

How much do Apple's factories cost? - strandev
http://www.asymco.com/2011/10/16/how-much-do-apples-factories-cost/

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lkrubner
I am not sure of the writer's intent, but this is a very strange way idea
that, as written, suggests that Apple is spending in an inefficient way:

"In the twelve months ended June, Apple will have spent $2.9 billion in M&E to
manufacture 118 million iOS devices. To put that in perspective, Nokia, which
manufacturers a large (if not majority) of the 340 million phones it sells,
expects full year 2011 capital expenditures of $1.1 billion. Correcting for
amortization and depreciation and deducting some spending on Mac M&E, it’s
very likely that Apple spent twice as much as Nokia on the instruments of
production for one third the number of devices."

There is another, better interpretation that can be given to the facts:
Apple's level of investment is high because it believes it will experience
dramatic growth in the near future, and Nokia's level of investment is low
because it does not expect dramatic growth in the near future.

This bit is an especially odd bit of reasoning:

"it’s very likely that Apple spent twice as much as Nokia on the instruments
of production for one third the number of devices."

Investment in production facilities are investments that are aimed at the
future, whereas how many units you've sold so far is a reflection of what
you've done in the past. What Apple is investing in the future says nothing
about what it has paid so far to produce its iPhones and iPads. Building up
production facilities is more expensive than maintaining them.

Imagine you have 2 companies, A and B. Imagine A has a great decade where it
dominates its industry, but then in the next decade is falls into decline, and
starts to lose market share. Imagine B sleeps through the first decade but
then takes off and has stellar growth during the second decade. What sort of
investment patterns would you expect to see in that second decade? Clearly,
you would expect investment from A to be declining, and investment from B to
be rising. But A probably built up some impressive production facilities back
when it was doing well, and it can coast on those production facilities for
awhile. It can continue to produce large amounts of units, without investing a
lot more in new facilities.

My point is, one has to be careful when drawing a relationship between present
levels of investment and how many units a company can build. Past investments
in production can allow a company to coast a long time. Building up production
facilities is more expensive than maintaining them.

~~~
skmurphy
I agree with your analysis but Apple may also be motivated by a desire to
delay or diminish a competitor's ability to leverage a supplier's excess
manufacturing capability.

This strategy assumes more risk by taking ownership of the capital equipment
but it strengthens their negotiating position with the supplier considerably.
The supplier is only leasing labor and would be more effectively barred from
running a second or third shift in the same facility to create competitive
products. For example, ownership of the capital equipment would allow for
considerably more visibility into factory operations by virtue of maintenance
and product test activities.

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hop
Apple must have one of the biggest fleets of cnc machines in the world to mill
all their aluminum MacBooks, iMacs, remotes, keyboards... And the steel bands
on the IPhone. I remember reading they bought 1000 Fanuk CNC's when they came
first came out with the MacBook unibody in 2008, and they have grown a lot
since then.

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mckoss
I seem to remember an Apple earnings call, around the time of the iPad launch,
where they disclosed that they were spending $1 Billion+ on some undisclosed
manufacturing facilities in China.

At the time it seemed to me that they were investing in touch-display
capability to ensure their production demands for the iPad display.

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Tycho
All that cash Apple has in the bank... I wonder if it's primarily there to
make sure Apple can comfortably ride out another global financial crisis (and
then clean up as the competition drop like flies).

~~~
bbhacker
Actually, Apple could stop selling all of their products and they could keep
their operations running until 2018, probably already 2019 after the next
quarterly results are in.

Source: <http://www.asymco.com/2011/04/26/2895/>

------
leoh
I found the article to be really flimsy. What about costs associated with
Apple buying tons of servers the last few years (for iTunes, for iCloud)?

~~~
Tloewald
Dealt with in the comments on the site — they'd have had to buy more servers
than Google.

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blumentopf
I wonder about the implications this has with regards to human rights issues:
Apple has always dismissed allegations of human rights violations with the
argument that it's basically not their direct responsibility and that it's
their suppliers' duty to adher to their supplier code of conduct.

Now if they _own_ their suppliers, that argument suddenly wouldn't really be
persuasive.

The human rights story comes to mind because I read this piece the other day
and the description of the "man whose right hand was permanently curled into a
claw from being smashed in a metal press at Foxconn" has remained vividly in
my imagination: :-(

[http://www.nytimes.com/2011/10/06/opinion/jobs-looked-to-
the...](http://www.nytimes.com/2011/10/06/opinion/jobs-looked-to-the-
future.html?_r=2)

~~~
tzs
"Apple has always dismissed allegations of human rights violations with the
argument that it's basically not their direct responsibility and that it's
their suppliers' duty to adher to their supplier code of conduct"

Wrong: <http://www.apple.com/supplierresponsibility/>

Apple actively monitors their suppliers to ensure compliance with their code
conduct, and if violations are found they make the supplier fix them,
compensate the workers for the abuse, and in some cases have dropped the
supplier if they thought it wasn't acting fast enough or sincerely enough.

~~~
treetrouble
You're right about apple's PR response but they do have a well documented
history of enabling worker abuse that suggests that this policy is either
ineffective at best or total bs at worst

[http://techcrunch.com/2011/08/31/environmental-watchdog-
repo...](http://techcrunch.com/2011/08/31/environmental-watchdog-report-calls-
apple-to-task-for-suppliers-violations/)

~~~
Tloewald
The linked article alleges pollution not worker abuse. I'm not saying that (a)
hazardous waste is ok or (b) that all of Apple's subcontractors behave
perfectly, but this seems like a case of shifting ground to score points.

In general, Apple gets a lot of flak from environmental groups simply because
it's the target that will make news. This means that Apple has to be
especially careful. Would anyone care or be surprised if Dell were polluting
an estuary?

~~~
treetrouble
I accidentally linked to the wrong article. Although that same report talked
about there did actually pertain to workers' rights, it's not highlighted in
that article.

Here are a couple others that come up in a quick search:

[http://www.nytimes.com/2011/02/23/technology/23apple.html?pa...](http://www.nytimes.com/2011/02/23/technology/23apple.html?pagewanted=all)

[http://arstechnica.com/apple/news/2011/01/chinese-
environmen...](http://arstechnica.com/apple/news/2011/01/chinese-
environmental-group-gets-on-apples-case-for-supplier-conduct.ars)

and this (which is a little bit older)

[http://www.nytimes.com/2010/06/07/business/global/07suicide....](http://www.nytimes.com/2010/06/07/business/global/07suicide.html)

Whether or not Dell is guilty of the same thing is a different issue
altogether and no less surprising or upsetting

