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Three hundred thousand workers work at a factory in China to make iPhones? I didn't realise how massive the production line is, considering they have a 23% mark

Three hundred thousand workers work at a factory in China to make iPhones? I didn't realise how massive the production line is, considering they have a 23% market share, and the rest is all Android lead by Samsung. I am always surprised that Apple (or other Western tech giants) never considered building backup factories. Did they never think about geopolitics or natural disasters and panamics? Apart from that iPhone will be cheaper in India because it cuts down all import duties, and who knows what other tax/land benefits the government of India/State government will provide them so that massive employment will be created. So it might help India in the long run, provided Indian governments give proper support to build these factories, especially in bureaucratic policies.

Cwizard 4y ago
Most of these supply chains basically didn’t have backup parts and you think they would consider building whole backup factories?
raverbashing 4y ago
> Did they never think about geopolitics or natural disasters and panamics? Not being ironic, apparently those "global MBA" types never heard of that. Their world view is probably also on continent-level and a couple of countries where labour is cheaper
- qwytw 4y ago
  Also it would be irrational to think too much about pandemics and other black swan events
mikymoothrowa 4y ago
Giant iPhone factories are already coming up in India around Chennai and Bangalore. > who knows what other tax/land benefits the government of India/State government will provide https://en.wikipedia.org/wiki/Production_Linked_Incentive_schemes_in_India https://en.wikipedia.org/wiki/Production_Linked_Incentive_sc...
simonbarker87 4y ago
I’ve been in and around manufacturing for the better part of a decade. I’ve run a small factory myself and have friends and family working at all levels of some of the largest factories in Europe. At the scale these things work out there’s no way to really “have a backup” not in the true sense that backup means. If you build a factory you use a factory - otherwise you’re wasting masses of money. What you should do is diversify and leave the option to quickly (relative terms here, still many months) ramp up production in other factories should one have an issue. Which is what most companies do. Manufacture rewards scale though so the diversification comes with its own set of problems (usually in logistics and stock management). So they do think about it for sure but due to the physical nature of things it’s not a case of “have a backup and decide to start going one day at a new location.”
- nixcraft 4y ago
  That is a thoughtful reply. Working in IT spoiled me, and I like having a backup or failover server or data centre but for Apple factory. But, it makes sense now, knowing the scale of this Apple iPhone factory, it is next to impossible to build the backup factory. Thanks!
  - 8ytecoder 4y ago
    There are aspects of this[1] book that I really enjoyed. I have no hardware/factory experience either but I had taken some operations research courses in college. In general, holding onto inventory more than you need is a waste of time, space, cost and introduces other complexities as well - like a defect identified even a little bit later in the process could lead to huge waste if you’re holding on to too much. But of course not having any sort of reserve also leads to issues. During the pandemic one of the only car companies that didn’t have major disruption was Toyota and they were the pioneers of this model of operating but they also understood the need to keep reserves of critical components. In the case of Apple, they do have a backup plan - the lower end models were already being manufactured outside China and they could scale that up while they scramble to fix the Pro lines. [1] https://www.amazon.com/Goal-Process-Ongoing-Improvement/dp/0884271951/ref=nodl_?dplnkId=d6eeff6b-2314-4cff-8129-e8b8bd4d979b https://www.amazon.com/Goal-Process-Ongoing-Improvement/dp/0...
helsinkiandrew 4y ago
> I am always surprised that Apple (or other Western tech giants) never considered building backup factories. Did they never think about geopolitics or natural disasters and panamics? They'll try to mitigate against issues with the supply chain but its very hard to eat the cost of having backup factories or using more expensive for something that might only happen every few decades or so (or longer) Adding 5-10% to your product price or taking a hit of 5-10% on your profits for 10 years will likely mean you'll lose customers or shareholders to your competition long before there's another pandemic.
cm2187 4y ago
What I am even more puzzled by is the concentration of manufacturing of CPUs in Taiwan, which beyond the chinese threat, is also an active seismic zone.
- peanuty1 4y ago
  Making chips in Taiwan is just so economical.
  - cm2187 4y ago
    Curious about why. It’s not a particularly cheap country.
    - mikymoothrowa 4y ago
      Semiconductor manufacturing is a highly specialised process. It doesn’t rely on the labor being cheap. Until recently, a good chunk of CPUs were Intel and were made in the US. The Chinese SMIC and Samsung were also making a good deal of CPUs. It’s just that only TMSC has the tech to make the higher end 5nm chips these days.
- sneak 4y ago
  TSMC are the only peolle that can do 4nm at scale, and they only do it in Taiwan at present. It's not like Intel wasn't trying.
  - cm2187 4y ago
    But isn’t the lithography done by those machines imported from the Netherlands?
    - the8472 4y ago
      It's not like you shove a blank wafer into the machine and finished chips pop out. ASML's machines only do the exposure step.
bell-cot 4y ago
> ...never considered building backup factories... How many $billion/year do you figure it'd cost, for Apple to build backup (idle) factories for iPhone production? To actually be usable, a backup factory can't be a mere umpteen-million-dollar huge empty building. You gotta spend umpteen more million to fully equip it, then maintain & upgrade that equipment to match the "live" factory. And hire and train a workforce, and keep their skills up. And then the same for some major chunks of your supply chain. Then...
ekianjo 4y ago
Building backup factories is prohibitive in terms of costs. We dont even have much of that for essential products like pharmaceuticals.
em500 4y ago
Apple is selling 250-300m iPhones per year. With seasonal variation, there are months where they need to churn out over a million iPHones every day. Such scales are hard for any human to internalize.
- dirtyid 4y ago
  I wonder how much assembly fees per device is now. PRC got $8 per 3G. It's wild to to think the actual assembling of 300M units per year doesn't amount to much.
ksec 4y ago
>Apart from that iPhone will be cheaper in India because it cuts down all import duties, Your components will still imported. Since India is only doing assembly. There might be Tax break for it, so iPhone assembled in India will still be cheaper. But Apple will still have to pay Import Tax. ( Just like they do with iPhone in China )
dirtyid 4y ago
High import duties likely more than enough to incentivize local assembly. Whether India can translate ~10$ assembly per device into grabbing rest of supply chain and moving up value chain is another question. West somewhat proactively ceded manufacturing to PRC, PRC who dominants Apple's supplier list is not going to make the same mistake by ceding unrestricted to India, preferring instead to spread some capacity in ASEAN where they have more influence. IMO countries can only do so much to attract, especially when others are reluctant to relinquish.

