The New York Times has posted a lengthy report on the conditions in factories that make Apple devices, and it isn’t pretty.
“Apple never cared about anything other than increasing product quality and decreasing production cost,” said Li Mingqi, who until April worked in management at Foxconn Technology, one of Apple’s most important manufacturing partners. Mr. Li, who is suing Foxconn over his dismissal, helped manage the Chengdu factory where the explosion occurred.
Apple is probably one of the better companies working with Chinese suppliers, since they have a supplier code of conduct that they audit, and they issue a yearly report about those audits. But, even though other companies might be worse, Apple is certainly the most profitable, having just reported that they made $13.2 billion last quarter. It would not have been a tragedy if they had made $12 billion or $11 billion and treated workers a hell of a lot better.
cathyx
I have this same problem with greedy 1%ers who whinge about paying higher taxes. They have more than enough money to buy anything in the world they want and it’s still not enough.
Chyron HR
You’re obviously confused. Apple is a cosmic/groovy company that plays hackey-sack on the quad and drinks Snapple. This sounds like the work of the nefarious Microdollarsignoft.
amk
Really ? This is the best title you could think of ? Need more pillows to back up ?
WyldPirate
Ahhhh, corporations…if they can’t exploit workers here, they can go over there.
Good damn thing we have loyal ‘Murican governors like Mitch Daniels who are trying to fix this travesty of justice inflicted on corporations here by Eugene Debs, Upton Sinclair and all the soshilist laborers who fought and died for fair treatment of workers.
Odie Hugh Manatee
Businesses today exist to profit at the expense of everything and everyone else, it’s the American ‘free market’ way! If Apple could impose the same working conditions here they would do so in a heartbeat.
Capitalism baby! It’s what’s eating you.
Punchy
OT:
Missouri — keeping the Douchebaggiest State title for another few months…
amk
@Odie Hugh Manatee: yup. capitalism with its pal ‘free-market’ from the best assassin team in the world.
jibeaux
I think this is a more realistic goal than bringing these manufacturing jobs to the U.S. Some manufacturing may come back here, but consumer electronics isn’t going to any time real soon. But there’s no reason consumers can’t bring pressure to bear improving on working conditions.
mistermix
@amk: WTF are you talking about? Pillows?
amk
@mistermix: yeah, I knew you wouldn’t get it.
flukebucket
Never, ever forget the capitalist manifesto. “From each as much as I can possibly get, to each the least I can possibly give”
Redshift
And remember, Romney intends to eliminate regulations that are making America less competitive with other countries so companies will locate here. There’s a Foxconn in your future!
Face
Anyone done a cost analysis of what an iPod or iPhone would cost if made in America by unionized workers? 30% more? 50% more? Just curious.
Enhanced Voting Techniques
Again you guys miss the elephant in the room’ twenty precent staff turn over, lawsuites, people raging against Foxcon. This means the era of the cheep and Chines worker is ending. These Chines are engaging in class warfare against their hard working slave masters because they have other options that 16 hours a day grind.
amk
@Face: The cost to the buyer wouldn’t change (after all they have to sell those fucking thingys), only apple’s gazillion dollar profit will not be there, they might just have to live with just millions. So what’s your point ?
Villago Delenda Est
Here’s the thing.
There are real logistic issues that drive the entire “make it in China” thing. The fact is, we were able to do those things here in the US once, but due to the nature of globalization, which is a monumental race to the bottom, instead of bringing the rest of the world up to our level, we’re sinking to theirs.
We can’t supply the components of an iPhone the way the Chinese special economic zones can, where everything is right there nearby to be assembled into a unit for retail sale.
The US, regrettably, has an industrial policy, even though it’s not official. It’s to allow other countries to take over the entire chain of supply for so many items.
The short term mentality allows this to happen. The Chinese eventually will catch MBA fever and suffer from this, too, but not today.
Cargo
Good thing my Android phone is made by the gnomes of Lollipop Lane, who ride the Toot-Toot Trolley to work every morning to the colorful factory full of whirligigs and gewgaws, singing happy tunes for three hours before enjoying a pleasant lunch of mince-pies and chocolate milk, then a four-hour afternoon shift with spindigglers and hob-gooblers, and home to their adorable mushroom houses! And they have six weeks’ paid vacation a year and full dental, vision and medical with a $5 deductible.
