Apple Moves Mac Pro Production to China
Apple Moves Mac Pro Production to China
The $6,000 desktop computer had been the company’s only
major device assembled in the U.S.
By Tripp Mickle and Yoko Kubota June 28, 2019 9:32 am ET
Apple Inc. is manufacturing its new Mac Pro computer in
China, according to people familiar with its plans, shifting abroad production
of what had been its only major device assembled in the U.S. as trade tensions
escalate between the Trump administration and Beijing.
The tech giant has tapped Taiwanese contractor Quanta
Computer Inc. to manufacture the $6,000 desktop computer and is ramping up
production at a factory near Shanghai, the people said. Apple can save on
shipping costs for components given the proximity of many of its suppliers to
Shanghai, rather than having to supply a factory in the U.S.
While the Mac Pro isn’t one of Apple’s higher-volume
products, the decision on where to make it carries outsize significance.
Apple’s reliance on factories in China to manufacture its products has been an
issue for the company, especially under President Trump, who has pressured
Apple and other companies to make more in the U.S.
With the previous Mac Pro model, released in 2013, Apple
Chief Executive Tim Cook trumpeted plans to build it in the U.S. Apple invested
$100 million in tooling and other equipment for a plant in Austin, Texas, run
by contract manufacturer Flex Ltd. Each computer was stamped “Assembled in the
USA.”
Flex and Quanta declined to comment. An Apple spokesman
said the new Mac Pro is designed and engineered in the U.S. and includes
U.S.-made components. Apple said it supports manufacturing in 30 U.S. states
and spent $60 billion last year with more than 9,000 U.S. suppliers.
“Final assembly is only one part of the manufacturing
process,” the spokesman said, adding that the company’s investments support two
million American jobs. The Mac Pro is Apple’s most powerful computer, used
primarily by a relatively small number of professionals working in industries
such as film and videogames.
President Trump has pressured Apple to make some iPhones,
Macs or iPads in the U.S. since the 2016 presidential campaign. He told The
Wall Street Journal in 2017 that Mr. Cook promised to build “three big plants,
beautiful plants” in the U.S., a claim Apple declined to comment on at the
time. Last year, as his administration imposed tariffs on imports from China,
Mr. Trump said the only way to ensure prices for Apple goods don’t increase
would be to make products in the U.S.
Apple in the past two years has announced a second campus
in Austin to handle customer support and operations, and reported more than
$500 million in new contracts with U.S. component suppliers that manufacture at
home. But Apple hasn’t disclosed any plans to build new manufacturing facilities
in the U.S.
Making the new Mac Pro in China isn’t likely to affect
many workers in Texas because demand for the old model fizzled years ago. The
Flex workforce had shifted to refurbishing already-made computers, former Flex
employees said. The Flex plant continues to make products for HP Inc. and other
companies, they said.
Mr. Trump and Chinese President Xi Jinping, looking to
revive trade talks, are scheduled to meet for lunch Saturday at the Group of 20
meeting in Osaka, Japan.
Trade tensions are disrupting supply chains in China that
have churned out electronics such as Apple's iPhone and Nintendo's Switch. Now
companies are considering a move out of the country.
Last year, the Trump administration spared product
categories including Apple’s smartwatch and AirPods wireless earbuds from an
initial round of duties. But the administration’s proposal to impose additional
tariffs of 25% covering $300 billion in imports from China would affect all of
Apple’s major devices, including the Mac, iPhone and iPad.
While it shifts Mac Pro production to China, Apple more
broadly is considering moving some of its assembly work out of China because of
concerns about U.S. tariffs, The Wall Street Journal reported last week. One of
the people familiar with Apple’s plans said that same consideration could
extend to the Mac Pro, with Ireland as an alternate possible site.
The Mac Pro’s history reflects the hurdles to doing
assembly in the U.S. The previous Mac Pro model—known as the “trash can”
because of its stumpy, cylindrical appearance—was the first computer Apple had
made in the U.S. in about a decade. Mr. Cook, who had engineered Apple’s
outsourcing to China, announced plans to build the product in the U.S. in late
2012, when Apple was facing major scrutiny over its reliance on manufacturers
in China and those contractors’ treatment of workers.
Flex secured a designation as a Texas Enterprise Zone
project at the time of the initiative, entitling it to $250,000 in annual tax
breaks in support of $15 million in equipment purchases and 500 jobs with an
average annual wage of $30,276, according to the state. The designation expires
this month.
Almost immediately, Apple ran into challenges at the Flex
plant in Austin, former Apple employees said.
More than 80% of the workers across three assembly lines
were contract employees paid minimum wage for eight-hour workdays, Alan
Hanrahan, a former Apple manufacturing supervisor, said in an interview with
the Journal two years ago. As soon as their shift ended, many headed out, he
said—even if the lines were still running. Then production would stop, only to
resume when the next shift was in place, he said.
As demand for the Mac Pro tapered off, Flex began laying
people off, several former Flex employees said. By last year, they were down to
a skeleton crew working just a quarter of one of the assembly lines and
refurbishing Mac Pros, said Jeff Gruger, a former vice president of product at
Flex.
“They learned it’s very difficult to manufacture in
America,” Mr. Hanrahan said of Apple in the 2017 interview.
Apple this year overhauled the Mac Pro to give it more
power and a radically different silver, rectangular design. The design could be
one of the last developed under the leadership of design chief Jony Ive, who
Apple announced Thursday will leave the company later this year.
Manufacturing labor costs in China, though rising, still
remain much lower than in the U.S., said Paul Gagnon, a consumer-electronics
analyst with IHS Markit.
Quanta has made MacBooks and Apple’s smartwatch for
years. In addition to four facilities in China, the Taiwan-based contractor it
has a small facility in Fremont, Calif., where it works on custom desktops,
according to one of the people familiar with its plans.
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