Sunday, January 29, 2012

Why Apple Makes iPhones In China And Why The US Is Screwed

(Editor's Note: A friend sent me this and I thought it was something others should see and understand. It says a lot about globalization, and why America can't compete anymore. One of the things it stresses is the nimbleness and adaptability of Chinese business, and how they can build plants quickly. Read this and the companion article that has a link at the end, and then think about what it would take just to permit a plant — especially here in Washington — like the Chinese can build seemingly almost overnight.)
From LinkedIn Insider

By Henry Blodget
The manufacturing processes of Apple and other electronics companies have come into sharp focus of late, with the revelation of more details about what life is like for the Chinese workers who make the world’s gadgets.

When one reads about these working conditions — 12-16 hour shifts, pay of ~$1 per hour or less, dormitories with 15 beds in 12x12 rooms — the obvious assumption is that it’s all about money:

Greedy manufacturers want to make bigger profits, so they make their products in places with labor practices that would be illegal in America.
And money is certainly part of it.

But an amazing new article by Charles Duhigg and Keith Bradsher of the New York Times reveals that there’s a lot more to it than that.

The article illustrates just how big a challenge the U.S. faces in trying stop the “hollowing out” process that has sent middle-class jobs overseas — and, with it, the extreme inequality that has developed in recent years.

The reason Apple makes iPhones and iPads in China, the article shows, is not just about money.

Manufacturing an iPhone in the United States would cost about $65 more than manufacturing it in China, where it costs an estimated $8. This additional $65 would dent the profit Apple makes on each iPhone, but it wouldn’t eliminate it. (The iPhone average selling price is about $600, and Apple’s average gross margin is about 40%. So Apple’s gross profit on each iPhone is probably in the neighborhood of $250.)

The real reasons Apple makes iPhones in China, therefore, are as follows:

Most of the components of iPhones and iPads — the supply chain — are now manufactured in China, so assembling the phones half-a-world away would create huge logistical challenges. It would also reduce flexibility — the ability to switch easily from one component supplier or manufacturer to another.

China’s factories are now far bigger and more nimble than those in the United States. They can hire (and fire) tens of thousands of workers practically overnight. Because so many of the workers live on-site, they can also press them into service at a moment’s notice. And they can change production practices and speeds extremely rapidly.

China now has a far bigger supply of appropriately-qualified engineers than the U.S. does — folks with the technical skills necessary to build complex gadgets but not so credentialed that they cost too much. And, lastly, China’s workforce is much hungrier and more frugal than many of their counterparts in the United States.

On this last point, Duhigg and Bradsher tell the story of Eric Saragoza, an engineer who began working in an Apple factory near Sacramento in 1995. The plant made Macs, and for a few years, Saragoza did well, earning $50,000 a year, getting married and having kids, and buying a house with a pool.

Soon, however, Apple started shipping jobs overseas, because the costs of manufacturing in Asia were so much lower. Importantly, these reduced costs weren’t just about wages — they were about being closer to the supply chain and the willingness of the workforce to put in over-time.

Saragoza was soon asked to work 12-hour days and come in on Saturdays. But, understandably, he wanted to watch his kids play soccer on the weekends.

Saragoza’s salary was too high for him to take an unskilled job. And he didn’t have the experience and credentials necessary to move into senior management. In 2002, his job was eliminated. Apple, meanwhile, turned the Elk Grove plant into an AppleCare facility, with call-center employees making $12 an hour.

Recently, desperate for work, Saragoza took a job at an electronics temp firm. Assigned to the AppleCare plant, he was paid $10 an hour to test repaired iPads before they were sent back to customers. That job paid so little (and was presumably so depressing) that the now 48-year-old Saragoza quit and is looking for work again.

Meanwhile, in Shenzhen, a young project manager named Lina Lin coordinates the manufacture of Apple accessories for a company in the Apple ecosystem. She makes a bit less than Saragoza made a decade ago as an Apple engineer. She lives in an 1,100-square foot apartment with her husband, their in-laws, and their son. They save a quarter of their salaries every month.

There are lots of jobs in Shenzhen, Lin says.

So, yes, money is part of why all of our gadgets are built in China. But what started a couple of decades ago as a reach for efficiency has now resulted in the entire electronics-manufacturing ecosystem being lifted up and transferred to China.

Apple doesn’t build iPhones in the United States, in other words, because there is no longer an ecosystem here to support that manufacturing. There’s no supply chain, there aren’t enough super-low-cost workers, and there are not enough mid-level engineers. And many Americans looking for work are still hoping for a return to jobs, salaries, and lifestyles that have simply disappeared.