The Moar You Know
Why should they? That’s not how capitalism works.
Let’s not forget, if I were a shareholder and Apple decided to “make a few bucks less” by treating their
modern-day slaves“employees” more nicely, I could sue the shit out of them and it would be a slam-dunk win. Apple’s only function is to maximize shareholder profit. Nothing else.This is the society, Democrat or Republican, that we keep voting for. Voting for the lesser of two evils is needful but isn’t going to solve the core problem. No, I have no fucking idea of how to fix it, either.
James K. Polk, Esq.
And here come Apple’s
trusted defenderscorporate PR stooges…Doc Sportello
From the first NYT piece on Apple in China:
I’d gladly split that $65 with Apple.
MattF
@Face: The figures I’ve seen that it would cost about $50 more per unit to manufacture on-shore. But this article:
http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?src=me&ref=business
says the problem is the whole supply chain and not just the wage/worker.
Odie Hugh Manatee
@Shorter Cargo: “Everyone does it!”
Yup, it’s just that Apple ‘does it’ better than anyone else while pretending to be all that is good and right in the computing world.
Pesky details.
kindness
I’m sure this post means well but you seem to think Apple Corp should operate under Occupy rules. Believe me, I agree with you in the sense that I think Corporations shouldn’t make all their determinations based on the bottom lines. But they do. They all do. Wall Street forces them to because if they don’t institutional stockholders will kill the Corporate Bosses.
Having said that, I’ll still buy Apple products because their products are some of the best made products in their fields.
Paul in KY
@Villago Delenda Est: It used to be that we didn’t make things in China, because the shipping costs were too high. Now, modern technology (giant, fast container ships) have fixed that ‘problem’ for our rentier class.
Corbin Dallas Multipass
This is most of the comment I left over on Slashdot when they talked about the original NYT article about Apple’s decision to use Chinese Manufacturing.
Personally, I feel this may also be about Apple’s clout within the manufacturing world abroad and their ability to get results since they’re such a high profile customer. Ars Technica (it’s actually a Wired article) had a piece a few months ago about small businesses and how turning away from overseas manufacturing was a win, since labor costs abroad were going up and they couldn’t get the quality they wanted: http://arstechnica.com/tech-policy/news/2011/03/in-early-2010-somewhere-high.ars
Just because Apple and other top tier companies had a good experience with overseas manufacturing doesn’t mean everyone will. If you’re pretty much any business smaller than Apple, you might not get the results you want since they simply may not care about you as much.
Montysano
@Cargo:
Well…. my wife’s Android phone is made in South Korea, which, last time I checked, was not a totalitarian regime.
The Moar You Know
@Face: Apple did. It’s really not that much more at all. Maybe 15%.
But labor is not the reason they’re manufacturing in China. It’s supply chain responsiveness. America does not have the capability. If you need, let’s say, a funky pentalobe screw, like Apple uses, you call…um, well, shit, nobody in America makes screws anymore. Fuck! Well, you gotta call China, and it takes ninety days to get here.
In China it’s a truck ride away. Hours, not months.
Cargo
“American made iPhone – costs $38,500, but comes in a really nice oak box lined with selvedge denim” – a comment on another blog I read about this topic.
Apple’s the frontrunner (words I’m certainly not used to typing) so of course they’re going to take the heat, just like Nike took heat for sweatshops 20 years ago although pretty much any shoe or clothing item you bought then or now is made by slave labor in awful conditions. People complained and the companies put a few fig leaves on what they were doing and continued exactly as before – because WE DON’T WANT TO PAY.
So the conditions in tech plants are bad? You don’t even wanna know where your chicken comes from, or your pants.
The only way to not be complicit is to not buy anything where you don’t know its provenance entirely from start to finish, which means living like the Amish.
