Apple’s focus on U.S. manufacturing isn’t exactly new

Summary

Marketplace Morning Report: Apple’s Focus on U.S. Manufacturing Isn’t Exactly New Hosted by David Brancaccio | Released: February 25, 2025

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Apple's Continued Investment in U.S. Manufacturing

In the latest episode of the Marketplace Morning Report, host David Brancaccio delves into Apple's substantial commitment to U.S. manufacturing. Highlighting a recent announcement, Brancaccio notes that Apple is planning a half-trillion-dollar investment in its U.S. operations over the next four years. This extensive investment encompasses building a new factory in Texas aimed at producing backend computers for artificial intelligence, expanding the workforce by 20,000 researchers, and enhancing content creation for Apple TV.

Historical Context and Strategic Timing

Brancaccio points out that Apple's strategy of ramping up U.S. investments typically aligns with the onset of new presidential administrations. For instance, in 2021, Apple unveiled a significant investment package at the beginning of the Biden administration. The current announcement mirrors this pattern, suggesting a strategic move that coincides with political shifts.

Mitchell Hartman from Marketplace provides further analysis, explaining that Apple's timing is influenced by the looming threat of new import tariffs from the Trump administration. These tariffs could potentially disrupt Apple's global supply chain and impact its lucrative iPhone sales. Hartman cites an analysis from the Wall Street Journal, which indicates that Apple's investment aligns with its historical spending trends.

Expert Insights on Apple's Strategy

Christine McDaniel from George Mason University's Mercatus Center offers insights into Apple's import reliance, estimating that the company imports between $60 billion and $100 billion worth of goods annually. Despite Apple's increased domestic production, especially in cutting-edge software and AI, Angelo Zino of CFRA Research anticipates that the majority of Apple's production will continue in China and, increasingly, in India due to their lower production costs.

Tech Giants' Shifts: Microsoft and Alibaba in the AI Race

The episode transitions to broader industry movements, highlighting that Microsoft may have overextended its investments in AI data centers, potentially retracting from some leases as the market evolves. Simultaneously, Alibaba, the Chinese e-commerce titan, is pivoting towards becoming an AI-centric company, with Bloomberg News reporting that Alibaba's AI investments could exceed $50 billion. This strategic shift signifies a major reorientation towards artificial intelligence within one of the world's largest tech conglomerates.

Elon Musk’s Federal Workforce Ultimatum Sparks Confusion

Another significant topic covered is Elon Musk’s controversial ultimatum to federal workers. Musk reportedly demanded that federal employees respond to an email detailing their activities over the past week by a specific deadline, implying that failure to comply would result in automatic resignations.

Christine McDaniel elaborates on this development, explaining that Musk announced on X (formerly Twitter) that non-compliance would be considered a resignation. However, confusion ensues as the Office of Personnel Management (OPM), the government's HR department, countermanded Musk’s directive. OPM advised federal agencies that employees were not required to respond to the email and would not face job loss for non-compliance. Reuters reports that OPM also instructed agencies to ensure that any responses from workers would exclude sensitive or classified information.

Nancy Marshall Genzer from Marketplace further details that federal agencies are responding inconsistently: while some, like OPM and the General Services Administration, are encouraging responses, others—including the Defense Department, Justice, State, and Homeland Security—are advising employees against replying. This mixed messaging has created a state of uncertainty among federal employees regarding their job security and compliance obligations.

Snowmobile Industry Faces Challenges Amid Climate Change

Shifting gears, the report covers the downturn in the snowmobile industry, particularly focusing on Arctic Cat, a well-known snowmobile manufacturer owned by Textron. David Brancaccio introduces the story, with reporter Tyler Scott from Michigan Public exploring the impact of Arctic Cat's decision to cease production. This move is expected to result in significant layoffs concentrated in Minnesota and the upper Midwest.

Angelo Zino from CFRA Research provides context, explaining that the snowmobile market is highly sensitive to weather conditions. Lenny Sims, Vice President of Specialty Vehicles at J.D. Power and Associates, notes that while sales surged during the COVID-19 pandemic as people sought outdoor activities, subsequent low-snow winters, coupled with inflation, high interest rates, and other consumer expenses, have dampened demand.

Equity analyst Jamie Katz from Morningstar underscores the severity of the industry's challenges, stating, “You have this amalgamation of headwinds that has been really unsurmountable for a lot of these guys” [06:35]. The decline is further evidenced by Yamaha folding its snowmobile division, leaving Ski-Doo and Polaris as the remaining major players in the market. Despite these setbacks, there remains a possibility for another company to acquire Arctic Cat and attempt a revival, given the passionate snowmobile community's dedication to the sport despite the adversities posed by climate change.

Joann’s Fabrics Continues to Close Stores Amid Bankruptcy

In the final segment of the episode, Brancaccio briefly touches on the ongoing bankruptcy proceedings of Joann’s Fabrics. The company has announced the closure of numerous stores, affecting 19,000 employees as per the latest updates. This development underscores the broader challenges faced by brick-and-mortar retail businesses in adapting to changing market dynamics and consumer behaviors.

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For those looking to stay informed on the complexities of the economy and business trends, the Marketplace Morning Report continues to offer insightful analysis and comprehensive coverage of the most pressing stories shaping our world.

Transcript

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[David Brancaccio]

Apple's focus on US manufacturing isn't exactly new I'm David Brian Caccio. Apple has a pattern of announcing big investments in US Jobs at the start of new presidential administrations. Back in 2021, at the dawn of the Biden administration, there was a big package. Now it's a half trillion dollar investment announcement from Apple for its US Operations over the next four years. That includes everything from building a new factory in Texas to make backend computers to process data for artificial intelligence to 20,000 more researchers to making shows and movies for Apple TV. Now an analysis in the Wall Street Journal finds the money is in line with previous trend lines for Apple. As for the timing of this announcement, here's Marketplace's Mitchell Hartman.

