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Raw Materials

Although most components essential to the Company’s business are generally available from multiple sources,

certain key components including but not limited to microprocessors, enclosures, certain liquid crystal displays

(“LCDs!, certain optical drives, and application"specific integrated circuits (“A#$Cs! are currently obtained by the

Company from single or limited sources, %hich sub&ects the Company to significant supply and pricing risks' anyof these and other key components available from multiple sources including but not limited to )A)D flash

memory, dynamic random access memory (“D*A!, and certain LCDs, are sub&ect at times to industry"%ide

shortages and significant commodity pricing fluctuations' $n addition, the Company has entered into certain

agreements for the supply of key components including but not limited to microprocessors, )A)D flash memory,

D*A and LCDs at favorable pricing, but there is no guarantee the Company %ill be able to e+tend or rene% these

agreements on similar favorable terms, or at all, upon e+piration or other%ise obtain favorable pricing in the future'

herefore, the Company remains sub&ect to significant risks of supply shortages and price increases that can

materially adversely affect its financial condition and operating results'

he Company and other participants in the personal computer, mobile communication and consumer electronics

industries also compete for various components %ith other industries that have e+perienced increased demand for

their products' $n addition, the Company uses some custom components that are not common to the rest of the personal computer, mobile communication and consumer electronics industries, and ne% products introduced by the

Company often utili-e custom components available from only one source until the Company has evaluated %hether 

there is a need for, and subsequently qualifies, additional suppliers' .hen a component or product uses ne%

technologies, initial capacity constraints may e+ist until the suppliers’ yields have matured or manufacturing

capacity has increased' $f the Company’s supply of a key single"sourced component for a ne% or e+isting product

%ere delayed or constrained, if such components %ere available only at significantly higher prices, or if a key

manufacturing vendor delayed shipments of completed products to the Company, the Company’s financial condition

and operating results could be materially adversely affected' he Company’s business and financial performance

could also be adversely affected depending on the time required to obtain sufficient quantities from the original

source, or to identify and obtain sufficient quantities from an alternative source' Continued availability of these

components at acceptable prices, or at all, may be affected if those suppliers decided to concentrate on the

 production of common components instead of components customi-ed to meet the Company’s requirements'

#ignificant portions of the Company’s ac computers, i/hones, i/ods, logic boards and other assembled products

are manufactured by outsourcing partners, primarily in various parts of Asia' A significant concentration of this

outsourced manufacturing is currently performed by only a fe% of the Company’s outsourcing partners, often in

single locations' Certain of these outsourcing partners are the sole"sourced suppliers of components and

manufacturing outsourcing for many of the Company’s key products, including but not limited to final assembly of

substantially all of the Company’s portable ac computers, i/hones, i/ods and most of the Company’s desktop

 products' Although the Company %orks closely %ith its outsourcing partners on manufacturing schedules, the

Company’s operating results could be adversely affected if its outsourcing partners %ere unable to meet their

 production commitments' he Company’s purchase commitments typically cover the Company’s requirements for

 periods ranging from 01 to 231 days'

he Company believes there are several component suppliers and manufacturing vendors %hose loss to the

Company if they %ere to encounter financial distress or become insolvent, incur capacity or supply constraints,

 become unable to obtain credit, or for any other reason could materially adversely affect the Company’s business

and financial condition' At this time, such vendors include, %ithout limitation, 0 Co', Advanced icro Devices

$nc', A4 #emiconductor $nc', Amkor echnology $nc', Analog Devices $nc', Aptina $maging Corp', A*

5oldings /LC', Atheros Communications $nc', Atmel Corp', A6 7ptronics Corp', Avago echnologies Ltd',

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http://www.wikinvest.com/stock/Apple_%28AAPL%29/Raw_Materials

 To make trl! "reat pro#cts$ we eel it&s crcial to 'il# them in wa!s that are

ethical an# environmentall! responsi'le.

All over the %orld, people are building Apple products' And %e %ant to make sure that each

 person is treated %ith dignity and respect' his is %hy %e create programs that educate and

empo%er %orkers, and help preserve our environment’s precious resources for future

generations' $t’s a massive challenge 8 one %here our %ork is never done' 9ut each year %e

implement meaningful, lasting changes across our supply chain'

Aron# the "lo'e$ Apple emplo!ees are nite# in 'rin"in" e(alit!$ hman ri"hts$an# respect or the environment to the #eepest la!ers o or sppl! chain.

*ead the letter from :eff .illiams 

Acconta'ilit!

)e "o #eep into or sppl! chain to enorce or social an# environmentalstan#ar#s.

