This post was going to be part of my new book, Tim Cook: The Genius Who Took Apple to the Next Level, but was cut for length or continuity. Over the next week or so, we will be publishing several more sections that were cut, focusing mostly on Apple’s manufacturing operations.
This is Part 2 of a two-part section on Apple’s misadventures in manufacturing. Part I is here.
Steve Jobs carried his dream of end-to-end control over manufacturing to NeXT, the company that Jobs founded after being booted out of Apple in 1985. It was here that he learned a tough lesson about manufacturing: that sometimes it’s more trouble than it is worth. Or, perhaps more kindly, that great manufacturing capabilities mean nothing if you don’t have a product people want to buy.
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As Randall E. Stross wrote in Steve Jobs and the NeXT Big Thing, manufacturing the NeXT computers in-house was the “single most expensive, and easily the most unwise, commitment that Jobs made and would not budge from.”
During the several year period in which NeXT owned and ran its own factory, it proved to be an enormous drain on both attention and cash.
Steve Jobs’ automated Fremont factory at NeXT
The decision to produce NeXT computers in-house was not something Jobs originally aimed for. At the very beginning of NeXT’s lifespan, during the planning phase, he pragmatically suggested that the company would subcontract out the majority of its manufacturing, and then carry out the final assembly and testing itself in its own Palo Alto office. (This would have been possible because of the relatively small number of computers NeXT was planning to manufacture, as compared to, for example, the iPhone today.)
By 1986, however, Jobs’ perfectionism had taken over. He now wanted NeXT to not only manufacture its own computers, but to do so with the most advanced automation available at the time.
In addition, Jobs wanted this manufacturing to be carried out in the United States, making the machines an all-American production designed and built on American soil.
“The neatest thing that I love about NeXT is that it’s not made in Osaka,” he said.
This differentiated what NeXT was doing from the computers made by rivals like HP and IBM, who were already outsourcing a lot of their manufacturing to places like Taiwan, South Korea and Japan (but not yet mainland China.)
Like buying a sports car
Years later, when he was back at Apple, Jobs stopped talking about the manufacturing of Apple products. The slogan “Designed by Apple in California” makes no mention of where the products are built because, well, no-one likes to think about sweatshop factories in China pumping out iPhone after iPhone, with production lines manned by low-paid workers.
The only time people got to look inside the plants building Apple devices was when Apple would allow a few controlled photographs to be released to counter this negative narrative. When it came to NeXT, however, Jobs dreamed that the factory would one day be part of the customer experience.
If everything went according to plan, he imagined particularly dedicated customers being able to fly to the NeXT factory to pick out their own model, hot off the assembly line. “If you’re going to buy a great sports car, what’s the best way to do it?” Jobs reportedly told employees. “You fly to Europe, go to the factory, and buy it there.”
No expenses spared
Jobs settled on a 40,000 foot manufacturing space in Fremont, California, as a destination for NeXT’s factory, across the bay from San Francisco, where Tesla has a factory today.
It was close to the automated factory Jobs had built a few years earlier to build Macintoshes.
At the time, Jobs and Susan Barnes, NeXT’s Chief Financial Officer, reportedly joked with one another that they would crack the problem of building NeXT’s factory because they had already learned all the mistakes from Apple’s automated factory.
As was typical with NeXT, its automated factory spared no expense. It helped pioneer the “pick and place” technology which is, today, used in factories all around the world. The robots used for this would create the printed circuit boards for all of the NeXT computers.
As he had with the Macintosh factory, Jobs insisted that all the robots and assembly line machines had to be repainted to give them a uniform appearance. The factory was gray, white, and black.
Part of this likely related to his plan to open the factory to the public, but it likely also related to the same perfectionist tendencies which meant that the inside of his computers look as beautiful as the outside.
More than just the colors, Jobs also insisted on the exact shade of each color.
“During the start-up [phase], one supplier’s machine arrived at the facility in glossy stippled texture, rather than flat gray, as specified. ‘Take it back and repaint it,’ was the order.
This was the supplier’s first encounter with concern for color integrity. His initial response, ‘You can’t tell me that the company president cares what shades of gray his machines are!’ soon faded. The machine was returned to the factory, sanded down, and repainted.”
A similar story was recounted by Newsweek:
“Jobs demanded that all the robots in the NeXT manufacturing plant be painted in coordinated shades of gray and black. Two of his top manufacturing engineers worked through a weekend to paint the assembly line, repeating the process four times until they got the finish just right.”
But Jobs went even further than this — by ordering that they be reengineered so the circuit board assembly moved the boards from right to left, rather than the conventional left to right.