Ron
@Cargo: I don’t think anyone is under the delusion that other electronic devices are made under wonderful conditions. The thing is that Apple is a single large company. “Android phones” are made by a whole bunch of companies. (disclaimer:I have an android phone and I’m sure I’m just as guilty as someone who buys an iPhone)
The Moar You Know
@Montysano: It kind of is, actually. Run by the military until the late 80s. I went there and loved it, but it’s not America. It’s run by an unholy trinity of the largest companies (they hold the most power) followed by a nominal civilian government which exists largely to serve the military and keep the people thinking they’ve got some say in their own affairs. People vote but it is largely meaningless as the corporations call the tune for more or less everything.
America’s a watered down version of this. Push comes to shove, the government can shut down/bankrupt/cripple a corporation. Not so, there.
Ron
@Montysano: No, it isn’t. On the other hand, do you think SK workers have the same rights/protections as US workers?
Maude
@The Moar You Know:
Because everybody knows that is is an emergency to have an iPhone right this minute.
The reason the US doesn’t have those parts is because the product isn’t made here.
Cars are made here and the parts are also available.
Don’t make excuses for cruelty.
This is also about the stock price which is predicted to go higher this year.
Can’t isn’t a word that should be used with US manufacturing.
iSuffer isn’t acceptable.
That goes for all electronics.
El Tiburon
Do any of you know what life was like for these Chinese workers before having the privilege in luxuriating in a US “home-stlye” dormitory?
Many had to live inside caves burrowed deep into cow dung. Once ensconced, they would have to fight off the maggots for food. (Which is how the chopsticks came to be.)
Their Communists overlords would harvest the peasants for their organs. (The people. Not the maggots.)
Now, thanks to AMERICA! They no longer live in shit-shacks and earn enough to eat in restaurants that don’t cater to maggots.
You people bitch when we bring FREEDOM! via freedom-bombs and you bitch when we bring FREEDOM! via freedom-slave labor.
Indeed.
Comrade Mary
@The Moar You Know:
I know that publicly traded corporations have certain obligations to their shareholders to maximize profits, but have any shareholders ever brought such a lawsuit — “you’re paying wages that are too high” — and won? Wouldn’t the usual recourse be just to dump the stock and find a more rapacious company for their investments?
kdaug
They stood there laughing
They’re not laughing anymore
And the walls came down
Brian S
@Odie Hugh Manatee: You sure that’s Apple doing that and not users who are projecting their personal ethos onto the company? Because I’m an Apple fanboy and have never seen them act like they’re some super-progressive company.
Woodrowfan
I wonder where my LG phone was made. (sigh) I think my previous phone was at least made in Finland (I think)
rlrr
@Face:
I remember reading somewhere that if the iPhone were made in the USA, it would add $65.00 to the cost.
Montysano
@Ron:
No, but maybe it’s somewhere in between?
At Casa del Monty, we went Mac back in the early 2000s, and we were total fanboys. Now, I think I’m about done with them. While their OS is nice, my experience has been that their hardware is overpriced, fragile, and non-repairable. I’ve got a houseful of busted Mac stuff that’s not worth repairing. Plus, I despise iTunes. If I were being honest, I’d say that my old Dell Lattitude laptop, running XP, is the best computer that I’ve ever owned. The thing is a tank, and always performs as it should.
I’ve got to buy a new cell phone; my 5 year old Blackberry is about shot. Plus, I travel a lot for business, so a tablet would be nice. I’m going to research country of origin and probably go Android.
Doc Sportello
@rlrr
Almost. Paying American labor costs would add $65 to the cost, but moving production of the Chinese manufacturing hub would probably add more.
But, with the good not being the enemy of the perfect, can’t we improve wages/safety to the tune of about $65 a phone? Seems like a win-win.
Not discussed in any of this is how much FoxConn is making. Perhaps they could chip in something from their profit as well.
Dustin
Just another example of why my company will never be publicly traded. When your only goal is to maximize profit anything hat gets in the way, including diversifying into component manufacturing if needed, gets tossed by the wayside. Wages are just the tip of that unholy iceberg.
Could Apple manufacture here? Absolutely yes, they’d just require a retooling of their operational and design SOPs and accept fewer billions in yearly profit. Too bad that last part makes anyone who suggests it liability.
Halteclere
Punchy: Missouri—keeping the Douchebaggiest State title for another few months.
From the article:
Ward Franz is a tool. He was elected in 2004 by defeating a conservative Democrat who had spent decades properly representing the people of West Plains, from lowly county positions up to State Representative. This Democrat was always a big supporter of local charities, churches, civic groups, farmers, etc. Basically he met the idea of a good local politician.