Accountability and improvement 8 for our suppliers and for ourselves 8 are among our core

ob&ectives' #o %e continually strengthen our #upplier Code of Conduct to help implement safer

and more ethical %orking conditions' $n ;12<, our auditors conducted =00 comprehensive, in"

 person audits 8 a <1 percent increase over ;120' .hen %e find noncompliance, %hich %e do in

every audit, %e partner %ith suppliers and %ork onsite to drive change' And then %e %ork to

raise the bar even higher'

Learn more about ho% Apple is holding suppliers accountable 

*++ a#its coverin" over ,.- million workers

% increase rom 2,+

,9 total contries a#ite#

0mpowerin" )orkers

)e empower workers thro"h e#cation.Apple is committed to providing and e+panding educational opportunities for %orkers in our

supply chain' #ince ;11>, more than >=2,111 %orkers have taken advantage of our #upplier

?mployee ?ducation and Development (#??D! program, %hich offers free courses ranging from

economics to ?nglish' )o% #??D is e+panding beyond the traditional classroom setting to

include more cutting"edge tools, including a ne% i/ad"based learning program'

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Learn more about ho% Apple is helping educate %orkers 

在参加 100 计划之后，我掌握了更多的职业发展技能，我对从事人力资源工作更有信心了。

龚!  

湖北  

Ater participatin" in 100$ 3 was a'le to "ain career #evelopment skills thatinspire# me to prse hman resorces as m! career.

 Xueyue Gong 

Hubei Province, China

La'or 4 5man Ri"hts

)e #eman# that sppliers treat workers airl! an# ethicall! at all times.

?very supplier that does business %ith Apple must demonstrate the highest commitment to

 protecting %orkers’ rights' his includes abiding by a ma+imum =1"hour %ork%eek' Last year,

@; percent of all our suppliers’ %ork%eeks %ere compliant %ith our =1"hour ma+imum standard'$t also means holding suppliers accountable to ethical hiring practices' $n ;12<, %e helped over

<311 foreign contract %orkers recoup 6#0'@= million in e+cessive fees paid to labor brokers'

7ur dedication to human rights even e+tends to using more conflict"free minerals in

our products'

Learn more about ho% Apple is helping protect %orkers’ rights 

% 

compliance withma6imm *7hor workweek

5ealth 4 1aet!

)e insist on sae an# health! acilities or all workers.

.hether it’s in Cupertino or Chengdu, %orker safety is of paramount importance' .e’ve found

that %ell"trained managers and employees are essential to the process' $n ;12<, participants in

our ?nvironment, 5ealth, and #afety (?5#! Academy launched more than >B1 pro&ects in their

facilities to improve %orking conditions' Apple also initiated an e+tensive mapping program to

strengthen chemical management processes across our supply chain'

Learn more about ho% Apple is safeguarding %orker health and safety 

r partners lanche# over

8

051 proects in 2,.

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0nvironment

)e hol# or pro#cts an# processes to the hi"hest environmental stan#ar#s.

7ur planet has a finite amount of precious resources' .e’re doing our part to conserve them,

including half a billion gallons of fresh%ater, through our Clean .ater /rogram' And by

educating managers on air pollution control and other sub&ects through our 2>"month, 2@"course?5# Academy' $t’s an ongoing effort, but %e’re committed to making Apple products and

 processes safer for people and the planet'

Learn more about ho% Apple is promoting environmental responsibility 

A#itors hire# '! Apple con#ct wastewater testin" at a printe# circit 'oar#actor! in ;nshan$ <hina.

r 1ppliers

)e p'lish or "i#elines an# sppliers or the worl# to see.

rom the start of our supplier responsibility efforts, %e’ve pushed ourselves to be increasingly

transparent about our %ork' ?very year %e publish our top ;11 suppliers, list the names of the

smelters in our supply chain 8 including their verification status %ith conflict"free audit

 programs 8 and freely share the detailed internal standards behind our Code of Conduct' .e

hope our openness inspires other companies to do the same'

Learn more about Apple suppliers 

=1A

Me6ico>ra?il

@rance

erman!