Cwizard 4y ago

Most of these supply chains basically didn’t have backup parts and you think they would consider building whole backup factories?

raverbashing 4y ago

> Did they never think about geopolitics or natural disasters and panamics? Not being ironic, apparently those "global MBA" types never heard of that. Their world view is probably also on continent-level and a couple of countries where labour is cheaper

qwytw 4y ago
Also it would be irrational to think too much about pandemics and other black swan events

mikymoothrowa 4y ago

Giant iPhone factories are already coming up in India around Chennai and Bangalore. > who knows what other tax/land benefits the government of India/State government will provide https://en.wikipedia.org/wiki/Production_Linked_Incentive_schemes_in_India https://en.wikipedia.org/wiki/Production_Linked_Incentive_sc...

simonbarker87 4y ago

I’ve been in and around manufacturing for the better part of a decade. I’ve run a small factory myself and have friends and family working at all levels of some of the largest factories in Europe. At the scale these things work out there’s no way to really “have a backup” not in the true sense that backup means. If you build a factory you use a factory - otherwise you’re wasting masses of money. What you should do is diversify and leave the option to quickly (relative terms here, still many months) ramp up production in other factories should one have an issue. Which is what most companies do. Manufacture rewards scale though so the diversification comes with its own set of problems (usually in logistics and stock management). So they do think about it for sure but due to the physical nature of things it’s not a case of “have a backup and decide to start going one day at a new location.”

