Tag Archives: Apple

Poison Apple?

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Move over, Foxconn. First Pegatron and now Jabil have joined you on the Apple-watcher hit list.

In June, the New York-based employee rights group known as China Labor Watch singled out three Pegatron sites for worker abuse. The alleged violations are now like a refrain: excessive overtime, harsh working conditions and employment of underage workers.

Today it was Jabil’s turn, as its Green Point unit in Wuxi drew CLW’s ire. Perhaps most concerning is the accusation that Jabil workers must agree to a “list of punishments.” That sounds sickening and demeaning.

The common thread, of course, is Apple, whose corporate standards are apparently more for show than practice.

Chinese law prohibits more than 49 hours of work per week. Yet the CLW report shows 80% of the 80 Jabil workers interviewed put in more than that. While both Apple and many workers claim they want the overtime, the sad truth is they need to work the extra hours in order to make sufficient wages. Yet with Apple sitting on more than $100 billion in cash, it’s illogical to argue that company needs to suppress wages in order to make its iPhones and related products affordable to Western consumers.

Just 18 months ago, then Jabil CEO (and now chairman) Tim Main excoriated Foxconn for its “very abusive policies, employment policies.”

“I think their business will begin to suffer because of the way they treated their employees,” Main told Jabil shareholders. “And you can all be quite comfortable and proud that, you know, that’s not your company. We treat people like human beings like we want to … treat our own kids. So you don’t have to worry about that with us.”

Sadly, CLW’s report says something very different.

At the time of Main’s comments, Apple had just become a 10% customer of Jabil. Now, Apple is estimated to make up 13%, or $2.23 billion, of Jabil’s annual revenue. So like Foxconn and Pegatron, does serving Apple necessarily cost a company its soul?

Correlation is not causation, but the circumstantial evidence is getting mighty difficult to ignore. Will any EMS company be able to resist the temptation of Apple’s poisonous riches?

 

Believing Foxconn Means Suspending Belief

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The Foxconn makeover is in full swing, with the latest this piece from the New York Times that supposes that the world’s largest ODM is worried that Apple — yes, Apple — might be bringing it down.

When Apple was subsequently criticized for low wages and poor working conditions at his factories in China, it was Mr. Gou’s company, the Foxconn Technology Group, and not Apple, that caught the most heat.

What this conveniently ignores, of course, is that no matter how demanding and dictatorial Steve Jobs could be, those weren’t Apple employees jumping to their deaths from their Cupertino offices.

Such unpleasantries aside, what the story also reveals is that Foxconn does not intend to go head to head with its customers. There’s ample evidence to the contrary already, of course, not the least of which are the Foxconn retail stores popping up all over China, not to mention the litany of ODM phones and other consumer electronics it design and makes.

To paraphrase an old saw, believe what I say, not what I do.

 

 

 

 

 

Broken Signal

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Lots of mainstream media hand-wringing over reports that Apple has returned a large number (5 million? 800 million? a gazillion?) iPhones to Foxconn for repairs.

Two things are on display here. One, that calling the companies involved for clarification or comment doesn’t appear to be part of the playbook. And two, the mainstream business press doesn’t totally grasp the Apple-Foxconn electronics manufacturing model, especially the part about repairs/returns.

 

 

Slowdown at Foxconn

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Could PCs do what the rest of the EMS industry could not — derail the Foxconn train?

Over the past decade, Foxconn has been practically unstoppable. Not a backlash against China, outrage over dozens of worker suicides, at least two plant explosions, campus riots, or other pressures could stop the Taiwanese manufacturing titan.

But as Apple goes, so does Foxconn. And nowhere are the reverberations from the occasional Apple hiccup felt more than at Foxconn, where sales dropped nearly 20% both year-over-year and sequentially during the recent March quarter. While Apple also uses other big and small name suppliers, and is a 10% customer of Jabil, Foxconn’s sales to Apple could be in the range of $60 billion to $70 billion (although I tend to doubt they are quite that high, as Apple’s cost of goods sold for 2012, less depreciation and amortization expenses, were $84.5 billion, and Apple buys its own components).