<hina

 Bapan

 Taiwan

1in"apore

Progress Report ?very year, Apple issues a progress report %ith the results of the previous

year’s audits and corrective actions'

https://www.apple.com/spplier7responsi'ilit!/

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.hen 9arack 7bama  &oined #ilicon alley’s top luminaries for dinner in California last

ebruary, each guest %as asked to come %ith a question for the president'

9ut as #teven /' :obs of Apple spoke, /resident 7bama interrupted %ith an inquiry of his o%nE

%hat %ould it take to make i/hones in the 6nited #tatesF

 )ot long ago, Apple boasted that its products %ere made in America' oday, fe% are' Almost all

of the B1 million i/hones, 01 million i/ads and 3@ million other products Apple sold last year

%ere manufactured overseas'

.hy can’t that %ork come homeF r' 7bama asked'

r' :obs’s reply %as unambiguous' “hose &obs aren’t coming back, he said, according to

another dinner guest'

he president’s question touched upon a central conviction at Apple' $t isn’t &ust that %orkers are

cheaper abroad' *ather, Apple’s e+ecutives believe the vast scale of overseas factories as %ell as

the fle+ibility, diligence and industrial skills of foreign %orkers have so outpaced their American

counterparts that “ade in the 6'#'A' is no longer a viable option for most Apple products'

Photo

A pro#ction line in @o6conn <it! in 1hen?hen$ <hina. The iPhone is assem'le# inthis vast acilit!$ which has 2+$ emplo!ees$ man! at the plant p to ,2 hors a#a!$ si6 #a!s a week. <re#it Thomas Lee/>loom'er" Cews

Apple has become one of the best"kno%n, most admired and most imitated companies on earth,

in part through an unrelenting mastery of global operations' Last year, it earned over <11,111 in

 profit per employee, more than Goldman #achs, ?++on obil or Google'

5o%ever, %hat has ve+ed r' 7bama as %ell as economists and policy makers is that Apple 8

and many of its high"technology peers 8 are not nearly as avid in creating American &obs as

other famous companies %ere in their heydays'

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Apple employs <0,111 people in the 6nited #tates and ;1,111 overseas, a small fraction of the

over <11,111 American %orkers at General otors in the 2@31s, or the hundreds of thousands at

General ?lectric in the 2@>1s' any more people %ork for Apple’s contractorsE an additional

B11,111 people engineer, build and assemble i/ads, i/hones and Apple’s other products' 9ut

almost none of them %ork in the 6nited #tates' $nstead, they %ork for foreign companies in Asia,

?urope and else%here, at factories that almost all electronics designers rely upon to build their%ares'

“Apple’s an e+ample of %hy it’s so hard to create middle"class &obs in the 6'#' no%, said :ared

9ernstein, %ho until last year %as an economic adviser to the .hite 5ouse'

“$f it’s the pinnacle of capitalism, %e should be %orried'

Apple e+ecutives say that going overseas, at this point, is their only option' 7ne former e+ecutive

described ho% the company relied upon a Chinese factory to revamp i/hone manufacturing &ust

%eeks before the device %as due on shelves' Apple had redesigned the i/hone’s screen at the last

minute, forcing an assembly line overhaul' )e% screens began arriving at the plant near

midnight'

A foreman immediately roused >,111 %orkers inside the company’s dormitories, according to the

e+ecutive' ?ach employee %as given a biscuit and a cup of tea, guided to a %orkstation and

%ithin half an hour started a 2;"hour shift fitting glass screens into beveled frames' .ithin @=

hours, the plant %as producing over 21,111 i/hones a day'

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“he speed and fle+ibility is breathtaking, the e+ecutive said' “here’s no American plant that

can match that'

#imilar stories could be told about almost any electronics company 8 and outsourcing has also

 become common in hundreds of industries, including accounting, legal services, banking, auto

manufacturing and pharmaceuticals'

9ut %hile Apple is far from alone, it offers a %indo% into %hy the success of some prominent

companies has not translated into large numbers of domestic &obs' .hat’s more, the company’s

decisions pose broader questions about %hat corporate America o%es Americans as the globaland national economies are increasingly intert%ined'

“Companies once felt an obligation to support American %orkers, even %hen it %asn’t the best

financial choice, said 9etsey #tevenson, the chief economist at the Labor Department until last

#eptember' “hat’s disappeared' /rofits and efficiency have trumped generosity'

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Companies and other economists say that notion is naHve' hough Americans are among the most

educated %orkers in the %orld, the nation has stopped training enough people in the mid"level

skills that factories need, e+ecutives say'

o thrive, companies argue they need to move %ork %here it can generate enough profits to keep

 paying for innovation' Doing other%ise risks losing even more American &obs over time, asevidenced by the legions of once"proud domestic manufacturers 8 including G'' and others 8 

that have shrunk as nimble competitors have emerged'

Apple %as provided %ith e+tensive summaries of he )e% Iork imes’s reporting for this

article, but the company, %hich has a reputation for secrecy, declined to comment'

his article is based on intervie%s %ith more than three do-en current and former Apple

employees and contractors 8 many of %hom requested anonymity to protect their &obs 8 as

%ell as economists, manufacturing e+perts, international trade specialists, technology analysts,

academic researchers, employees at Apple’s suppliers, competitors and corporate partners, and

government officials'

