A Novel Way of Dealing With Apple Supply Shortages: Bring Component Production Back Onshore!

As anyone who closely follows procurement and supply chain management knows, production for many supply categories has moved entirely offshore in the past decade. From certain textiles to TV/monitors to computer hardware and peripherals, it's all but impossible to find domestic sources of supply. Low cost countries aren't an option for these spend areas -- they're a requirement. Even if you wanted to source locally, you couldn't. We've often debated this topic around our office, including the premium we would pay for domestically sourced products -- or products with greater domestic spend included as part of the finished product or complete bill of material -- if we could. When it comes to such things as children's toys, an area where the Chinese have consistently shown a willingness to compromise quality and safety on from lead paint to Cadmium, we'd happily pay a 100% premium if we could. And we'd buy less junk for our kids in the process (which was the way it was when we were growing up).

I think there are a lot of people in the workforce and in the home who would consider a similar argument if a domestically made and sourced premium substitute was available. Perhaps a company like Apple, which has historically created more expensive products with no differentiation -- remember the black MacBook, anyone?? -- could begin to take advantage of these sentiments by creating premium versions of their products with greater domestically sourced or manufactured components (even if the final assembly remains with an offshore contract manufacturer). If Apple were to take the lead in rebuilding a domestic supply base where it does not exist today, they would gain numerous benefits including:

  • An outstanding basis for a marketing campaign
  • The potential for greater control over IP in sensitive areas
  • The ability to charge a material premium for select product lines (or configurations within a product line)
  • The ability to reduce supply risk by hedging their bets with multiple supply options (witness the recent supply shortage LG forecasted for a component they supply for the iPad)
  • Currying favor with domestic industry and government (who might be more likely to consider Apple products in the workplace)

What do you think? Is this idea as absurd as it may seem on the surface? If you think it is, I would posit that the US has already started down a slide similar to Europe, ceding it's future super power status to India, China and other developing markets. Without a rebirth of domestic manufacturing -- especially manufacturing in environments with significant automation and where customers may actually be willing to pay a domestic price premium -- I'd sooner keep the cash portion of my retirement portfolio in Rupees and RMB than dollars.

Jason Busch

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