Worse, however, is that the main market Foxconn plays in — PCs — continues to shrink, with no obvious signs in sight of turning around. So as HP, Dell and other key Foxconn accounts experience double-digit declines, the near-term outlook at the world’s largest electronics contract assembler has suddenly dulled.

Could the PC (as in personal computer) customers do what the PC (as in politically correct) crowd couldn’t? Finally fell Foxconn?

Apple Supply Chain Takes a Green Arrow

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Interestingly, nearly half of Apple’s suppliers that underwent a focused environmental audit last year violated the company’s standards.

Those who violated standards were cited in China’s Institute of Public and Environmental Affairs (IPE) pollution database.

Apple inside

The IPE was founded by environmentalist Ma Jun, and has already gained renown for its China Water Pollution Map and China Air Pollution Map. These online maps, linked to databases of government-sourced information on pollution, give citizens, corporations, media, and other interested parties access to details related to water and air quality across the country.

The air and water pollution web site lists 80,000 records of violations by noncompliant enterprises.

The surprising thing is that the Chinese government is letting these things be tracked publicly. Perhaps Ma explains why with this statement:

“China’s environmental problem is so big that it can’t be resolved without engaging the public,” said Ma, “and access to information is the pre-condition for any meaningful public participation.”

Apple core suppliers

The report revealed other tidbits:

  • 147 facilities were not properly storing, moving or handling chemicals, e.g., some facilities did not provide anti-leakage protection or provide separate storage for incompatible chemicals.
  • Some 85 facilities failed to label hazardous waste storage locations and chemical containers, while 119 facilities lacked management procedures for labeling hazardous waste.
  • The report also outlined wastewater and stormwater management issues, and found that 96 facilities failed to adequately monitor and control air emissions.
  • Apple found only one breach it labelled as a “core violation”: a supplier intentionally dumping waste cutting oil into a restroom receptacle.

Apple’s “responsibility policy” is online, here.

Smoke and Mirrors?

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Apple has cut ties with Guangdong Real Faith PZ Electron on the grounds that it was using scores of underage workers.

So while noting that this is a step in the right direction, is it cynical to suggest that Apple’s decision to fire a fairly run-of-the-mill supplier for using underage workers while basically ignoring its much larger (but harder) problem of Foxconn was promotional in nature?

 

Onshoring

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Onshoring has become the word of the moment, the expression of hope, the exposure of wishful thinking to those who try to intepret relatively small onshoring activities as major moves for job and economic recovery.

Flextronics CEO Mike McNamara pointed out in an interview with Larry Dignan of ZDNet, “As you see things that get pushed back into the US, “a la” the (recent) Apple comment it is more than just having the right cost structure. You also have to design for more automation and more different kinds of productivity. So, it is an evolution; it is not just flipping a switch. You actually have to spend a lot of work in the design, all the way through to the manufacturing process, knowing where you are going to manufacture. I think it is going to take time.”

It will not only take time, it will take incentives from the government. If Taiwan can do it, why can’t America do it? A major lure could be the lowering of one of the world’s highest corporate tax rates. Another would be to remove or simplify many of the “make-do” reporting procedures and requirements that seem to do nothing but tie a company’s hands, increase costs, and create more public sector jobs.

Taiwan’s new reinvestment incentives began last month, with an aggressive goal of more than doubling the returning investment from overseas Taiwanese businesses to $6.89 billion over the next two years. Companies need to meet certain requirements, such as producing critical components or marketing products under their own brand. Taiwan’s government announced on Dec. 6 that Catcher Technology and Largan Precision will invest in new factories in Taiwan that will create some 3,800 jobs over the next few years.