/rivately, Apple e+ecutives say the %orld is no% such a changed place that it is a mistake to

measure a company’s contribution simply by tallying its employees 8 though they note that

Apple employs more %orkers in the 6nited #tates than ever before'

hey say Apple’s success has benefited the economy by empo%ering entrepreneurs and creating

 &obs at companies like cellular providers and businesses shipping Apple products' And,

ultimately, they say curing unemployment is not their &ob'

“.e sell i/hones in over a hundred countries, a current Apple e+ecutive said' “.e don’t have anobligation to solve America’s problems' 7ur only obligation is making the best product

 possible'

‘I Want a Glass Screen’

$n ;11B, a little over a month before the i/hone %as scheduled to appear in stores, r' :obs

 beckoned a handful of lieutenants into an office' or %eeks, he had been carrying a prototype of

the device in his pocket'

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r' :obs angrily held up his i/hone, angling it so everyone could see the do-ens of tiny scratches

marring its plastic screen, according to someone %ho attended the meeting' 5e then pulled his

keys from his &eans'

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/eople %ill carry this phone in their pocket, he said' /eople also carry their keys in their pocket'

“$ %on’t sell a product that gets scratched, he said tensely' he only solution %as using

unscratchable glass instead' “$ %ant a glass screen, and $ %ant it perfect in si+ %eeks'

After one e+ecutive left that meeting, he booked a flight to #hen-hen, China' $f r' :obs %anted

 perfect, there %as no%here else to go'

or over t%o years, the company had been %orking on a pro&ect 8 code"named /urple ; 8 that

 presented the same questions at every turnE ho% do you completely reimagine the cellphoneF

And ho% do you design it at the highest quality 8 %ith an unscratchable screen, for instance 8

%hile also ensuring that millions can be manufactured quickly and ine+pensively enough to earn

a significant profitF

he ans%ers, almost every time, %ere found outside the 6nited #tates' hough components

differ bet%een versions, all i/hones contain hundreds of parts, an estimated @1 percent of %hich

are manufactured abroad' Advanced semiconductors have come from Germany and ai%an,

memory from 4orea and :apan, display panels and circuitry from 4orea and ai%an, chipsets

from ?urope and rare metals from Africa and Asia' And all of it is put together in China'

$n its early days, Apple usually didn’t look beyond its o%n backyard for manufacturing solutions'

A fe% years after Apple began building the acintosh in 2@>0, for instance, r' :obs bragged

that it %as “a machine that is made in America' $n 2@@1, %hile r' :obs %as running )eJ,

%hich %as eventually bought by Apple, the e+ecutive told a reporter that “$’m as proud of the

factory as $ am of the computer' As late as ;11;, top Apple e+ecutives occasionally drove t%o

hours northeast of their headquarters to visit the company’s iac plant in ?lk Grove, Calif'

9ut by ;11<, Apple had largely turned to foreign manufacturing' Guiding that decision %asApple’s operations e+pert, imothy D' Cook , %ho replaced r' :obs as chief e+ecutive last

August, si+ %eeks before r' :obs’s death' ost other American electronics companies had

already gone abroad, and Apple, %hich at the time %as struggling, felt it had to grasp every

advantage'

$n part, Asia %as attractive because the semiskilled %orkers there %ere cheaper' 9ut that %asn’t

driving Apple' or technology companies, the cost of labor is minimal compared %ith the

e+pense of buying parts and managing supply chains that bring together components and

services from hundreds of companies'

or r' Cook, the focus on Asia “came do%n to t%o things, said one former high"ranking Apple

e+ecutive' actories in Asia “can scale up and do%n faster and “Asian supply chains have

surpassed %hat’s in the 6'#' he result is that “%e can’t compete at this point, the e+ecutive

said'

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<ontine rea#in" the main stor! 

he impact of such advantages became obvious as soon as r' :obs demanded glass screens in

;11B'

or years, cellphone makers had avoided using glass because it required precision in cutting and

grinding that %as e+tremely difficult to achieve' Apple had already selected an American

company, Corning $nc', to manufacture large panes of strengthened glass' 9ut figuring out ho%

to cut those panes into millions of i/hone screens required finding an empty cutting plant,

hundreds of pieces of glass to use in e+periments and an army of midlevel engineers' $t %ould

cost a fortune simply to prepare'

hen a bid for the %ork arrived from a Chinese factory'

.hen an Apple team visited, the Chinese plant’s o%ners %ere already constructing a ne% %ing'

