Tag: Chips Act

OM in the News: Apple’s Global Strategy– Why the MacBook Neo Rules Out a “Made in USA” Label

In operations management, achieving a competitive advantage relies heavily on a well-executed Operations Strategy. a topic we stress in Chapter 2. When Apple introduced its new $599 MacBook Neo to challenge Google’s dominance in the low-priced laptop market, many asked a familiar question: Why not assemble it in the U.S.?

While the U.S. has recently expanded high-tech chip production through the CHIPS Act, high-volume electronic assembly requires a completely different operational footprint. Apple’s decision to stick with manufacturing hubs in China and Vietnam highlights how leveraging global operational strengths secures a low-cost and response-driven competitive advantage, reports Forbes (may 10, 2026).

1. Cost Leadership Through Labor  To compete effectively with the Chromebook, Apple must maintain strict cost leadership. Labor costs remain a significant differentiator in product assembly:

U.S.: $39.32/ hour , China: $6/hour , Vietnam: $2/hour

Placing assembly lines in the U.S. would completely erase the slim margins required to sustain a $599 consumer laptop.

2. Rapid Response and Engineering Flexibility Competitive advantage isn’t just about cost; it’s also about speed and flexibility. Overseas manufacturers like Foxconn and Quanta employ thousands of specialized production engineers. These engineers can rapidly redesign and reconfigure high-volume assembly lines on short notice to accommodate sudden production spikes—such as Apple’s recent plan to double Neo production from 5 million to 10 million units. Finding this scale of specialized technical talent quickly in the U.S. remains an steep uphill battle.

3. The Power of a Localized Supply Chain This is perhaps the ultimate barrier to entry for domestic assembly. In Asia, component suppliers, repair services, and maintenance facilities are clustered tightly around major assembly plants. When Apple previously tried to build the high-end Mac Pro in Texas, production stalled simply because they struggled to source custom screws from local machine shops. In contrast, overseas supply chains can manufacture vast quantities of custom components virtually on demand.

Classroom Discussion Questions:

  1. How does the concept of “comparative advantage” affect a company’s decisions regarding geographic supply chain design?

  2. Can automation and AI ever fully offset the labor rate differentials between Western and Asian manufacturing hubs?

OM in the News: The Battle for Chip Manufacturers

A Taiwan-based company plans to build a $5 billion factory in Texas to make silicon wafers used in semiconductors, but the deal hinges on financial incentives bogged down in Congress.

GlobalWafers said its planned factory in would be the first U.S. silicon wafer-facility in more than two decades and create as many as 1,500 jobs, as well as helping fuel the expansion of the U.S. chip-making industry. But the firm said the plant will require financial incentives included in the Chips Act, which is aimed at increasing chip production in the U.S. “If the Chips Act is not passed, we have to pivot to South Korea, as costs there would be substantially less,” said the CEO. (The Chips Act would provide $52 billion to build up the U.S. semiconductor industry).

South Korea, Japan and members of the E.U. are all offering hefty subsidies to ensure stable supplies of chips that power consumer, industrial and military products amid a global shortage, reports The Wall Street Journal (June 27, 2022). 

The GlobalWafers plant in Texas would contribute to a U.S. effort to boost domestic production of advanced semiconductors and reduce reliance on imports by supplying materials to companies such as Intel and Taiwan Semiconductor (TMSC). These leading semiconductor manufacturers have pledged significant investments in new U.S. factories to make chips to meet strong demand, and to relieve shortages that have disrupted production of a range of products, including automobiles.

Silicon wafers made by TSMC, which is among the leading semiconductor manufacturers that have pledged significant investments in new U.S. factories

The existing U.S. manufacturing capacity of silicon wafers will be able to supply only 20% of the estimated domestic demand by 2025, and the wafers won’t be suitable for some of the advanced chips planned to be manufactured at the new production facilities currently being built by Intel, TSMC and Samsung. Most advanced semiconductors, as well as silicon wafers, are manufactured in Northeast Asia. In 2021, 92% of the world supply of advanced semiconductors came from one company, TSMC.

The U.S. share of the global semiconductor market has fallen to 10%-12% from 40% previously. “In search of cheap labor, we’ve watched a lot of our manufacturing leave our shores,” said the U.S. Commerce Secretary. “As a result, the lack of chip production in the United States is hurting our economy and also our national security.”

Classroom discussion questions:

  1. Why is this an important OM issue?
  2. What might happen if the Chips Act fails to pass Congress?