In major news for American manufacturing, electronics producer Apple has announced a $500 billion investment in United States production over the next four years. The half-trillion-dollar investment is expected to create some 20,000 jobs, especially in major AI server investments in the Houston, Texas, area. Other areas that will gain some jobs from Apple investments are Detroit, Michigan, via the Apple Manufacturing Academy, and Arizona, where Apple is a major purchaser of computer chips made by TSMC.
The new Apple Manufacturing Academy is a service geared toward assisting other businesses with using advanced technology in manufacturing and artificial intelligence. Individuals would access Apple classes on-site or online about using smart techniques to enhance their business’ operations, and the Manufacturing Academy will likely complement the Apple Developer Academy that opened in Detroit in 2021. As the Developer Academy is a partnership with Michigan State University, it is likely that the Manufacturing Academy will also be a university-linked partnership.
Apple May Fear Raising Prices Could Jeopardize Sales
By indicating that it plans to increase its domestic operations, and thereby avoid tariffs, Apple is likely fearful that consumers will not tolerate higher prices on its electronic devices. Because many electronics are durable goods, consumers can avoid replacing them often, making demand for them more elastic. Many Apple customers can use their devices more cautiously to keep them functioning longer, avoiding the need to purchase new Apple products during the period of high tariffs. Apple is also likely concerned about consumers being more accepting of substitute goods like Samsung and Google phones.
Apple’s huge investment is also likely influenced by increased domestic investments of its chief rivals, such as Microsoft. Other “Big Tech” firms are investing in new capital across the United States, especially to handle the massive energy requirements of AI servers. By spending big now, Apple may be trying to beat the competition to a critical mass of AI investment and land major contracts with companies that need their data processed and stored.
Investment May Be Done Now To Avoid Rising Construction Costs
Apple’s decision to spend big today also implies that it is near its production capacity within the United States; it needs new factory space because its current space is operating at close to 100 percent. Apple may be trying to build new facilities rapidly to avoid higher construction costs from general tariffs. While $500 billion may seem like a hefty price to pay for expansion today, rising costs of construction could mean Apple would have to pay $800 or $900 billion in a few years to get the same expansion.
Although some critics are questioning Apple’s moves, noting the hefty price and the fact that Apple previously made similar announcements about massive investments, major corporate investments can pay big dividends. In 2006, Ford Motor Company famously borrowed heavily on upgrades in a move criticized at the time and seen as unnecessary. A year later, the financial crisis that led to the Great Recession hit, and Ford ended up in better shape than its non-investing rivals, Chrysler and General Motors. By investing early, Ford was in better shape to ride out the recession. This investment from Apple is a long-term positive for American manufacturing and an exciting development for our country.
