Apple moves production of $6G Mac Pro to China

Apple is manufacturing its new Mac Pro computer in China, according to people familiar with its plans, shifting abroad production of what had been its only major device assembled in the U.S. as trade tensions escalate between the Trump administration and Beijing.

The tech giant has tapped contractor Quanta Computer Inc. to manufacture the $6,000 desktop computer and is ramping up production at a factory near Shanghai, the people said. Quanta’s facility is close to other Apple suppliers across Asia, making it possible for Apple to achieve lower shipping costs than if it shipped components to the U.S.

While the Mac Pro isn’t one of Apple’s bigger products, the decision on where to make it carries outsize significance. Apple’s reliance on factories in China to manufacture its products has been an issue for the company, especially under President Trump, who has pressured Apple and other companies to make more in the U.S.

With the previous Mac Pro model, released in 2013, Apple Chief Executive Tim Cook trumpeted plans to build it in the U.S. Apple invested $100 million in tooling and other equipment for a plant in Austin, Texas, run by contract manufacturer Flex Ltd. Each computer was stamped with “Assembled in the USA.”

Flex and Quanta declined to comment. An Apple spokesman said the new Mac Pro is designed and engineered in the U.S. and includes U.S.-made components. Apple said it supports manufacturing in 30 U.S. states and spent $60 billion last year with more than 9,000 U.S. suppliers.

“Final assembly is only one part of the manufacturing process,” the spokesman said, adding that the company’s investments support two million American jobs. The Mac Pro is Apple’s most powerful computer, used primarily by a small group of professionals working in industries such as film and videogames.

President Trump has pressured Apple to make some iPhones, Macs or iPads in the U.S. since the 2016 presidential campaign. He told The Wall Street Journal in 2017 that Mr. Cook promised to build “three big plants, beautiful plants” in the U.S., a claim Apple declined to comment on at the time. Last year, as his administration imposed tariffs on imports from China, Mr. Trump said the only way to ensure prices for Apple goods don’t increase would be to make products in the U.S.

Apple in the past two years has announced a second campus in Austin, Texas, to handle customer support and operations, and announced more than $500 million in new contractswith U.S. component suppliers that manufacture at home. But Apple hasn’t disclosed any plans to build new manufacturing facilities in the U.S.

Making the new model in China isn’t likely to affect many workers in Texas because demand for the old Mac Pro had fizzled years ago. The Flex workforce had shifted to refurbishing already-made computers, former Flex employees said. The Flex plant continues to make products for HP Inc. and other companies, they said.

Mr. Trump and Chinese President Xi Jinping, looking to revive trade talks, are scheduled to meet for lunch Saturday at the Group of 20 meeting in Osaka, Japan.

Last year, the Trump administration spared product categories including Apple’s smartwatch and AirPods wireless earbuds from an initial round of duties. But the administration’s proposal to impose additional tariffs of 25% covering $300 billion in imports from China would affect all of Apple’s major devices, including the Mac, iPhone and iPad.

While it shifts Mac Pro production to China, Apple more broadly also is considering moving some of its assembly work out of China because of concerns about U.S. tariffs, The Wall Street Journal reported last week. One of the people familiar with Mac Pro plans said that same consideration also could extend to the Mac Pro, with Ireland as an alternate possible site.

The Mac Pro’s history reflects the hurdles to doing assembly in the U.S. The previous Mac Pro model—known as the “trash can” because of its stumpy, cylindrical appearance--was the first computer Apple had made in the U.S. in about a decade. Mr. Cook, who had architected Apple’s outsourcing to China, announced plans to build the product in the U.S. in late 2012, when Apple was facing major scrutiny over its reliance on manufacturers in China and those contractors’ treatment of workers.

Flex secured a designation as a Texas Enterprise Zone project at the time of the initiative, entitling it to $250,000 in annual tax breaks in support of $15 million in equipment purchases and 500 jobs with an average annual wage of $30,276, according to the state. The designation expires this month.

Almost immediately, Apple ran into challenges at the Flex plant in Austin, former Apple employees said.

More than 80% of the workers working across three assembly lines were contract employees paid minimum wage for eight-hour workdays, said Alan Hanrahan, a former Apple manufacturing supervisor, in an interview with the Journal two years ago. When their shift ended, many walked off the job, he said—even if the lines were still running. Production would stop, and people would just be standing there until the next person arrived and the shift could resume, he said.

As demand for the Mac Pro tapered, Flex began laying people off, several former Flex employees said. By last year, they were down to a skeleton crew working just a quarter of one of the assembly lines and refurbishing already-made Mac Pros, said Jeff Gruger, a former vice president of product at Flex.

“They learned it’s very difficult to manufacture in America,” Mr. Hanrahan said of Apple in the 2017 interview.

Apple this year overhauled the Mac Pro to give it more power and a radically different silver, rectangular design. The design could be one of the last developed under the leadership of design chief Jony Ive, who Apple announced Thursday will leave the company later this year.

Manufacturing labor costs in China, though rising, still remain much lower than in the U.S., said Paul Gagnon, a consumer-electronics analyst with IHS Markit.

Taiwan-based Quanta has made MacBooks and Apple’s smartwatch for years. In addition to four facilities in China, it has a small facility in Fremont, Calif., where it works on custom desktops, according to one of the people familiar with its plans.

Click on The Wall Street Journal for more.