How-the-U.S.-Lost-Out-on-iPhone-Work

HowtheU.S.LostOutoniPhoneWorkDavidBarboza,PeterLattmanandCatherineRampellWhenBarackObamajoinedSiliconValley’stopluminariesfordinnerinCalifornialastFebruary,eachguestwasaskedtocomewithaquestionforthepresident.ButasStevenP.JobsofApplespoke,PresidentObamainterruptedwithaninquiryofhisown:whatwouldittaketomakeiPhonesintheUnitedStates?Notlongago,AppleboastedthatitsproductsweremadeinAmerica.Today,feware.Almostallofthe70millioniPhones,30millioniPadsand59millionotherproductsApplesoldlastyearweremanufacturedoverseas.Whycan’tthatworkcomehome?Mr.Obamaasked.Mr.Jobs’sreplywasunambiguous.“Thosejobsaren’tcomingback,”hesaid,accordingtoanotherdinnerguest.Thepresident’squestiontoucheduponacentralconvictionatApple.Itisn’tjustthatworkersarecheaperabroad.Rather,Apple’sexecutivesbelievethevastscaleofoverseasfactoriesaswellastheflexibility,diligenceandindustrialskillsofforeignworkershavesooutpacedtheirAmericancounterpartsthat“MadeintheU.S.A.”isnolongeraviableoptionformostAppleproducts.Applehasbecomeoneofthebest-known,mostadmiredandmostimitatedcompaniesonearth,inpartthroughanunrelentingmasteryofglobaloperations.Lastyear,itearnedover$400,000inprofitperemployee,morethanGoldmanSachs,ExxonMobilorGoogle.However,whathasvexedMr.ObamaaswellaseconomistsandpolicymakersisthatApple—andmanyofitshigh-technologypeers—arenotnearlyasavidincreatingAmericanjobsasotherfamouscompanieswereintheirheydays.Appleemploys43,000peopleintheUnitedStatesand20,000overseas,asmallfractionoftheover400,000AmericanworkersatGeneralMotorsinthe1950s,orthehundredsofthousandsatGeneralElectricinthe1980s.ManymorepeopleworkforApple’scontractors:anadditional700,000peopleengineer,buildandassembleiPads,iPhonesandApple’sotherproducts.ButalmostnoneofthemworkintheUnitedStates.Instead,theyworkforforeigncompaniesinAsia,Europeandelsewhere,atfactoriesthatalmostallelectronicsdesignersrelyupontobuildtheirwares.“Apple’sanexampleofwhyit’ssohardtocreatemiddle-classjobsintheU.S.now,”saidJaredBernstein,whountillastyearwasaneconomicadvisertotheWhiteHouse.“Ifit’sthepinnacleofcapitalism,weshouldbeworried.”Appleexecutivessaythatgoingoverseas,atthispoint,istheironlyoption.OneformerexecutivedescribedhowthecompanyrelieduponaChinesefactorytorevampiPhonemanufacturingjustweeksbeforethedevicewasdueonshelves.ApplehadredesignedtheiPhone’sscreenatthelastminute,forcinganassemblylineoverhaul.Newscreensbeganarrivingattheplantnearmidnight.Aforemanimmediatelyroused8,000workersinsidethecompany’sdormitories,accordingtotheexecutive.Eachemployeewasgivenabiscuitandacupoftea,guidedtoaworkstationandwithinhalfanhourstarteda12-hourshiftfittingglassscreensintobeveledframes.Within96hours,theplantwasproducingover10,000iPhonesaday.“Thespeedandflexibilityisbreathtaking,”theexecutivesaid.“There’snoAmericanplantthatcanmatchthat.”Similarstoriescouldbetoldaboutalmostanyelectronicscompany—andoutsourcinghasalsobecomecommoninhundredsofindustries,includingaccounting,legalservices,banking,automanufacturingandpharmaceuticals.ButwhileAppleisfarfromalone,itoffersawindowintowhythesuccessofsomeprominentcompanieshasnottranslatedintolargenumbersofdomesticjobs.What’smore,thecompany’sdecisionsposebroaderquestionsaboutwhatcorporateAmericaowesAmericansastheglobalandnationaleconomiesareincreasinglyintertwined.“CompaniesoncefeltanobligationtosupportAmericanworkers,evenwhenitwasn’tthebestfinancialchoice,”saidBetseyStevenson,thechiefeconomistattheLaborDepartmentuntillastSeptember.“That’sdisappeared.Profitsandefficiencyhavetrumpedgenerosity.”Companiesandothereconomistssaythatnotionisnaïve.ThoughAmericansareamongthemosteducatedworkersintheworld,thenationhasstoppedtrainingenoughpeopleinthemid-levelskillsthatfactoriesneed,executivessay.Tothrive,companiesarguetheyneedtomoveworkwhereitcangenerateenoughprofitstokeeppayingforinnovation.DoingotherwiseriskslosingevenmoreAmericanjobsovertime,asevidencedbythelegionsofonce-prouddomesticmanufacturers—includingG.M.andothers—thathaveshrunkasnimblecompetitorshaveemerged.ApplewasprovidedwithextensivesummariesofTheNewYorkTimes’sreportingforthisarticle,butthecompany,whichhasareputationforsecrecy,declinedtocomment.ThisarticleisbasedoninterviewswithmorethanthreedozencurrentandformerAppleemployeesandcontractors—manyofwhomrequestedanonymitytoprotecttheirjobs—aswellaseconomists,manufacturingexperts,internationaltradespecialists,technologyanalysts,academicresearchers,employeesatApple’ssuppliers,competitorsandcorporatepartners,andgovernmentofficials.Privately,Appleexecutivessaytheworldisnowsuchachangedplacethatitisamistaketomeasureacompany’scontributionsimplybytallyingitsemployees—thoughtheynotethatAppleemploysmoreworkersintheUnitedStatesthaneverbefore.TheysayApple’ssuccesshasbenefitedtheeconomybyempoweringentrepreneursandcreatingjobsatcompanieslikecellularprovidersandbusinessesshippingAppleproducts.And,ultimately,theysaycuringunemploymentisnottheirjob.“WeselliPhonesinoverahundredcountries,”acurrentAppleexecutivesaid.“Wedon’thaveanobligationtosolveAmerica’sproblems.Ouronlyobligationismakingthebestproductpossible.”‘IWantaGlass