U.S. global companies rush to return home, with Apple joining foray

U.S. manufacturing companies that advanced into foreign countries for production are returning to the country en mass. Notably, many are coming back home from China. Such a move will likely spawn seismic shift in the map of global manufacturing industry, as well as those in China and the U.S.

Bloomberg reported on Tuesday that Apple decided to purchase First Solar’s plant in Mesa City, Arizona, and transform it into a factory producing sapphire glass, a part used in camera lens cover for the iPhone.

Apple spokeswoman Kristin Huguet said the company is proud to expand domestic production and create up to 2,000 jobs by establishing the plant. Apple, which closed all plants in the U.S. and moved to China in 1999, has announced a plan to construct a second factory in the U.S. in less than one and half years after releasing a plan on the first in late last year. Next year, Apple is reportedly set to construct a plant that will produce 1 million Mac Pro PCs per year.

Earlier, General Electric and Google also decided last year and this year to move their production facilities to the U.S. mainland from overseas, in a spree of U.S. companies heading back home. In February last year, GE said it is relocating its plant for large water heaters from China to Louisville, Kentucky.

U.S. companies are making U-turn due to economic factors resulting from "boosting of the manufacturing sector." When a U.S. media outlet lauded GE for repatriating its plant even by calling its chairman Jeffrey Immelt a “patriot,” Immelt immediately wrote an op-ed piece in Harvard Business Review to say that they have not moved to the U.S. to conduct charitable activities (for the U.S.), noting “Entrepreneurs make decision based on profitability.”

GE constructed production facilities in China in 2000 to benefit from low labor cost, but Chinese workers’ wage has continued to rise. According to the National Bureau of Statistics of China, the average salary of Chinese workers jumped 71 percent during a five-year period from 2008 to September this year. While gains from low wage are declining, the cost of maritime shipping to the U.S., which takes four weeks on average, soared due to a nearly three-fold increase in oil price. After relocating its plant to the U.S., GE cut production costs by 20 percent, and lowered the price of its gas water heater from 1,500 U.S. dollars to 1,299 U.S. dollars.

Google, which acquired Motorola, also started operating a plant that produces the Motorola Moto X in Fort Worth, Texas in September. It is the first smartphone assembly plant in the U.S.

The U-turn phenomenon, which started with small and medium-sized enterprises in 2010, has been spreading to global conglomerates over the past two years.

“In 2020, the U.S. will become the global production base of manufacturing industry again,” Boston Consulting Group said in a report in August. “U.S. manufacturing companies that moved to low-cost countries over the past 40 years are coming back.” The report said that the Barack Obama administration’s policy to halt tax reduction for overseas income of its companies and boost tax benefits for firms returning to the U.S. mainland has also significantly affected the trend.

According to an earlier survey conducted in 106 U.S. manufacturing firms with annual sales of 1 billion dollars or more by BCG in February last year, 37 percent of them replied they “are considering relocating overseas production facilities to the U.S.”