[Mitchell Hartman]

Apple's announcement comes amidst the looming threat of new import tariffs from the Trump administration that could hit Apple's global supply chain and its biggest cash cow, iPhones. It also comes days after President Trump met with Apple CEO Tim Cook, who Dan Ives at Wedbush securities calls 10% politician, 90% CEO.

[Unknown Speaker]

Definitely a good poker move to make.

[Mitchell Hartman]

Sure if there's loopholes, exclusions to tariffs, they'd get them. Apple's got a lot to lose from new tariffs, says Christine McDaniel at George Mason University's Mercatus Center.

[Christine McDaniel]

They're probably importing between 60 and 100 billion each year.

[Mitchell Hartman]

Apple now says it'll produce more domestically, especially cutting edge software and AI. But as for Apple's overall production spending, says Angelo Zino at CFRA Research, we.

[Angelo Zino]

Do expect an overwhelming majority to continue.

[Mitchell Hartman]

To go into China and increasingly its low cost neighbor India. I'm Mitchell Hartman for Marketplace.

[David Brancaccio]

Meanwhile, an investment company analysis suggests Microsoft may have gotten a bit too over its skis when booking data centers for AI and could be pulling back from some of those leases. Meanwhile, the China based E commerce giant Alibaba is pivoting to become an AI company. Bloomberg News says that the Alibaba AI investment could be more than $50 billion. There's still confusion at federal agencies over an ultimatum from government cuts unofficial czar Elon Musk. He he had given federal workers until yesterday to respond to an email asking what they did the previous week or resign. But key parts of the administration are also telling workers not to respond, Marketplace's Nancy Marshall Genzer reports.

[Christine McDaniel]

In a post on X, Elon Musk said federal workers had to reply to the email by just before midnight Eastern time yesterday, and if they didn't, that would be tantamount to a resignation. Now there are reports the Office of Personnel Management, basically the government's HR department, told federal agencies their work workers didn't have to reply to the email and wouldn't lose their jobs if they didn't. Reuters is reporting that OPM also told agencies that if their workers did respond, they shouldn't include any sensitive or classified information. Federal agencies have taken different approaches. Some, like OPM and the General Services Administration, which manages federal buildings, still encourage workers to respond. Others, like the Defense Department, Justice, State and Homeland Security departments, told workers not to reply. Federal employees at the Consumer Financial Protection Bureau got the email even though they'd been told to stop working. I'm Nancy Marshall Genser for Marketplace.

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[David Brancaccio]

Some people call them snow machines. I'm from Maine and where I grew up, we call them snowmobiles. Or maybe just the big brand Attic Cat, Arctic Cat owned by Textron. The conglomerate says it'll stop building new snowmobiles this year, which will mean layoffs concentrated in Minnesota and the upper Midwest. Michigan Public's Tyler Scott has more.

[Angelo Zino]

On the shores of Starvation Lake in northern Michigan, the Hideaway bar is popular with snowmobilers. Curtis Goings and his buddies are here. They came all the way from Indiana. They're thawing out after a day enjoying the trails.

[Unknown Speaker]

We got a group of about 10 of us. We're always out there drag racing. We're always out there having a good time.

[Angelo Zino]

The speed, the fresh air, being outdoors, it's all a lot of fun. But Goings can only get out on his snowmobile when there's snow.

[Unknown Speaker]

This whole week we've been up here, it's been beautiful weather, but the time before that we couldn't come up because they didn't have snow.

[Angelo Zino]

This is the first time in two years he's been back to Starvation lake. Warm winters have kept the snow from piling up. With more snow this year, Goings won't miss any opportunity.

[Unknown Speaker]

Oh, no, we're doing more riding tonight.

[Angelo Zino]

After a bite to eat, they hop on their sleds to hit the trail. Goings and his group are enjoying this year, but the trend toward milder winters isn't great for the snowmobile business in general, it's the gravy train when snow hits. Lenny Sims is the vice president of specialty vehicles at J.D. power and Associates. And if it's a good winter, the snowmobile market does pretty well. When it doesn't, it's it's a struggle. He says sales of snowmobiles boomed during the pandemic when people were thirsty to get outdoors. Since then, low snow years plus inflation, high interest rates and other consumer expenses are softening demand for snowmobiles.

[Jamie Katz]

You're facing all of these other increasing factors and the pie is only so big for discretionary income.

[Angelo Zino]

Jamie Katz is an equity analyst at Morningstar. Textron, the parent company of the well known snowmobile company Articat cited that softening demand when it announced it's indefinitely pausing snowmobile production sometime this year. Yamaha is also folding its snowmobile division. Other manufacturers have a bigger share of the market, including Ski Doo and Polaris. But Kat says it's telling that two of the big four snowmobile companies are getting out.

[Jamie Katz]

You have this like amalgamation of headwinds that has been really unsurmountable for a lot of these guys.

[Angelo Zino]

There's still a chance another company could swoop in to buy Articat and try to revive it. After all, snowmobile riders are a passionate bunch who go to great lengths to find snow, even if climate change makes it more difficult in northern Michigan. I'm Tyler Scott for Marketplace.

[David Brancaccio]

Last week we reported Joann's Fabrics, back in bankruptcy, will close many of its stores now. Word is all stores. There were 19,000 employees there at last check. Got a lot of good people here. Nick Perez, Arianna Rosas, Alex Schroeder and Erica Soderstrom. Our senior producer is Meredith Garretson. Morby. I'm David Brancaccio. This is the Marketplace Morning Report from APM American Public Media.