This was because, believing in his dream of opening the NeXT factory to the public, Jobs thought it would be more aesthetically pleasing for customers standing on a nearby balcony, watching the production process unfold.
When this didn’t wind up happening, it became another enormous NeXT expenditure that yielded no positive result.
No coat racks
In addition to retooling and repainting the manufacturing robots, Jobs’ other efforts to make the NeXT factory a possible destination for visitors included installing a custom staircase, white art gallery-style walls, and $20,000 each black leather chairs for the lobby. (It didn’t include a coat rack for employees, however, since Jobs feared this would ruin the minimalist aesthetic.)
Jobs didn’t reveal an exact figure for the cost of getting the factory built, but it was reportedly “significantly less” than the $20 million startup cost of the Macintosh plant. Nonetheless, it was state of the art in every possible way, using robots equipped with the latest artificial intelligence technology to carry out things like image recognition of boards.
Jobs gets teary-eyed
NeXT showed off the technology in a short film, costing several hundred thousand dollars, titled “The Machine That Builds Machines.”
It depicted the manufacturing robots manipulating the boards, including dipping them into a bath of molten solder. It was set to soaring music; almost as scintillating a piece of tech propaganda as Apple’s iconic 1984 Super Bowl commercial for the original Macintosh. “The board emerges ready to power the most advanced, most sophisticated, most efficiently produced computer workstation of all time. NeXT.”
A Newsweek article from October 1988, the time that NeXT launched, described Jobs’ reaction to it during a rehearsal for the keynote: “Later, a video shows the automated assembly plant that Jobs has built to manufacture the NeXT machines. Wandering back to sit with a handful of employees, Jobs watches as robot hands install the state-of-the-art chips that will power the computer. For a second he looks almost teary. “It’s beautiful,’ he says softly.”
The ultimate computer factory
Fortune described the automated NeXT factory as, “the ultimate computer factory.”
Casting NeXT’s factory as a science fiction plant from the future, the article’s headline boasted that,” “Steve Jobs has built a NeXT workstation plant with just about everything: lasers, robots, speed, and remarkably few defects.”
“Welcome to the Next world. Here a robot that looks like a futuristic sewing machine places tiny capacitors and integrated circuits, rapid-fire, on a printed computer circuit board. A laser zeros in on each electrical connection. Two robot arms move in tandem, one selecting parts from a bin and the other deftly inserting them into the board. After 20 minutes the board reaches the end of the assembly line, where — finally — a real person steps in to check it. Robots outnumber people 13 to five on this line, which turns out the brains for aging whiz kid Steve Jobs’s new workstation.”
The article finished with a quote from Steve Jobs: “I’m as proud of the factory as I am of the computer.”
Given that the NeXT computer was, at the time, the purest distillation of Steve Jobs’ belief in what a computer should be — with no meddlesome Apple board to cause compromise — that’s not a comment that he made lightly.
Jobs’s good reasons
NeXT didn’t release any output figures for the factory. However, AME estimated that it would be possible for the production line to churn out 207,364 completed boards per year, with space allocated for a second line which could double production.
NeXT never got close to selling that number of computers.
To be fair to Jobs, his insistence on building an automated factory wasn’t just about image. It was also about two of his other bugbears.
The first of these was secrecy. Controlling NeXT’s means of production meant that Jobs could guard against leaks. This wouldn’t be an absolute safeguard, but it would make it easier than outsourcing to another manufacturer.
The second was quality control. The theory (not necessarily correct, as discussed later) was that increased automation would reduce errors. According to Kevin Canty, materials manager: “Anytime you handle a board, you run the risk of introducing a defect. The advantage of automation is that it takes the mundane labor out of building a board. With a program such as robotics or automation, you get repeatability for free.”
Stuffed with PhDs
Because so much of the work was automated, the NeXT factory was a long way from the typical factory Silicon Valley manufacturers used (which Apple returned to years later, by handing out contracts to Foxconn, TSMC, and the like.)
Instead of blue collar workers, the factory was staffed by a smaller number of engineers with advanced degrees. The company said at one point that 70 percent of its factory workers had PhDs.
At other factories, NeXT suggested, barely 70 percent of factory workers had passed their high school diplomas. Recruiting these high-end PhD factory workers was one way Jobs rationalized the expenditure. You had to be willing to push “the edge of the envelope,” he said.
“Untouched by human hands”
With his factory, Jobs cast himself as a sort of real-life Willy Wonka figure. In the 1964 Roald Dahl book, Charlie and the Chocolate Factory, Wonka insists that his chocolate must stay “untouched by human hands” until it arrives with the customer. Jobs frequently used that same choice of words.
