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Apple, Lenovo, and Google Are Bringing Production Back to the US, but Should We Celebrate?

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The production of state-of-the-art electronic devices largely remains an international enterprise, and this is unlikely to change.

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Lenovo (OTCMKTS:LNVGY), the world's second largest PC vendor, showed off its new computer plant in Whitsett, North Carolina in mid-June. At about the same time, Apple Inc. (NASDAQ:AAPL) officially announced that its newest Mac Pro workstations would be assembled in the US. And back in May, Motorola (NASDAQ:GOOG) announced that its new flagship smartphone Moto X was going to be built in the US.

So, is electronics manufacturing finally heading onshore? Or does the devil, as usual, hide in the details? There are reasons to both celebrate and remain skeptical about the emerging trend. Let's look at some of the recent news.

Apple: The Cupertino giant announced its plans to bring some production back to the US in 2012, and in 2013, the company revealed more specific information: The products that will be built in the US are the new futuristic-looking Mac Pro computers.

The company is investing $100 million in the onshoring effort, said Apple CEO Tim Cook. He said that Macs Pro "will be assembled in Texas, include components made in Illinois and Florida, and rely on equipment produced in Kentucky and Michigan."

However, Apple is likely to cooperate with its long-established Taiwan-based partner Foxconn (TPE:2354) or even Singapore-based Flextronics (NASDAQ:FLEX) instead of creating its own production infrastructure.

Lenovo: As mentioned above, China-based Lenovo is another big name in the computer industry trumpeting the idea of building PCs in the US. The company launched US production of its ThinkPad laptops and desktops in January, reaching full production power in June with the official opening of its 240,000-square-foot facility. The opening of the North Carolina plant added 115 new manufacturing jobs to the area, and that number might go up late in the year as the company expands the plant's production line to include tablets and servers. The tech giant was not a newcomer to North Carolina; Lenovo has previously established logistics, customer solutions, and national returns centers in Whitsett.

Google and Motorola: Pulling on the heartstrings of patriotic Americans this week, Motorola has made American-made the key selling point for its new Moto X smartphone: "The first smartphone designed, engineered, and assembled in the USA is coming," states an ad released just in time for Independence Day.

In discussing the move, Motorola highlighted some of the benefits it sees in onshoring, including the ability for its production department to better coordinate with engineers in Illinois and California, which should result in faster design iterations. A leaner supply chain and streamlined logistics will help Motorola ship devices faster. The company also expects to "respond much more quickly to purchasing trends and demands."

Motorola CEO Dennis Woodside said that 70% of components for its new flagship smartphone would come from the US. The enterprise will create 2,000 jobs in Fort Worth, Texas. However, Moto X devices shipping to other international markets will be produced in China and Brazil by Flextronics, which will also operate the plant in Texas.

Google itself plans to produce its new Glass devices in the US, yet again it's likely to outsource the production to a large-scale manufacturing company, like Foxconn.

Hold the Applause?

A handful of smaller companies -- like Falcon Northwest, Puget Systems, and Lotus Computer -- already assemble their PCs in the US, yet it's only the efforts of big-name brands that attract media attention and praise. Do these firms really deserve the warm, fuzzy vibes we send them?

If you were to tear down your laptop -- say, the latest Apple MacBook Air -- you'd discover a set of components coming from different countries.

Your new MacBook Air's Intel (NASDAQ:INTC) processor was likely manufactured in Israel (or the US or Ireland) and packaged in Malaysia, for example. The battery pack was probably assembled in China. The solid-state disk drive and display likely came from Samsung (KRX:005930) factories in Korea. And while the MacBook Air is "designed by Apple in California," the actual assembly happens in China.

This should come as no surprise. The modern laptop, like almost any other electronics gadget, is a complex product, reliant on a number of components manufactured around the globe, with most parts still coming from Asia. But the manufacturing couldn't have happened without design and engineering, which is often based in the US or Europe.

Don't forget that every piece of hardware needs software to operate, and the software might come from almost anywhere – the US, India, or China. More than that, a number of technology companies are operating globally and developing their products through the collaboration of the teams scattered in offices around the world.

Given all of this, are companies being honest by adding a "Made in the USA" sticker to electronics assembled here? Should we really get excited about computers and smartphones assembled at home, and operated by global companies with headquarters overseas?

Don't forget that manufacturing plants usually employ a low-skilled and low-wage workforce, and US companies competing with overseas manufacturers face enormous pressure to keep wages down. In 2011, IHS Global Insight reported some samples of low factory wages in developing nations: $0.90 per hour in Pakistan, $1.28 in Indonesia, and $2.19 for China.

So do we really have to care that much about the efforts of the big three and admire these companies for creating a couple of hundred non-engineering positions in the US (and remember that these positions are not even operated by American companies)? Or maybe adulation should go to the companies, big and small, actually creating "the next big things" right here in America?

While it can be assembled nearly anywhere in the world, a device like the iPhone can only be dreamed up in a special sort of country. The same goes for a microprocessor, or the Windows operating system.

As long as inventions like these are happening in the US, where production is located should remain a less important issue.

(See also: The iPhone Was Designed in California and the Moto X Was Born in the USA: Should We Care?)
No positions in stocks mentioned.
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