A lot has been made about the plans of Apple CEO Tim Cook moving some manufacturing operations to the US. Some say that it is due to Foxconn issues. Others say it is due to the fact that ‘outsourcing’ is not exactly a warmly welcomed word in the US right now. As I have written earlier, it might be a serendipitous move for Apple since the US might be in the cusp of a new manufacturing (albeit with less human jobs) renaissance due to cheaper energy and advances in complicated robotic manufacturing. Still, many people breathed in the Apple vapors and saw some sort of genius behind the move. This has, of course, led to a lot of jawboning and outright speculation on the tech blogosphere regarding the ‘real reason’ for Apple’s desire for moving some of its manufacturing back ot the US. At least one author, Harvard Business School former fellow James Allworth says that the move might be spurred by something entirely different-Samsung.
While Apple won a huge lawsuit against Samsung, Allworth says that the legal fireworks is just part of the picture. In fact, it might even serve to confuse the real picture of the relationship between Samsung and Apple. He writes that Apples’ business is really composed of two parts-design and manufacturing technology. While any large tech company can give Apple a run for its money when it comes to design, the real key to Apple’s success is the latter-manufacturing. And this is precisely the front where it is vulnerable to Samsung. As Allworth notes, Apple has outsourced so much manufacturing work to Samsung that Samsung might possibly replicate Apple’s manufacturing success. This would leave Apple with a fleeting advantage-design. Fleeting? While many people, fanboys mostly, would fawn over Apple’s design sensibilities, these are easy to reverse engineer and improve on. Apple’s real ace in the hole is its manufacturing operations and business process and this is what is making it vulnerable to Samsung. Apple has outsourced much of its manufacturing and business innovation to Samsung. Samsung is at an advantage since it does not have to go through a decade-long evolutionary process like Apple. Apple just gave it to Samsung and now Cook is trying to reverse the situation by moving some manufacturing back to the US.
Quite an interesting theory. It has legs because it clearly analyzed Apple’s real strength. It isn’t the ‘cool’ design. It’s the ability to manufacture ‘cool’ on an economy of scale and speed. Outsourcing this is a bad idea and Allport’s hunch might be correct-moving this closer to shore beefs up Apple’s defenses against Samsung’s own manufacturing prowess. Regardless, it is clear that Wall Street is beginning to see that Apple has feet of clay. Unless the company weans itself off China and Korea while hitting the ball out of the park with a future iteration of Apple TV, its stock might still have quite a ways to fall.