“his is in case you give us the contract, the manager said, according to a former Apple

e+ecutive' he Chinese government had agreed to under%rite costs for numerous industries, andthose subsidies had trickled do%n to the glass"cutting factory' $t had a %arehouse filled %ith

glass samples available to Apple, free of charge' he o%ners made engineers available at almost

no cost' hey had built on"site dormitories so employees %ould be available ;< hours a day'

he Chinese plant got the &ob'

“he entire supply chain is in China no%, said another former high"ranking Apple e+ecutive'

“Iou need a thousand rubber gasketsF hat’s the factory ne+t door' Iou need a million scre%sF

hat factory is a block a%ay' Iou need that scre% made a little bit differentF $t %ill take three

hours'

In Foxconn City

An eight"hour drive from that glass factory is a comple+, kno%n informally as o+conn City,

%here the i/hone is assembled' o Apple e+ecutives, o+conn City %as further evidence that

China could deliver %orkers 8 and diligence 8 that outpaced their American counterparts'

hat’s because nothing like o+conn City e+ists in the 6nited #tates'

he facility has ;01,111 employees, many %orking si+ days a %eek, often spending up to 2;

hours a day at the plant' 7ver a quarter of o+conn’s %ork force lives in company barracks andmany %orkers earn less than 2B a day' .hen one Apple e+ecutive arrived during a shift change,

his car %as stuck in a river of employees streaming past' “he scale is unimaginable, he said'

o+conn employs nearly 011 guards to direct foot traffic so %orkers are not crushed in door%ay

 bottlenecks' he facility’s central kitchen cooks an average of three tons of pork and 20 tons of

rice a day' .hile factories are spotless, the air inside nearby teahouses is ha-y %ith the smoke

and stench of cigarettes'

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o+conn echnology has do-ens of facilities in Asia and ?astern ?urope, and in e+ico and

9ra-il, and it assembles an estimated <1 percent of the %orld’s consumer electronics for

customers like Ama-on, Dell, 5e%lett"/ackard, otorola, )intendo, )okia, #amsung and #ony'

“hey could hire 0,111 people overnight, said :ennifer *igoni, %ho %as Apple’s %orld%ide

supply demand manager until ;121, but declined to discuss specifics of her %ork' “.hat 6'#' plant can find 0,111 people overnight and convince them to live in dormsF

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$n mid";11B, after a month of e+perimentation, Apple’s engineers finally perfected a method for

cutting strengthened glass so it could be used in the i/hone’s screen' he first truckloads of cut

glass arrived at o+conn City in the dead of night, according to the former Apple e+ecutive'

hat’s %hen managers %oke thousands of %orkers, %ho cra%led into their uniforms 8 %hite

and black shirts for men, red for %omen 8 and quickly lined up to assemble, by hand, the phones' .ithin three months, Apple had sold one million i/hones' #ince then, o+conn has

assembled over ;11 million more'

o+conn, in statements, declined to speak about specific clients'

“Any %orker recruited by our firm is covered by a clear contract outlining terms and conditions

and by Chinese government la% that protects their rights, the company %rote' o+conn “takes

our responsibility to our employees very seriously and %e %ork hard to give our more than one

million employees a safe and positive environment'

he company disputed some details of the former Apple e+ecutive’s account, and %rote that a

midnight shift, such as the one described, %as impossible “because %e have strict regulations

regarding the %orking hours of our employees based on their designated shifts, and every

employee has computeri-ed timecards that %ould bar them from %orking at any facility at a time

outside of their approved shift' he company said that all shifts began at either B a'm' or B p'm',

and that employees receive at least 2; hours’ notice of any schedule changes'

Photo

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3n <hina$ Lina Lin is a proect mana"er at P<5 3nternational$ which contracts withApple. DThere are lots o o's$E she sai#. D0speciall! in 1hen?hen.E <re#it ThomasLee or The Cew Fork Times

o+conn employees, in intervie%s, have challenged those assertions'

Another critical advantage for Apple %as that China provided engineers at a scale the 6nited

#tates could not match' Apple’s e+ecutives had estimated that about >,B11 industrial engineers

%ere needed to oversee and guide the ;11,111 assembly"line %orkers eventually involved in

manufacturing i/hones' he company’s analysts had forecast it %ould take as long as nine

months to find that many qualified engineers in the 6nited #tates'

$n China, it took 23 days'

Companies like Apple “say the challenge in setting up 6'#' plants is finding a technical %orkforce, said artin #chmidt, associate provost at the assachusetts $nstitute of echnology' $n

 particular, companies say they need engineers %ith more than high school, but not necessarily a

 bachelor’s degree' Americans at that skill level are hard to find, e+ecutives contend' “hey’re

good &obs, but the country doesn’t have enough to feed the demand, r' #chmidt said'

