement made by Apple CEO Tim Cook on Thursday was in response to the US government’s plan to create more job opportunities through manufacturing in the US.

However, the shifting of one of Apple’s iMac computer production lines back to the US “is not going to emerge [as] an overall trend in tech manufacturing,” Lai wrote in a report.

Apple’s move was unlikely to become a trend because most companies’ personal computers, servers and television products meant for sales in the US are already being produced in Mexico, which is closer to the American market, Lai said.

Moreover, Apple’s initial investment of US$100 million in the US iMac plant is “very small,” and indicated that the new iMac plant would be small and likely to be used only for a final assembly of PC and TV products, Lai said.

The new plant could also be used to produce “iTV” — a device that combines features from an iPad tablet with those of a television set — in the future, she added.

Both PCs and TVs are mostly assembled close to the sales location as their bigger size involves greater shipping costs, according to HSBC’s report.

Lai said that as far as supply was concerned, Apple’s production shift would benefit Taiwanese automation suppliers such as Delta Electronics Inc (台達電) and Hiwin Technologies Corp (上銀科技), since most manufacturing lines in the US are highly automated in view of steep labor costs.

Craig Stice, senior principal analyst for computer systems at research firm IHS iSuppli, said the percentage of production likely to be shifted by Apple from Asia to the US next year would likely be “negligible,” both for the company and for the PC industry at large.

“Apple’s move appears to be a symbolic effort to help improve its public image, which has been battered during recent years by reports of labor issues at its contract manufacturing partners in Asia,” he said in a report on Thursday.

With the vast majority of PCs now being produced in Asia by contract manufacturers, Apple’s move would be unlikely to trigger a major shift in production from Asia to the US, Stice said.

Apple is a relatively small player in the global PC market, as the company’s 5.8 percent share in global shipments during the third quarter of this year was only ranked sixth on a global scale, iSuppli said.

The Cupertino, California-based firm has made extensive use of contract manufacturing services, outsourcing the production of all of its notebooks and PCs to Quanta Computer Inc (廣達), Foxconn Technology Group (富士康) and occasionally Pegatron Corp (和碩), it said.

The firms are based in Taiwan, but have manufacturing operations in China, it said.