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For weeks, he had been carrying a prototype of the device in his pocket.
Jobs angrily held up his iPhone, angling it so everyone could see the dozens of tiny scratches marring its plastic screen, according to someone who attended the meeting. He then pulled his keys from his jeans.
People will carry this phone in their pocket, he said. People also carry their keys in their pocket. “I won’t sell a product that gets scratched,” he said tensely. The only solution was using unscratchable glass instead. “I want a glass screen, and I want it perfect in six weeks.”
After one executive left that meeting, he booked a flight to Shenzhen, China. If Jobs wanted perfect, there was nowhere else to go.
For more than two years, the company had been working on a project that presented the same questions at every turn: How do you completely reimagine the cellphone? And how do you design it at the highest quality – with an unscratchable screen, for instance – while also ensuring that millions can be manufactured quickly and inexpensively enough to earn a significant profit?
The answers, almost every time, were found outside the United States.
In its early days, Apple usually didn’t look beyond its own backyard for manufacturing solutions. But by 2004, Apple had largely turned to foreign manufacturing.
In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.
The impact of such advantages became obvious as soon as Jobs demanded glass screens in 2007.
For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve.
Apple had already selected a U.S. company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.
Then a bid for the work arrived from a Chinese factory.
When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive.
It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.
The Chinese plant got the job.
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”
It is difficult to estimate how much more it would cost to build iPhones in the United States. However, various academics and manufacturing analysts estimate that because labor is such a small part of technology manufacturing, paying U.S. wages would add up to $65 to each iPhone’s expense.
Since Apple’s profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward.
But such calculations are, in many respects, meaningless because building the iPhone in the United States would demand much more than hiring Americans – it would require transforming the national and global economies. Apple executives believe there simply aren’t enough U.S. workers with the skills the company needs or factories with sufficient speed and flexibility.
INNOVATION’S LOSERS
In the last decade, technological leaps in solar and wind energy, semiconductor fabrication and display technologies have created thousands of jobs.
But while many of those industries started in America, much of the employment has occurred abroad. Companies have closed major facilities in the United States to reopen in China.
The pace of innovation, say executives from a variety of industries, has been quickened by businessmen like Jobs. GM went as long as half a decade between major automobile redesigns. Apple, by comparison, has released five iPhones in four years, doubling the devices’ speed and memory while dropping the price that some consumers pay.
David Barboza, Peter Lattman and Catherine Rampell contributed reporting.