“The board’s got the most aggressive use of surface-mount technology,” he said at the NeXT intro. “And it’s built completely untouched by human hands.” (Years later at Apple, Jobs wanted to celebrate the one millionth iMac purchase by dressing up as Willy Wonka in purple suit and top hat, and showing the millionth iMac-buying customer around the Apple campus.)
Randy Heffner, the vice president of manufacturer Steve Jobs recruited from Hewlett-Packard to work at NeXT, the company’s automated factory and overall manufacturing strategy, “is a conscious effort to make manufacturing competitive, by effective management of assets of inventory, capitol, and people.”
Heffner said that he joined NeXT because, when it came to manufacturing, “They got it. They got why manufacturing is important.”
He continued: “What happens here is that I want to do world-class manufacturing. I want to build high-quality computer workstations at a lower cost than the freight plus a four percent import duty paid by the Japanese or Koreans or Taiwanese. If I can do that, if my total expenses — labor, rent, salary, overhead, depreciation, scrap, are less than that number — we’ll beat [competitors] in the marketplace.”
Heffner listed the advances of NeXT’s automated factory being its high quality, with a reject rate of fewer to 4-6 parts per million; short cycle times of less than one hour, and law labor requirements. At least in theory, the hope was that these would allow NeXT to produce great computers at great speed and great flexibility.
Speed and flexibility would, it hoped, usher in a new speed in just-in-time manufacturing: “In less time than it takes to drive to Fremont, the factory can tool up, train robots, optimize the design, compare it to the bill of material, and produce a whole new board.”
According to Kevin Canty, materials manager: “Time-to-market is everything. Nothing else matters. You have to have the right product, the right sense of the market, be light on your feet, and be working with customers to anticipate and exceed their expectations, and turn products on a dime.”
With manufacturing time cut down, Canty said his next goal was to do the same to processing time. He wanted to shorten the sales order cycle time from ten to four days, from when a customer sent in his or her order to the time a shipment was received. (You could compare this dream of the 1990s to the reality of Apple today, which is typically excellent at marrying supply and demand and getting products to customers quickly. The other tech company currently on track to become the first $1 trillion business in history, Amazon, has also revolutionized the distribution chain.)
What went wrong?
There were several misjudgements Jobs made by insisting on the automated factory. For all the good press that it received, both for being ahead of its time and also taking place on American soil, there were downsides.
The big one was simply the economics of having an automated factory. It meant that the company needed to produce a certain number of product for it to be financially viable. Drop below this, and it became another drain on resources.
NeXT never got close to this point. By the end of 1988, it was producing just 400 NeXT computers per month to fill demand. Head of manufacturing Randy Heffner pointed out that the factory was capable of producing 10,000 units per month, but Jobs and co didn’t want to up the manufacturing numbers for fear of being left with piles of unsold stock. A few years after that, this number fell to a run rate of fewer than 100 units per month.
Put simply, there was never any necessity for NeXT to have an automated factory. Jobs might have been right that the future of just-in-time manufacturing would involve a heavy dose of automation, but it made no financial sense whatsoever to have a plant staffed with the latest robots for such a low volume business. The problem with NeXT came down to one thing: no-one (relatively speaking) was buying the computers.
Everything on the cheap
Ultimately, the factory kept going until February 1993, when Jobs made the decision to shutter it and abandon his insistence on end-to-end control of NeXT’s manufacturing.
It coincided with NeXT getting out of the hardware game altogether; stopping producing computers and turning NeXT into a company which only produced software. Many of the contents of the Fremont factory were sold off. As Alan Deutschman writes in The Second Coming of Steve Jobs:
“A bunch of salvagers and used-furniture dealers went to the NeXT factory for an auction of what was still left. They bid on hundreds of lots that were laid out on the barren cement floor. They bought everything on the cheap — the chairs, the trash cans, the paper shredders, all the surplus NeXT computers and laser printers and oversized monitors. It was weirdly reminiscent of the famous scene from Citizen Kane when the many possessions of the vanquished mogul are carted up and then either shipped away or burned in a great fire. Steve’s dream was being liquidated. He was at the nadir.”
The end of the automated NeXT factory in Fremont seems to have effectively ended Jobs’ insistence on running his own manufacturing facilities. While Apple continued for this a bit after he returned to the company later in the 1990s, he was far more willing to ditch this costly exercise. Provided he could find the right partner, that is.
Luke Dormehl and Killian Bell contributed to this post.