#ome aspects of the i/hone are uniquely American' he device’s soft%are, for instance, and its

innovative marketing campaigns %ere largely created in the 6nited #tates' Apple recently built a

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311 million data center in )orth Carolina' Crucial semiconductors inside the i/hone < and <#

are manufactured in an Austin, e+', factory by #amsung, of #outh 4orea'

9ut even those facilities are not enormous sources of &obs' Apple’s )orth Carolina center, for

instance, has only 211 full"time employees' he #amsung plant has an estimated ;,<11 %orkers'

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“$f you scale up from selling one million phones to 01 million phones, you don’t really need

more programmers, said :ean"Louis GassKe, %ho oversa% product development and marketing

for Apple until he left in 2@@1' “All these ne% companies 8 acebook, Google, %itter 8

 benefit from this' hey gro%, but they don’t really need to hire much'

$t is hard to estimate ho% much more it %ould cost to build i/hones in the 6nited #tates'

5o%ever, various academics and manufacturing analysts estimate that because labor is such asmall part of technology manufacturing, paying American %ages %ould add up to =3 to each

i/hone’s e+pense' #ince Apple’s profits are often hundreds of dollars per phone, building

domestically, in theory, %ould still give the company a healthy re%ard'

9ut such calculations are, in many respects, meaningless because building the i/hone in the

6nited #tates %ould demand much more than hiring Americans 8 it %ould require transforming

the national and global economies' Apple e+ecutives believe there simply aren’t enough

American %orkers %ith the skills the company needs or factories %ith sufficient speed and

fle+ibility' 7ther companies that %ork %ith Apple, like Corning, also say they must go abroad'

anufacturing glass for the i/hone revived a Corning factory in 4entucky, and today, much of

the glass in i/hones is still made there' After the i/hone became a success, Corning received a

flood of orders from other companies hoping to imitate Apple’s designs' $ts strengthened glass

sales have gro%n to more than B11 million a year, and it has hired or continued employing

about 2,111 Americans to support the emerging market'

9ut as that market has e+panded, the bulk of Corning’s strengthened glass manufacturing has

occurred at plants in :apan and ai%an'

“7ur customers are in ai%an, 4orea, :apan and China, said :ames 9' la%s, Corning’s vice

chairman and chief financial officer' “.e could make the glass here, and then ship it by boat, butthat takes 03 days' 7r, %e could ship it by air, but that’s 21 times as e+pensive' #o %e build our

glass factories ne+t door to assembly factories, and those are overseas'

Corning %as founded in America 2=2 years ago and its headquarters are still in upstate )e%

Iork' heoretically, the company could manufacture all its glass domestically' 9ut it %ould

“require a total overhaul in ho% the industry is structured, r' la%s said' “he consumer

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electronics business has become an Asian business' As an American, $ %orry about that, but

there’s nothing $ can do to stop it' Asia has become %hat the 6'#' %as for the last <1 years'

Middle-Class Jobs Fade

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Recent <omments

well

 Banar! 2*$ 2,2

6# Companies must make stuff here and thus live %ith less profits or these markets they sell in

%ill be denied to them' hey can pick'

MP

 Banar! 2$ 2,2

he article and e+ecutives kept erroneously saying the &obs might return to America if there %ere

enough trained engineers' *ubbish " they'''

s##enn

 Banar! 2$ 2,2

hose Chinese %orkers are slaves'''2B a day for 2; hours2'<2 hr and $ hear that is

high'''some %ork for '0@ cents an hour'''.hen they say'''

•

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he first time ?ric #arago-a stepped into Apple’s manufacturing plant in ?lk Grove, Calif', he

felt as if he %ere entering an engineering %onderland'

$t %as 2@@3, and the facility near #acramento employed more than 2,311 %orkers' $t %as a

kaleidoscope of robotic arms, conveyor belts ferrying circuit boards and, eventually, candy"

colored iacs in various stages of assembly' r' #arago-a, an engineer, quickly moved up the

 plant’s ranks and &oined an elite diagnostic team' 5is salary climbed to 31,111' 5e and his %ife

had three children' hey bought a home %ith a pool'

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“$t felt like, finally, school %as paying off, he said' “$ kne% the %orld needed people %ho can

 build things'

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At the same time, ho%ever, the electronics industry %as changing, and Apple 8 %ith products

that %ere declining in popularity 8 %as struggling to remake itself' 7ne focus %as improving

manufacturing' A fe% years after r' #arago-a started his &ob, his bosses e+plained ho% the

California plant stacked up against overseas factoriesE the cost, e+cluding the materials, of

 building a 2,311 computer in ?lk Grove %as ;; a machine' $n #ingapore, it %as =' $n ai%an,

