Apple has chosen Mesa as the site of its newest manufacturing plant. The facility will create 700 quality jobs in its first year of operation and 1,300 construction jobs. Arizona State University W.P. Carey School of Business professor Arnie Maltz will discuss the impact of the new plant.
Richard Ruelas: Good evening, and welcome to "Arizona Horizon," I'm Richard Ruelas in for Ted Simons. Apple has picked Mesa as the site of its newest manufacturing plant. The facility will create 700 quality jobs in its first year of operation and 1,300 construction jobs. Arizona State University W.P. Carey School of Business professor Arnie Maltz is here to discuss the impact of the plant.
Arnie Maltz: My pleasure.
Richard Ruelas: What will this plant create?
Arnie Maltz: It's designed to grow more than anything else crystals, sapphire crystal that Apple will use for the covering of their button, the new fingerprint buttons, and for the covering for the camera on the iPhone 5.
Richard Ruelas: So growing, I'm imagining sort of a clean room.
Arnie Maltz: Oh yeah, all of those things. Which is one of the reasons this is a terrific fit, because of course the original use for that plant was going to be something similar.
Richard Ruelas: So what form, I mean, sapphire crystals that actually evolve and morph and become something solid?
Arnie Maltz: My guess is- I don't know all about that- it's going to be basically slabs and they will cut them to proper shapes.
Richard Ruelas: And they will use them to make the fingerprint sensor, not the glass screen?
Arnie Maltz: Apparently not the glass screen, but the sensor and the camera cover.
Richard Ruelas: What kind of jobs are these? How important are these jobs? Are these sort of the high-tech, high education quality jobs?
Arnie Maltz: They would be fairly high tech, comparable to what Intel does in their plants, very similar. My guess would be like that.
Richard Ruelas: What kind of training would someone need to get a job here?
Arnie Maltz: They're going to need to be at least technically- how do I say it- comfortable. They will be working primarily with controlling and things like that. This is not hands on manufacturing, this is going to be one step away kinds of manufacturing that we're looking at here.
Richard Ruelas: Someone who's had- would you need a college degree, an engineering degree?
Arnie Maltz: I don't think you would necessarily need that, although that remains to be seen. You would need a good technical background, possibly at a community college, as I say, very comfortable around technology.
Richard Ruelas: Of course there's going to be supervisory roles and what not?
Arnie Maltz: Of course. All of rest of that comes in through there.
Richard Ruelas: Apple is buying what was a vacant building essentially, that was supposed to create solar panels.
Arnie Maltz: Uh-huh.
Richard Ruelas: And I guess talk us through what the handoff is. What is Apple doing with the building, and what does the company expect it to do in return.
Arnie Maltz: What Apple has done- and it's very common with the large high-tech guys- is to buy, because they have the money, a building. They spent I think $115 million. They are then going to lease that building to A.G. Advanced Technologies. A.G. Advanced Technologies historically- and they have been around since about 1994- has built equipment to do the sapphire manufacturing, and they have handed it off to somebody else to actually do the manufacturing. That is a brand-new situation for A.G., it's now going to become a manufacturer of these things.
Richard Ruelas: Before A.G. would create the equipment.
Arnie Maltz: Right.
Richard Ruelas: That would produce these crystals, grow these crystals.
Arnie Maltz: And then hand that off to contract manufacturing people, any variety of people. Now what they are going to do is run it themselves. They are going to run that plant, hire the people, they are going to supervise the people.
Richard Ruelas: Presumably with the equipment.
Arnie Maltz: Yes. They have their own equipment.
Richard Ruelas: So they have a building and they're going to stock it with equipment and they will bring in employees and figure out how to run this.
Arnie Maltz: Yes.
Richard Ruelas: Is there a big learning curve? Do you anticipate any problems with them transitioning into manufacturing?
Arnie Maltz: There may be. One of the nice things for A.G., Apple has handed them nearly $600 million to get them through the learning curve.
Richard Ruelas: It is a slight calculated gamble on Apple's part.
Arnie Maltz: Well I presume. I haven't talked to Apple directly, and sometimes they don't tell you anyway. But they are very interested in the technology. My guess is they are very interested in staying with this technology. They have not made buy guarantees with A.G., but they have told A.G., in return for this we expect you to have a certain amount of capacity at all times.
Richard Ruelas: So there's a chance if things don't go well Apple might not take what they are selling.
Arnie Maltz: It might now. But again, it's like Apple has prepaid. They are going to take this out in trade is what it amounts to.
Richard Ruelas: There is a lot of secrecy around this deal with governments having to sign confidentiality agreements. A, is that is normal, B, a good way of doing business to have governments be secret about business dealings?
Arnie Maltz: It's certainly normal, Apple doesn't operate any other way. Maybe that's a little unfair, I haven't checked all of their deals within the last 20 years. But Apple has a reputation for being careful.
Richard Ruelas: Normal for Apple or normal for high-tech companies?
Arnie Maltz: I guess I'm not sure about that. Intel may be a little more transparent. I don't think anybody wants their elbow joggled while they are trying to negotiate incentives. They are sensitive to everybody.
Richard Ruelas: I guess Apple is still- I guess you can discuss whether it merits this reputation, when Apple comes to town, people seem to change their ordinary course of business.
Arnie Maltz: Of course.
Richard Ruelas: Is that warranted? How big of a deal is it that Mesa gets an Apple related facility?
Arnie Maltz: It's a big deal because Apple is likely to attract other things just by reputation. This is an advanced technology company. These guys are operating state of the art stuff.
Richard Ruelas: If they like it here, if this factory works well, do we think they are still on the hunt to try to move more of their operations into the United States?
Arnie Maltz: That's hard to tell. They have already moved very high-end manufacturing- not manufacturing, but very high-end product into the Silicon Valley, because they are making the computer they are now selling for $3,000 they are making some of that in the U.S. It's hard to tell. My guess is, and I've said this before to other people, what's coming out of this plant may not go to U.S. manufacturing. It may go to Mexico where Apple has a major lead manufacturer down there, over near El Paso. Or it may go back to Asia.
Richard Ruelas: I guess if more goes to Mexico for the actual manufacturing of it, the fact that we're here, and if they have established a base, that might be good news down the road.
Arnie Maltz: Very much good news, no question about it.
Richard Ruelas: I appreciate you joining us and trying to make some sense of what this deal means for the state. Thanks for coming down.
Arnie Maltz: Thank you very much, appreciate it.
Arnie Maltz:Professor, Arizona State University W.P. Carey School of Business;