nixcraft 4y ago
That is a thoughtful reply. Working in IT spoiled me, and I like having a backup or failover server or data centre but for Apple factory. But, it makes sense now, knowing the scale of this Apple iPhone factory, it is next to impossible to build the backup factory. Thanks!
- 8ytecoder 4y ago
  There are aspects of this[1] book that I really enjoyed. I have no hardware/factory experience either but I had taken some operations research courses in college. In general, holding onto inventory more than you need is a waste of time, space, cost and introduces other complexities as well - like a defect identified even a little bit later in the process could lead to huge waste if you’re holding on to too much. But of course not having any sort of reserve also leads to issues. During the pandemic one of the only car companies that didn’t have major disruption was Toyota and they were the pioneers of this model of operating but they also understood the need to keep reserves of critical components. In the case of Apple, they do have a backup plan - the lower end models were already being manufactured outside China and they could scale that up while they scramble to fix the Pro lines. [1] https://www.amazon.com/Goal-Process-Ongoing-Improvement/dp/0884271951/ref=nodl_?dplnkId=d6eeff6b-2314-4cff-8129-e8b8bd4d979b https://www.amazon.com/Goal-Process-Ongoing-Improvement/dp/0...

helsinkiandrew 4y ago

> I am always surprised that Apple (or other Western tech giants) never considered building backup factories. Did they never think about geopolitics or natural disasters and panamics? They'll try to mitigate against issues with the supply chain but its very hard to eat the cost of having backup factories or using more expensive for something that might only happen every few decades or so (or longer) Adding 5-10% to your product price or taking a hit of 5-10% on your profits for 10 years will likely mean you'll lose customers or shareholders to your competition long before there's another pandemic.

cm2187 4y ago

What I am even more puzzled by is the concentration of manufacturing of CPUs in Taiwan, which beyond the chinese threat, is also an active seismic zone.

peanuty1 4y ago
Making chips in Taiwan is just so economical.
- cm2187 4y ago
  Curious about why. It’s not a particularly cheap country.
  - mikymoothrowa 4y ago
    Semiconductor manufacturing is a highly specialised process. It doesn’t rely on the labor being cheap. Until recently, a good chunk of CPUs were Intel and were made in the US. The Chinese SMIC and Samsung were also making a good deal of CPUs. It’s just that only TMSC has the tech to make the higher end 5nm chips these days.
sneak 4y ago
TSMC are the only peolle that can do 4nm at scale, and they only do it in Taiwan at present. It's not like Intel wasn't trying.
- cm2187 4y ago
  But isn’t the lithography done by those machines imported from the Netherlands?
  - the8472 4y ago
    It's not like you shove a blank wafer into the machine and finished chips pop out. ASML's machines only do the exposure step.

bell-cot 4y ago

> ...never considered building backup factories... How many $billion/year do you figure it'd cost, for Apple to build backup (idle) factories for iPhone production? To actually be usable, a backup factory can't be a mere umpteen-million-dollar huge empty building. You gotta spend umpteen more million to fully equip it, then maintain & upgrade that equipment to match the "live" factory. And hire and train a workforce, and keep their skills up. And then the same for some major chunks of your supply chain. Then...

ekianjo 4y ago

Building backup factories is prohibitive in terms of costs. We dont even have much of that for essential products like pharmaceuticals.

em500 4y ago

Apple is selling 250-300m iPhones per year. With seasonal variation, there are months where they need to churn out over a million iPHones every day. Such scales are hard for any human to internalize.

dirtyid 4y ago
I wonder how much assembly fees per device is now. PRC got $8 per 3G. It's wild to to think the actual assembling of 300M units per year doesn't amount to much.

ksec 4y ago

>Apart from that iPhone will be cheaper in India because it cuts down all import duties, Your components will still imported. Since India is only doing assembly. There might be Tax break for it, so iPhone assembled in India will still be cheaper. But Apple will still have to pay Import Tax. ( Just like they do with iPhone in China )

dirtyid 4y ago

High import duties likely more than enough to incentivize local assembly. Whether India can translate ~10$ assembly per device into grabbing rest of supply chain and moving up value chain is another question. West somewhat proactively ceded manufacturing to PRC, PRC who dominants Apple's supplier list is not going to make the same mistake by ceding unrestricted to India, preferring instead to spread some capacity in ASEAN where they have more influence. IMO countries can only do so much to attract, especially when others are reluctant to relinquish.