Foxconn Moves Intriguing

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There is a lot of speculation regarding Apple’s stated intent to build a manufacturing site in the US. This is not a major move. Only 200 jobs will be created. I cannot help but wonder if this is related to Foxconn’s (Apple’s major supply-chain device manufacturer) recent offer to help train Americans in manufacturing technologies. Is there a greater strategy about to be implemented? Is it the precursor to a potentially much larger move as costs continue to rise in China? America is still the major market for Apple where new products are introduced. Do Tim Cook and Terry Gou have a larger strategic plan? As Sherlock might say to Watson, “Methinks a new game is afoot.”

The November contraction of the US manufacturing sector does not bode well for the domestic electronics industry. According to the Institute for Supply Management (ISM), the index declined to the lowest level in three years, as national factory activity fell to 49.5% in November from 51.7% in October. Expectations had been for a level of 51.3%. Levels below 50% indicate a contraction. These figures are reflected in recent IPC book-to-bill ratios. The news in Japan is also discouraging for that nation’s interconnect industries. The Japanese Ministry of Economy, Trade and Industry showed negative growth for the country’s electronic industry in September. Not only is board production dropping, but so are board prices. Panasonic and Sharp have lost market share and are experiencing heavy losses, according to DKN Research. JX Nippon Oil & Energy (a major metal and oil supplier) has decided to close its PV silicon wafer business due to extreme global price competition. Uncertainty seems to reign everywhere. Many strategists are now working on improving efficiencies, finding new markets, and a resumption of growth in 2013.

For Americans, too? More cooperative activities reducing redundancy is needed between the IPC and the EIPC.

The EIPC made following announcement on Dec. 3: The EIPC has made an effort to provide the latest information on Standards for PCBs from Japan. The 4th edition was released at the JPCA Show in June 2011. The EIPC is encouraging the specialists in the European Electronic Industry to learn the knowledge that has been accumulated by the Japan Electronics Packaging and Circuits Association (JPCA) and documented in the Standard on Device Embedded Substrate Terminology Reliability Test/Design Guide Edition 4.0- JPCA-EB01 (2011) The English version of the document is on stock at the EIPC office in Maastricht, The Netherlands.

The Unsung IBM

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As CEO Tim Cook shakes up the Apple management team and struggles to keep Apple at the top of the hyper-competitive electronics heap, I am reminded of the last time Apple saw such a fundamental challenge to its mojo.

It was the John Sculley era, when the former Pepsi exec was tapped to add some juice to the lagging MacIntosh maker. Sales rose tenfold during his five-year reign, but the tension rose between the Apple board, Sculley  and ex CEO Steve Jobs, and both ultimately were given their walking papers.

That was some 20 years ago, and while the PC wars on the Left Coast were taking their toll on Apple, a similar story was emerging in upstate New York. There, IBM, long the king of the DOS-based computer equipment world, was being overrun by competitors like HP, Compaq, Dell and Digital Equipment and had seen its stock slide more than $100 to the low $40s. Some were going so far as to predict the end was near.

About that time, the editor of the magazine I worked for visited IBM and came back with this warning: “IBM remains a manufacturer of the top rank,” a firm response to those who believed that Big Blue was about to fade to black. And sure enough, IBM overcame its own product hurdles and regained its crown.

Not that many notice. While others make news for either their stunning profits (Apple, Samsung) or stunning slides (Dell, HP), IBM has gone about its business in the professional, button-down way that its founder Thomas Watson would both recognize and approve of. While others may grab the headlines, IBM is still the bluest of the blue chips, a company that others should spend more time understanding and emulating. Through management changes and computer fads (mainframe to PC to the cloud), IBM has shown an unprecedented ability to adjust and stay relevant.

I’m not sure whether Apple under Tim Cook can duplicate the success of Steve Jobs. That’s like following Babe Ruth, the quintessential game changer, and no person should have to do that. But I do know that no matter where Apple is in 20 years, IBM will still be at the top of the computing pile.