While no company outshines Apple when it comes to design and marketing, some of its other endeavors need work.
Apple has a long and tiresome history of using alleged sweatshops to build its latest gizmos, and outsources heavily to Foxconn, where no fewer than 10 workers have committed suicide this year.
Apple’s response? As reported in the Wall Stree Journal today:
Apple spokeswoman Jill Tan: “We are definitely concerned … but would like to emphasize that Apple is committed to ensuring the highest standards of social responsibility wherever Apple products are made.”
Her quote is followed by this damning statement: “Apple conducts annual reviews of final assembly manufacturers to uncover any possible violations of its Suppliers’ code of conduct. In its 2010 Supplier Responsibility Report, it found that 65% of the 102 facilities it audited were paying the wages and benefits due to workers.” [itals mine]
What, in Apple’s eyes, constitutes “highest standards?” Would it accept a 65% yield on its iPods or iPhones?
I don’t think so.
Agreed…
Apparently…not enough pressure/ political will/ incentives / what ever.. to make this situation change.
What are Apple’s options?
– Bring manufacturing back in house? (it is not a matter of money, it is laziness on management’s part that keeps this from happening- they just don’t know how to do it competitively anymore and are too lazy to attempt it).
– find a another CM that can ship 1 million I-pads in a month?.. Not many CMs that can do this, without committing nearly an excessively large percentage of their capacity (bad business strategy) .
Apple won’t bring manufacturing back in house, of course. They have the best margins in the industry, and would lose that advantage if they had to buy everything on the open market. Their volume is a pittance compared to large EMS companies.
And you are right that not many EMS companies could handle Apple’s volume — but several can. Celestica, Sanmina, Elcoteq, Venture and Flextronics could absorb those orders right now, based on what I know of their respective capacities. Cal-Comp probably could, too.
Here’s what else they could do: Write into their supplier contracts that 100% of their factories must pass their CSR audits 100% of the time, or pay severe financial penalties.
And here’s where NGOs like Greenpeace can provide a service to the consumer. Instead of blocking traffic in front of H-P’s buildings in San Francisco to draw attention to its use of BFRs in PCs (the absence of which would solve absolutely nothing), Greenpeace could review OEMs’ own CSRs, then publish the findings of how close (or not) the companies come to living up to the very standards they purport to embody.
Mike,
Penalties.. may have some effect.
Certainly any item of non-compliance should have a known cost (penalty).
Otherwise, why bother to specify it?
In-house vs CM……..
I don’t see how introducing a CM’s profit into the total cost of a product helps the bottom line.
There was a time when .. the cost of keeping a SMT line running was hard to justify – when it was dedicated to only a few products…
But today the latest machines produce at much higher quantities with much lower install costs. .. the costs vs production in the last 10 years have improved by at least 4 to 1.
Nearly all new designs are close to 100% SMT… (labor not THAT much of an issue)
Yes, It may mean Apple actually have a facility in a lower cost region of the world… but I would not expect this to be required to “break even” with current costs.
And yes, it would mean Apple would have more capital tied up.. but someone has to pay for this capital – somewhere in the total cost…
OK.. there are some artificially created incentives/offsets caused by the Chinese government and it’s monetary policies.
But , is this something a US company should depend on for it’s margins?
I would expect the best course of action would be a combination of in-house (60-70%) and CM (remainder). .. .to allow for most flexibility/security/profit in the market… There are other volume players doing this.
Original subject………..
Presently China has a fairly high suicide rate. (according to my son’s quick search on the web).
15 deaths per 100,000 per year! ( with a much higher percentage towards females vs males)
The Foxconn facility in question has ~300,000 people working there.. (crazy big)
so if it were typical of the rest of the country.. I would expect 45 suicides/ year.
If their facility was in the scale of most facilities (less than 10,000) this comparison wouldn’t mean much.
But with their size.. they ARE big enough to be compared directly with the rest of the country.
With this cursory review.. they appear to be doing OK.
Any deaths at a facility, are too many.
but one needs to keep the issue in perspective.
by the way….keep up the good work..
I’m always glad when you comment, John.
You raise an excellent point about the suicide rates. To properly compare, I looked up the World Health Organization data regarding suicide by gender and age. A few initial comments:
1. Per the chart, younger and older males tend to be more likely than women to commit suicide, but women aged 35-64 years have higher rates than men. Also — key point — the suicide rates are substantially higher in rural areas vs. urban areas: 11.67 per 100,000 vs. 32.8 per 100,000.
2. While at most factories I’ve been to in China, the workers are predominantly female, when a company has between 200,000 and 400,000 employees (estimates vary wildly) on a single campus, there certainly are going to be plenty of both genders.
3. Suicide in general appears to be the dramatic and horrible result of one or two primary causes: mental illness (including clinical depression), and/or an overwhelming sense of hopelessness (often is the case when one feels trapped in their environment with nowhere to turn; witness the high suicide rates of Amish teens). That could begin to explain why the suicide rates are so much higher in China’s rural areas, where the prospects for improving one’s life are severely limited.
4. It might be telling to learn whether those who have died were about to return to their native towns, or had a family history of mental illness, or both.
5. Foxconn’s immediate solution of putting in nets address one of the possible
methods to achieve the result while doing nothing to address the root cause(s).
To a degree, the latter may well be beyond the company’s control.
The WHO data are from 1999, by the way, which just precedes China’s ramp into the manufacturing and economic power it is today. I’m actually surprised the reported rates are as high as reported, not because I don’t think they are plausible, but because China tried to suppress anything that puts the nation in a bad light.
Hi Mike,
Putting 2 and 2 together with a previous post about the regionalization of manufacturing, I’m surprised that Apple manufactures in China at all. Most of the companies I have spoken to about why they outsourced to China point to the huge market available there. Obviously there are cost savings involved but if you look at a company like Universal Instruments, the cost savings was pointless compared to the quality issues that plauged them. (they’ve since moved 100% of it back to Binghamton, NY)
Apple sells to wealthy people. By default even the “poor” of America are wealthy compared to the vast population of Chinese. So, getting back to my original point, why manufacture there?If Apple isn’t afraid to spend $1B for a server farm in NC, why are they afraid to just build their products themselves.
This makes me think of another point. Apple loves to do it all themselves. The hardware, the software, the sales, the marketing etc. Why not build it themselves too? Seriously, it has perplexed me for years why they outsource. They certainly don’t need to worry about their margins (currently about 29 cents on the dollar).
– Chris
Chris,
I think Apple took Jack’s (Jack Welch of GE) mantra of the 90s ( If we can’t be the top 1st or 2nd doing something and/or it can be determined not to be our primary skill/value adder… we need to get out of doing it).
Bit too simplistic in my opinion….