This is a complex problem, and there’s no easy solution. But it’s a problem this country is going to have to fix. Or the massive middle class that once drove America’s prosperity will just cease to exist.

Now go read Duhigg and Bradsher...

Majority of State's Business Leaders Say Washington Is Heading in the Wrong Direction

More than 75 percent of the respondents to an Association of Washington Business (AWB) membership survey believe the state is generally heading in the wrong direction — and more than half don’t see things improving anytime during the next 12 months.

Employers surveyed said the biggest issue facing their businesses is complying with government regulations (25 percent), a lack of customers or clients (24 percent) and the cost of health care (21 percent).

According to AWB, the survey results illustrate the fragile state of Washington’s economy, and underscore the need for lawmakers to be mindful of their decisions on the state’s private employers as they attempt to close a $1.5 billion budget shortfall during the 2012 legislative session.

“Although we have seen some positive economic signs in recent months, it is clear based on this feedback from our members that Washington state has a long way to go before its economy is truly thriving again,” said AWB President Don Brunell. “Many businesses are still hunkered down, doing whatever they can to survive the combined impacts of a terrible recession, a growing thicket of government regulation and spiraling health care costs.”

Meanwhile, lawmakers appear to be more engaged in the gay marriage issue than the budget problems, along with numerous other less important bills such as whether or not drivers should be required to turn on their headlights when their windshield wipers are engaged (HB 2182).  

Looking ahead, Washington business leaders don’t see things improving soon. More than half of respondents said they expect business conditions to be about the same a year from now. Only one-third believe conditions will improve over the next year, and 14 percent say they will be worse in a year.

Saturday, January 21, 2012

Urine Testing For Cheeseburgers?

If you're worried about what Obamacare will mean for you, this should scare you. In Japan — already the slimmest industrialized nation on the planet — people are being forced to comply with a government-imposed waistline standard.

Japanese lawmakers have set a maximum waistline size for anyone over age 40 - 33.5 inches for men and 35.4 inches for women.

In the United States, the Senate and House health care reform bills have included the so-called “Safeway Amendment,” which would offer reductions in insurance premiums to people who lead fitter lives. The experience in Japan offers lessons in how complicated it is to legislate good health.

Though Japan’s “metabo law” aims to save money by heading off health risks related to obesity, there is no proof that it actually will.

Under Japan’s health care coverage, companies administer check-ups to employees once a year. Those who fail to meet the waistline requirement must undergo counseling. If companies do not reduce the number of overweight employees by 10 percent in 2012 and 25 percent by 2015, they could be required to pay more money into a health care program for the elderly. An estimated 56 million Japanese will have their waists measured this year.

Never mind that Japan has some of the world’s lowest rates of obesity — less than 5 percent, compared to nearly 35 percent for the United States.

Meanwhile, a number of US companies — especially hospitals and medical businesses — are adopting strict policies making smoking a reason to turn away job applicants. The rationale is increasing worker productivity, and reducing health care costs by encouraging healthier living. Federal estimates say employees who smoke, cost on average, $3,391 more a year each for health care and lost productivity. About 1 in 5 Americans still smoke, and smoking remains the leading cause of preventable deaths. 
Meanwhile, a spokeswoman for the confrontational Service Employees International Union (SEIU), which represents 1.2 million health care workers, said the issue isn’t on its radar — yet.

The new rules essentially treat cigarettes as an illegal narcotic, and job seekers must submit to urine tests for nicotine, as well as other drugs.

This shift — from smoke-free to smoker-free workplaces — brings up an interesting question about whether the policies establish a troubling precedent of employers intruding into employees’ private lives to ban a legal habit. What’s next — urine testing for cheeseburgers?

Friday, January 13, 2012

The Answer That Would Have Won the Nomination

An interesting commentary...

By Peter Heck
To say the moment was ripe for any earnest conservative who wanted to capture the Republican nomination for president would be an understatement. As Diane Sawyer sniffled out a question that makes even the most fanatical bleeding heart look cold, she dangled a low-hanging fruit for any of the candidates to pluck with ease. To my great disappointment, none of them did.

After spending nearly a quarter of an hour at the recent Republican presidential debate discussing a hypothetical scenario where a state might want to ban contraception, Sawyer put on her trademark pained countenance and, continuing the transparently obvious moderator pledge to direct all issues away from Barack Obama, challenged, “If I could come back to the living room question...what you would say sitting down in your living room to a gay couple who say...we want gay people to form loving, committed, long-term relationships? In human terms, what would you say to them?”

Anticipating the trap being laid for them, the Republican candidates gave carefully articulated responses that struck a balance between personal freedom and traditional morality.