Ward Franz had no background in politics or involvement in the local community, and ran on the platform of being more Christian than the Democrat. The Saturday before the election a huge package of Republican talking points lies was mailed out to everyone in the county basically accusing the Democrat of being godless, supporting abortions, etc, and which the Democrat had no time to counter before the Tuesday election.
Just look at Ward Franz’ picture to see what a tool looks like.
rlrr
@Halteclere:
Missouri Republicans. I hate Missouri Republicans.
Gus
Tell that to their shareholders.
BDeevDad
Where do you think we live, Communist China. Oh, wait….
Karounie
Maybe Apple should continue making its current line of products but introduce an ultra high status made entirely in the US line of devices that reflected all actual cost differentials including the supply chain issues and cannibalized sales of the lower priced versions. If USA iPhone was twice the price and the USA MacBook was an additional $500 I would still pay that difference.
Apple is already leading the industry in getting customers to pay a premium for intangibles. They could be leading the way on the idea that US made = luxury good that makes you look cool.
Yevgraf
OT – On a supremely funny tack, now even the old line GOP types are being linked to Saul Alinsky. Wingers are squealing about it at the same decibel level as a Brownie who just watched a puppy get eaten.
http://www.buzzfeed.com/andrewkaczynski/photo-exclusive-when-george-romney-met-saul-alins
It is hysterical stuff – they’ve all turned into Birchers.
I think what it really comes down to is that the original Texas oilboys who funded and promoted the Bircher thing got their feelings hurt when Eisenhower called them stupid, and have been on a propagandizing rampage ever since.
How else would anything and everything that American government has been involved in for the past 100 years be deemed “unconstimatooshinally soc!alist”?
nancydarling
@Halteclere: Then there’s this. I posted it on a thread yesterday. Arkansas has not cornered the market on political terrorism, although no animal or human has been killed in Missouri—yet. Just rifle crosshairs on the office doors of the 4 Democratic women state senators.
http://www.columbiatribune.com/news/2012/jan/24/images-rifle-crosshairs-found-senators-office-door/
Brachiator
@Villago Delenda Est:
There is more to it than this. Apple is beginning to ramp up iPad production in Brazil, which is a hell of a lot closer the US than China.
And it is not just that US industrial policy is lacking. The Chinese are the manufacturers for the world.
China could teach MBAs a thing or two. They have long had a mercantile tradition, sometimes as coldly profit driven as the most avaricious robber baron. Even when the West was “opening up” China to trade during the era of the Boxer Rebellion and the British takeover of Hong Kong, Chinese merchants rivaled the Europeans for guile and business acumen.
@The Moar You Know:
China is just the hub of the chain.
Apple and other companies have a sweet deal when having assembly done in China, but I really wonder whether it could only be done there. China has pushed the other Asian tigers aside, especially Japan, but even the Chinese are beginning to lose some of their advantages.
The Moar You Know
@Maude: Excuses? Not I. Just pointing out the unpleasant reality of shareholder lawsuits and a non-existent U.S. supply chain.
Sorry to harsh your mellow with facts.
kindness
Isn’t this conversation exactly like the pieces we have about Obama and the Democrats in Congress not doing a better job representing progressives? Funny too as it has the same ending. Jesse Unruh once said “If you can’t eat their food, drink their booze, screw their women and then vote against them, you have no business being up here.” regarding legislators and lobbyists. Now it seems the Democratic Party has it going the other way around wrt their progressive members.
We all want them to be better but it’s better to live in the real world than a purer fairytale one. Apple isn’t the problem in and of itself, the system is the problem.
Doc Sportello
Foxconn is huge but not especially profitable. Last year they had revenues of $111 billion but only $4 billion in profit.
Lojasmo
@Face:
Cost of labor for actual production isn’t the issue. It’s availability of competent engineers, and locale and flexibility of various parts production that makes it nearly impossible for apple to relocate production to the US. There’s a good recent article about this that somebody else has likely linked.
ETA: mattf got it @#21
Halteclere
West Plains is also the location where this “friendly” sign was posted during the 2008 election.
