The Trump administration and manufacturing
Thoughts on Apple Car, Part 55
It took me a few weeks to get used to the new US. In that time, Neil Cybart answered a Thursday Q&A in his Above Avalon member email about Trump’s impact on Apple manufacturing:
It would probably make sense for Apple to locate auto assembly close to the markets it wants to serve. This would mean having car assembly in the U.S. to serve the U.S. market, regardless of the current administration. Meanwhile, SoftBank’s $100B tech fund (with a portion dedicated to the U.S.) will be focused on robotics, among other things. The pieces are coming together for Foxconn to expand its U.S. presence in the area of robotics and manufacturing. This would certainly come in handy for manufacturing an „Apple Car“ in the U.S.
Here are my thoughts.
Apple Car needs to be made close to its customers
Unlike any other Apple product so far, cars can not be shipped in large quantities (say, 78 million a quarter). Of course, cars are being shipped today, but waiting times can be months – even if a model is being made in multiple locations in parallel.
So, looking at the most important markets for Apple Car, it’s clear they would need to have a production in China, one near or in the US, and one in Europe.
China is straightforward: Foxconn is already leapfrogging to become a car manufacturer. They have scaled up to making millions of iPhones each month, they can also accept the challenge to pivot into a whole different production process. Backed by the Chinese government, they not only have the financial resources, but also legal advantages to make that happen.
The US is a big question mark right now. Obviously, to make enough cars close to the US market, a domestic production facility makes sense. The Trump administration would certainly applaud to that, and may help with all kinds of subventions. Apple would of course not build their own factory, like Tesla does, but rely on contract manufacturing like they so successfully did in the past. Which brings Foxconn into play. They already plan to open plants in the States, and will most likely be the idea candidate for Apple. The question is, will there be enough skill & talent to run the production like they are used to in mainland China?
Looking near the US, not many options remain. Foxconn tried to build an iPhone business in Brazil, but failed lacking a skilled workforce on scale. The other partner would be Canada, and there is a partner who may make sense: Magna (the same as in Europe, see below). The question is however, how much political turmoil such a move would create between Trump and Cook, and how fierce the administration would react with all kinds of import hurdles.
Europe has come up way early in the Apple Car story. Austrian-based Magna International is a capable partner and will have free capacities after a BMW/MINI contract ends in 2018. They do their own concept cars and have an understanding of making premium cars – and rethinking them.
Skill on scale
It all boils down to the most important manufacturing question: Where can I get a skilled workforce that I can scale up to making millions of products a year in case the market reacts well to a brand new idea?
Apple Car will face the same supply constraints at launch, like other Apple product lines. It’s part of the brand, after all. But to scale up a business in serious terms, Apple needs reliable partners on at least three continents.
Can Trump force Apple Car to be made in the US?
No. They can create all kinds of ways to make Tim Cook’s life harder, but so can he: Publicity, taxes, education, and so on.
Apple will make decisions for Apple Car with a 10+ year outlook (they’re building a car business, after all), and Trump may only be an inconvenient truth along that path.
Apple just celebrated its 40 year anniversary, and plans to impact the next 40 in the transportation (and adjunct) industries. Let’s hope Apple Car makes a stronger dent in the universe than Trump.