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Apple To Manufacture Data Server Cabinets in Mesa, Arizona Facility
Posted January 10, 2017
Apple To Manufacture Data Server Cabinets in Mesa, Arizona Facility
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By Jef Cozza. Updated January 10, 2017 9:47AM

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Tech giant Apple took a big step toward expanding its production facility in Mesa, Arizona last month when it requested permission from the U.S. Foreign-Trade Zone (FTZ) Board to expand the types of devices it can build and components it can import to the facility, according to a report on the Federal Registry.

The company is looking to repurpose the site to build data server cabinets for use in enterprise data centers, according to the Mesa city government. Since Apple does not currently sell such cabinets, the company may plan to use the machines in its own data centers or may be looking to expand its offerings.

Expanded Authority

The Mesa production facility that Apple is looking to expand originally belonged to GT Advanced, a defunct manufacturer that used to supply Sapphire glass for Apple devices. When the company declared bankruptcy, Apple took ownership of the plant.

If the FTZ Board approves Apple's request for permission to import components and build new devices at the site, the company's production costs could fall significantly. Production under FTZ procedures could exempt Apple from customs duty payments on the foreign materials/components used in export production.

"On its domestic sales, Apple would be able to choose the duty rate during customs entry procedures that applies to finished server assembly cabinets (duty-free) for the foreign-status materials/components noted below and in the existing scope of authority," the filing stated. "Customs duties also could possibly be deferred or reduced on foreign-status production equipment."

Like many modern manufacturers, Apple's products include a wide variety of components, many of which are sourced from countries around the world. Everything from fiber optic cables to lithium batteries to LEDs are sourced from manufacturers located overseas. The company's iPhone models and other devices are assembled in countries like China, where labor costs are significantly cheaper.

Political Pressure

If Apple goes through with the plan, the move would be a rare case of a U.S. tech company moving production and manufacturing operations stateside, although Apple does already build some servers in Oregon and elsewhere in Arizona. The expanded FTZ authorization would effectively consolidate that production into the Mesa facility, which the company said will provide the local job market with some 150 high-paid positions.

Several manufacturers have come under scrutiny recently for decisions to expand their operations in other countries while closing factories in the U.S. In particular, President-elect Donald Trump has called out companies such as Toyota, Carrier, and Ford over Twitter after they announced plans to open plants in Mexico.

Trump specifically mentioned Apple and its products by name during the presidential campaign, saying that if he were elected, the company would be encouraged to assemble the iPhone in the U.S. Trump reportedly called Apple CEO Tim Cook after the election to discuss the company moving more of its manufacturing operations to the States.

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