Violet
OT–The long knives are out for Newt. (Politico link) Excerpt:
Tom DeLay? That’s hilarious. There’s more there from Drudge, National Review, etc.
Also, the CNN debate tonight should be verrry interesting. (Politico quote via TPM)
I wonder if the CNN moderator will bring this up? Popcorn!
Brachiator
@Villago Delenda Est:
@The Moar You Know:
An earlier response got lost in moderation. Let’s try again.
There is not a lot of manufacturing going on in China. It’s assembly. There’s this, for example.
And Apple is beginning to ramp up production in Brazil, which is a lot closer to the US than China.
Apple and other companies have a sweet deal when having assembly done in China, but I really wonder whether it could only be done there. China has pushed the other Asian tigers aside, especially Japan, but even the Chinese are beginning to lose some of their advantages.
The Moar You Know
@Dustin: Mine either. Can’t imagine a bunch of greedheads telling me I can’t give the office cleaning guy a Christmas bonus because it would eat into my bottom line too much.
Plus, the whole stock market thing is nothing more than legalized gambling anyhow, and I’ve got some fairly strong opinions that such activities should not be allowed. I certainly will not participate in it.
SteveM
But … but … coolness! Intense coolness!
JPL
After reading both articles on Foxconn and Apple, I don’t see electronic manufacturing returning to the USA. The first article you have to sign a promise not to kill yourself and the second mentions forced push-ups if you have don’t perform. The workers are often required to work over twelve hour days, six days a week and live in dorms. As long as the factories are overseas, we as a public can see no evil, hear no evil but abusive work areas would be harder to hide in the States.
It’s not just the pay, it’s the urgency they want the product produced.
gene108
Speak for yourself. I bet $11 billion in profits would drive share prices down and cost Apple executives several hundred million in stock options.
I don’t know about you, but I’d find it a tragedy to lose hundreds of millions of dollars.
(/sarcasm)
Unsympathetic
@The Moar You Know:
Only if you define “supply chain responsiveness” as “Apple’s execs can pay themselves more while decreasing the cost of the Iphone9, screw their labor more, and handwave a plausibility denial because the transaction includes enough reverse-merger shell companies.”
You’re objectively wrong, but perhaps you’re paid enough to troll. So you’ve got that going for you.
Belafon (formerly anonevent)
I think someone on DK had posted about an initiative started in CA to build an exchange for companies that wanted to consider their social commitment in addition to their profit margin. Being at work, I don’t have time to look it up, but I think this is what we’re all hinting at.
jehrler
@Maude:
But, if the bailout hadn’t saved GM and Chrysler then the supply chain may have weakened enough to take down Ford, Honda and Toyota plants as well. Hence why Ford *favored* the bailout for their two main domestic rivals.
Krugman had a post recently about how it is the manufacturing ecosystem, not just the assembly.
And, as the owner of a company that makes it’s product here in the good old USA (and have looked at going overseas but found it too far and too expensive) I live his comment as we are blessed that here in the Twin Cities in Minnesota we have the manufacturing base to punch out the parts we need.
harlana
oh, so Steve Jobs was not a god after all. who knew?
jehrler
@Brachiator:
Don’t forget that Samsung is now running a plant in Austin, TX dedicated exclusively to outputting Apple’s A5 processor, the most expensive semiconductor in the iPhone and iPad. So some of this is, in fact, coming back.
The Moar You Know
@Unsympathetic: Fat troll bucks, ace. You should look into it, it is quite a job.
I wind up dealing with a lot of idiots, though. It wears on one after a while.
Brachiator
@jehrler:
The sad thing, I was listening to a tech podcast where this was discussed, and the host asked a guest whether this was good, and the guest said, he didn’t care.
It’s funny how there are tech weenies who just want their gear, and they couldn’t give a rat’s ass whether the country falls down around their head economically.
harlana
republican plan: if we could just convince Amurkins to suffer in the same way the Chinese have to do just to put a bowl of rice on the table for their families, we can bring our technology production back! until they are willing to do this, they can just die in the streets, weeding out all the weak and ungrateful old people who were used to being treated with a modicum of respect and decency and replacing them with youngsters we can train to expect below survival pay, horrific working conditions and being separated from their families for indefinite, extended periods of time while living in a box!