<'>3' .ages %eren’t the ma&or reason for the disparities' *ather it %as costs like inventory andho% long it took %orkers to finish a task'

“.e %ere told %e %ould have to do 2;"hour days, and come in on #aturdays, r' #arago-a

said' “$ had a family' $ %anted to see my kids play soccer'

oderni-ation has al%ays caused some kinds of &obs to change or disappear' As the American

economy transitioned from agriculture to manufacturing and then to other industries, farmers

 became steel%orkers, and then salesmen and middle managers' hese shifts have carried many

economic benefits, and in general, %ith each progression, even unskilled %orkers received better

%ages and greater chances at up%ard mobility'

9ut in the last t%o decades, something more fundamental has changed, economists say' id%age

 &obs started disappearing' /articularly among Americans %ithout college degrees, today’s ne%

 &obs are disproportionately in service occupations 8 at restaurants or call centers, or as hospital

attendants or temporary %orkers 8 that offer fe%er opportunities for reaching the middle class'

?ven r' #arago-a, %ith his college degree, %as vulnerable to these trends' irst, some of ?lk

Grove’s routine tasks %ere sent overseas' r' #arago-a didn’t mind' hen the robotics that made

Apple a futuristic playground allo%ed e+ecutives to replace %orkers %ith machines' #ome

diagnostic engineering %ent to #ingapore' iddle managers %ho oversa% the plant’s inventory

%ere laid off because, suddenly, a fe% people %ith $nternet connections %ere all that %ereneeded'

r' #arago-a %as too e+pensive for an unskilled position' 5e %as also insufficiently credentialed

for upper management' 5e %as called into a small office in ;11; after a night shift, laid off and

then escorted from the plant' 5e taught high school for a %hile, and then tried a return to

technology' 9ut Apple, %hich had helped anoint the region as “#ilicon alley )orth, had by

then converted much of the ?lk Grove plant into an AppleCare call center, %here ne% employees

often earn 2; an hour'

here %ere employment prospects in #ilicon alley, but none of them panned out' “.hat theyreally %ant are 01"year"olds %ithout children, said r' #arago-a, %ho today is <>, and %hose

family no% includes five of his o%n'

After a fe% months of looking for %ork, he started feeling desperate' ?ven teaching &obs had

dried up' #o he took a position %ith an electronics temp agency that had been hired by Apple to

check returned i/hones and i/ads before they %ere sent back to customers' ?very day, r'

#arago-a %ould drive to the building %here he had once %orked as an engineer, and for 21 an

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hour %ith no benefits, %ipe thousands of glass screens and test audio ports by plugging in

headphones'

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Paydays or !pple

As Apple’s overseas operations and sales have e+panded, its top employees have thrived' Last

fiscal year, Apple’s revenue topped 21> billion, a sum larger than the combined state budgets of

ichigan, )e% :ersey and assachusetts' #ince ;113, %hen the company’s stock split, share

 prices have risen from about <3 to more than <;B'

#ome of that %ealth has gone to shareholders' Apple is among the most %idely held stocks, and

the rising share price has benefited millions of individual investors, <12(k!’s and pension plans'

he bounty has also enriched Apple %orkers' Last fiscal year, in addition to their salaries,Apple’s employees and directors received stock %orth ; billion and e+ercised or vested stock

and options %orth an added 2'< billion'

he biggest re%ards, ho%ever, have often gone to Apple’s top employees' r' Cook, Apple’s

chief, last year received stock grants 8 %hich vest over a 21"year period 8 that, at today’s share

 price, %ould be %orth <;B million, and his salary %as raised to 2'< million' $n ;121, r'

Cook’s compensation package %as valued at 3@ million, according to Apple’s security filings'

A person close to Apple argued that the compensation received by Apple’s employees %as fair, in

 part because the company had brought so much value to the nation and %orld' As the company

has gro%n, it has e+panded its domestic %ork force, including manufacturing &obs' Last year,

Apple’s American %ork force gre% by >,111 people'

.hile other companies have sent call centers abroad, Apple has kept its centers in the 6nited

#tates' 7ne source estimated that sales of Apple’s products have caused other companies to hire

tens of thousands of Americans' ed?+ and 6nited /arcel #ervice, for instance, both say they

have created American &obs because of the volume of Apple’s shipments, though neither %ould

 provide specific figures %ithout permission from Apple, %hich the company declined to provide'

“.e shouldn’t be critici-ed for using Chinese %orkers, a current Apple e+ecutive said' “he

6'#' has stopped producing people %ith the skills %e need'

.hat’s more, Apple sources say the company has created plenty of good American &obs inside its

retail stores and among entrepreneurs selling i/hone and i/ad applications'

