How Big Is the Apple iEconomy?
Mar 5th 2012 11:06PM
Updated Mar 5th 2012 11:08PM
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Apple (NAS: AAPL) has been getting an awful lot of bad press lately over sending jobs overseas that will never come back. While the situation itself is nothing new, the most recent round of media blitzing began when The New York Times ran an article in January on why iPhones are manufactured in China instead of the good ol' US of A.
The report sparked a series of others on Apple's supply-chain and working-condition controversies, which are well beyond the scope of this article, so I'll just stick with the jobs aspect.
Dinner's on me
The report began by recalling when President Obama hosted a dinner whose guest list was a veritable Who's Who of Silicon Valley last year, including Steve Jobs, Facebook's Mark Zuckerberg, Oracle CEO Larry Ellison, Yahoo! ex-CEO Carol Bartz, Google (NAS: GOOG) Chairman Eric Schmidt, and Netflix CEO Reed Hastings, among many others.
The combined value of the companies being represented was nearly $1 trillion based on valuations at the time; this figure would be much higher today, especially since Apple alone is now halfway there. I wonder who picked up the tab.
Obama wanted to know: Why can't those manufacturing jobs come home? Jobs simply replied, "Those jobs aren't coming back." That gloomy realization was attributed to a plethora of factors (I encourage you to read the full report), including the fact that China has more supply of the types of industrial engineers needed for the task. Specifically, companies in Apple's shoes need a skill set beyond high school but potentially short of a bachelor's degree.
For example, the report showed that Apple estimated that it needed an army of roughly 8,700 industrial engineers to oversee manufacturing of the original iPhone. iAnalysts predicted that it could take upwards of nine months to recruit the necessary talent. How long did it take to wrangle up that many qualified engineers in China? About two weeks.
In response to all the hoopla about all those jobs, Apple has now released some figures from a study done by the Analysis Group on how many U.S. jobs are tied to the iEconomy. The total tally? More than half a million.
Keep in mind that some of those positions are a bit of a stretch, and "supported by Apple" can mean just about anything, including the "delivery person who brings [an iPad] to your door." That said, let's break down some of these digits.
According to Apple's most recent Form 10-K, it had roughly 60,400 full-time employees globally as of September. Of that total, 47,000 are located within the United States. Apple boasts full-time positions in all 50 states, largely thanks to its retail footprint, with 246 stores in 44 states.
The report claims that 257,000 jobs at other companies are supported by Apple, including the "Corning (NYS: GLW) employees in Kentucky and New York who create the majority of the glass for iPhone," whose Gorilla Glass has taken off thanks to Cupertino. Apple is also including jobs in fields like component suppliers, professional services, sales, transportation, and health care. That brings the domestic total up to about 304,000 jobs directly or indirectly tied to Apple.
There's an app for that
Apple has created a massive content ecosystem within its App Store and chalks up 210,000 domestic jobs to its iOS app economy. The company notes that it has 248,000 registered iOS developers within the United States and has paid out a cumulative total of $4 billion to developers for App Store sales.
That's not too surprising, since Apple just announced that the App Store reached its 25 billionth download for the first time, complete with a $10,000 gift card to a lucky Chinese local who downloaded the free app that crossed that threshold.
Bringing it home
The Mac maker also points out that it doesn't outsource customer-service call-center positions, with the "vast majority" of calls handled domestically. Apple points out that it could save at least 50% of those costs by moving call centers to places like India but keeps them stateside to deliver better service and support.
Apple had planned on building a call center in India to supplement domestic ones back in 2006, but it hung up on that idea just three months later.
It now has 7,700 AppleCare Advisors in the United States, with 21 call centers in 15 states.
In the clear?
Touting more than a half million jobs sounds fine and dandy, but this is clearly a PR defense with a bit of stretching involved. Does Apple help create or support a massive number of jobs? Absolutely. Did it commission this study so it's slightly tilted in its favor? Probably.
Many large companies could argue over how many jobs tie back to them, and I'd wager Google's tally would run even higher when you consider fields like search engine optimization consultants and content farms like Demand Media (NYS: DMD) . That company got hammered last year, after Big G mildly tweaked its search algorithms and bumped Demand Media's eHow.com down a few notches. Even freshly public Yelp (NYS: YELP) thanks the search giant for more than half of its Web traffic.
With as much as I write on Apple, you could also contend that Cupertino indirectly supports me, too. Let's bring that figure up to 514,001.
Apple surely creates plenty of jobs throughout its supply chain and Web of component suppliers. Despite their oaths of secrecy, with enough digging you can uncover some winners. Get this new special free report on "3 Hidden Winners of the iPhone, iPad, and Android Revolution."
At the time this article was published Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Corning, Oracle, Google, Yahoo!, and Apple. Motley Fool newsletter services have recommended buying shares of Apple, Yahoo!, Google, Corning, and Netflix and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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