But none of the candidates answered the question as they should have. I don’t think I was alone in hoping that one of them would lean into the microphone and, after starting off by incredulously asking, “Are you kidding me?,” unleash the following:

Diane, we are living in a country with 9% unemployment, and let’s cut the bull — everyone knows that number doesn’t include the enormous number of people who every week throw up their hands and leave the job market. If those were added, we’ve got closer to 1 in 5 Americans desperately looking for good, steady work.

We’ve got a record number of American families subsisting on food stamps. We’ve wasted a trillion taxpayer dollars on a government stimulus that brought no substantive job growth, but added more crushing debt to the backs of our children.

We have small businesses being threatened by the specter of an ill-advised health care entitlement that was crammed down Americans’ throats despite their vehement objection. And to add to their frustration, all the folks who were clamoring and lobbying for the legislation are mysteriously all receiving waivers exempting them from its dire consequences.
For the first time in our history we have a majority of American parents who believe that their children will have things worse than they did.

We have a housing market that’s depressed, an energy crisis brewing, and a border that is unprotected to the point where American families living near it are being terrorized by invading drug lords.
We have gas prices that are two times what they were when this president took office, and those increased fuel prices are driving up the cost of living, placing an unprecedented strain upon the American family’s budget.

We have an administration that is engaged in outright corruption — from gun-running schemes that result in the deaths of border officers to crony capitalism that sees taxpayer dollars flushed down green energy toilets like Solyndra.

Internationally, we have upwards of nine countries now under the thumb of the Muslim Brotherhood. We have a rapidly deteriorating situation in Iraq due to our politically motivated rushed withdrawal. Next door to that, the caliphate-obsessed, apocalyptic madmen running Iran are pursuing nuclear weapons with the promise to use them indiscriminately in their efforts to bring glory to Allah. They are at this very moment positioned to shut down the Strait of Hormuz and thus hijack 40% of the world’s oil — bringing on an industrial crisis around the world.

We face an increasingly hostile Chinese regime that is stealing our patents and intellectual property, hacking our computers, deploying advanced weapons systems and buying our debt so as to hold a position of economic blackmail over us.

Meanwhile, our allies in Israel have never seen us as weaker or less reliable, and our allies in Europe are mired in an economic crisis from which they may not be able to avert total collapse.

And at precisely such a dangerous moment in world affairs, our president — who has been conducting social sexual experiments with our armed forces for 3 years — decides it is the best time to dramatically slash our defense budget and usher in a vast reduction in the size and strength of the United States military.

With all that on the table, Diane, you take valuable time in this debate to ask me what I’d say to a gay couple in my living room?

What a great question. Let me make sure I state my position on this critical issue unequivocally so that there can be no mistake, because I can’t imagine any American finding anything else more significant than this: we’d first pop in a copy of the Bette Midler classic Beaches, then we’d take time to independently journal about our reaction to its message. Then, after a good cry, we’d grab the acoustic guitar and sing a round of “We are the World” before calling it an evening.

That’s the answer that question deserved. And it’s one I think would have brought with it the White House in 2012

Conservativism vs. Liberalism in America Today

Gallup Poll tells the story...

According to a recent Gallup poll reported by Politico, Conservatives continue to make up the largest segment of political views in the country, outnumbering Liberals nearly two-to-one.

Of the 20,393 people polled from January through December of last year, Gallup found that 40 percent of Americans consider themselves to be Conservatives; 35 percent consider themselves Moderates; with 21 percent defining themselves as Liberals. These are the same figures Gallup found in 2010. More telling however, is that for the third straight year, Conservatives outnumbered both Moderates and Liberals.

According to previous polls by Gallup, it appears Moderates seemingly began turning into Conservatives in significant numbers in 2008 — just as they began losing their jobs in the Obama economy — while the percentage of Moderates has also declined steadily over the past two decades, from 43 percent 1992, to 35 percent in 2011.

Although the Republican Party is dominated by self-identified Conservatives who make up 71 percent, the Democratic Party is more evenly split — with 39 percent of viewing themselves as Liberals, and 38 percent as Moderates.

The wild card in all this is the Independents who are mostly moderate (41 percent), but lean more toward conservatism (35 percent) than liberalism (20 percent). 

Meanwhile, both self-identified Conservatives and Liberals have risen in number since the early 1990s, which accounts for the growing political polarization America continues to suffer from. 

     However, the trend is clear, and correlates directly to the state of the economy. Ironically, it appears that Bill Clinton long ago understood something very basic that President Obama still fails to grasp — to quote Clinton… “It’s the economy stupid.”