After t%o months of testing i/ads, r' #arago-a quit' he pay %as so lo% that he %as better off,

he figured, spending those hours applying for other &obs' 7n a recent 7ctober evening, %hile r'

#arago-a sat at his ac9ook and submitted another round of rKsumKs online, half%ay around the

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%orld a %oman arrived at her office' he %orker, Lina Lin, is a pro&ect manager in #hen-hen,

China, at /C5 $nternational, %hich contracts %ith Apple and other electronics companies to

coordinate production of accessories, like the cases that protect the i/ad’s glass screens' #he is

not an Apple employee' 9ut rs' Lin is integral to Apple’s ability to deliver its products'

rs' Lin earns a bit less than %hat r' #arago-a %as paid by Apple' #he speaks fluent ?nglish,learned from %atching television and in a Chinese university' #he and her husband put a quarter

of their salaries in the bank every month' hey live in a 2,1>1"square"foot apartment, %hich they

share %ith their in"la%s and son'

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“here are lots of &obs, rs' Lin said' “?specially in #hen-hen'

Inno"ation’s #osers

o%ard the end of r' 7bama’s dinner last year %ith r' :obs and other #ilicon alley

e+ecutives, as everyone stood to leave, a cro%d of photo seekers formed around the president' A

slightly smaller scrum gathered around r' :obs' *umors had spread that his illness had

%orsened, and some hoped for a photograph %ith him, perhaps for the last time'

?ventually, the orbits of the men overlapped' “$’m not %orried about the country’s long"term

future, r' :obs told r' 7bama, according to one observer' “his country is insanely great'

.hat $’m %orried about is that %e don’t talk enough about solutions'

At dinner, for instance, the e+ecutives had suggested that the government should reform visa

 programs to help companies hire foreign engineers' #ome had urged the president to give

companies a “ta+ holiday so they could bring back overseas profits %hich, they argued, %ould

 be used to create %ork' r' :obs even suggested it might be possible, someday, to locate some ofApple’s skilled manufacturing in the 6nited #tates if the government helped train more

American engineers'

?conomists debate the usefulness of those and other efforts, and note that a struggling economy

is sometimes transformed by une+pected developments' he last time analysts %rung their hands

about prolonged American unemployment, for instance, in the early 2@>1s, the $nternet hardly

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e+isted' e% at the time %ould have guessed that a degree in graphic design %as rapidly

 becoming a smart bet, %hile studying telephone repair a dead end'

.hat remains unkno%n, ho%ever, is %hether the 6nited #tates %ill be able to leverage

tomorro%’s innovations into millions of &obs'

$n the last decade, technological leaps in solar and %ind energy, semiconductor fabrication and

display technologies have created thousands of &obs' 9ut %hile many of those industries started

in America, much of the employment has occurred abroad' Companies have closed ma&or

facilities in the 6nited #tates to reopen in China' 9y %ay of e+planation, e+ecutives say they are

competing %ith Apple for shareholders' $f they cannot rival Apple’s gro%th and profit margins,

they %on’t survive'

“)e% middle"class &obs %ill eventually emerge, said La%rence 4at-, a 5arvard economist'

“9ut %ill someone in his <1s have the skills for themF 7r %ill he be bypassed for a ne% graduate

and never find his %ay back into the middle classF

he pace of innovation, say e+ecutives from a variety of industries, has been quickened by

 businessmen like r' :obs' G'' %ent as long as half a decade bet%een ma&or automobile

redesigns' Apple, by comparison, has released five i/hones in four years, doubling the devices’

speed and memory %hile dropping the price that some consumers pay'

9efore r' 7bama and r' :obs said goodbye, the Apple e+ecutive pulled an i/hone from his

 pocket to sho% off a ne% application 8 a driving game 8 %ith incredibly detailed graphics' he

device reflected the soft glo% of the room’s lights' he other e+ecutives, %hose combined %orth

e+ceeded =@ billion, &ostled for position to glance over his shoulder' he game, everyone

agreed, %as %onderful'

here %asn’t even a tiny scratch on the screen'

Correction: January 24, 2012

An article on #unday about the reasons i/hones are largely produced overseas omitted a passage

immediately after the second continuation, from /age A;; to /age A;0, in one edition' he full

 passage should have readE “Another critical advantage for Apple %as that China provided

engineers at a scale the 6nited #tates could not match' Apple’s e+ecutives had estimated that

about >,B11 industrial engineers %ere needed to oversee and guide the ;11,111 assembly"line

%orkers eventually involved in manufacturing i/hones' he company’s analysts had forecast it%ould take as long as nine months to find that many qualified engineers in the 6nited #tates'

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