Amurka, we CAN be great again!
maya
So, that bite out of the apple represents worker’s cost vs overall profitability to owner/investors. Should be no more than a worm hole.
BerkeleyMom
I first heard about all this when I went to Berkeley Reparatory Theater and saw Mike Daisy’s play, “the Agony and Ecstasy of Steve Jobs”. I hear it is coming back to NY. It is a one-man show (a monologue really) about Mike’s experiences traveling to China and interviewing Foxconn workers. Steve Wozniak was in the audience the night I saw it and he looked pretty shook up after.
This American Life the radio show also did an hour on this topic a couple of weeks ago.
Amir Khalid
It’s not just that Apple reports profits of $13 billion in a quarter. It’s also that they are sitting on a mountain of cash — per TIME, some $97.6 billion, about a third of it in the US and the rest abroad.
What the hell is Apple going to do with all that money? TIME suggests that if Apple gets stuck for an idea, it’ll likely just sit on the money. That much money just sitting around doing fuck-all is harmful to the US and global economy, just like labor and environmental abuses perpetrated by Foxconn on Apple’s behalf.
Yevgraf
On another OT note, my Mormon facebook friends are positively pissed off at Newt and the Evangelicals, all with zero prompting from me. I don’t know how many of them will bolt the GOP, but the Mormon hate is causing a lot of consternation.
I can practically hear the spittle hitting the monitors, the Newt hate is coming so hard and fast.
burnspbesq
@Cargo:
“pretty much any shoe or clothing item you bought then or now is made by slave labor in awful conditions”
False. I’ve been in shoe factories in China and apparel factories in India (have you?). Those are hard jobs, with risk of RSI and exposure to toxic substances. I wouldn’t want to spend ten hours a day gluing midsoles to outsoles and then handing them to the guy who uses a heat gun to make sure the glue sets properly. But those employees make enough money to get by in their local economy, and if it gets to be too much they can walk at the end of their contract.
The reason that more of them don’t is that no matter how bad you think those conditions are, the alternative is worse: going back to subsistence farming in the middle of nowhere.
rlrr
@Yevgraf:
Harry Reid and the Udall family show that Mormons can be Democrats…
Marcelo
@Face: Even with a higher manufacturing cost, Apple could afford to charge the same amount and they’d still be hella profitable. A higher manufacturing cost doesn’t automatically translate to increased consumer prices. Apple could afford to eat the increase and still make billions in profit. They’d probably sell more units, too, by advertising their new “Made in America” approach.
Brachiator
@Amir Khalid:
Here, the Times reporter is obviously an idiot.
I am not sure that just sitting on the money for some time is harmful. Worse would be what some other tech companies have recently done, over pay tremendously to make acquisitions of companies that are going nowhere.
Added to the mix will be what happens when Facebook goes public.
The tech companies are sitting on a huge wad of cash, but they are oddly vulnerable to future innovation. RIM and Nokia were solid companies a short time ago. Now, they are has beens struggling to keep up.
Yevgraf
Holy shit – I just waded into Mormon land even deeper. I’m seeing a shitload of sentiment from Mormon conservatives that if Romney isn’t the nominee, that at least Obama isn’t bipolar and they’ll either vote for him or stay home.
Could this be the vehicle that seals Obama’s EV counts in Nevada and Colorado, while putting Arizona seriously in play?
How do you shit on an important (and reliable, in a “Stepford Voter” sort of way) voting bloc to that extent?
Shinobi
This article from Forbes really outlines why our economy and indeed our society is pretty much screwed.
The problem isn’t Apple, it’s a system that incentivises profits and shareholder value over production and productivity. If it wasn’t Apple it would be Sony, or Dell or even Ford.
The Moar You Know
@burnspbesq: You see those farmers everywhere once you get out past the cities. Truly amazing. You’re driving along the nicest highway I’ve seen in any country, and there’s guys out there in the fields not a hundred yards away from this unbelievable highway, spreading the contents of the nightsoil buckets by hand, up to their knees in human and other types of shit, just like in the Middle Ages.
The Moar You Know
@Yevgraf: But Romney will be the nominee. Newt will be nothing but a non-stop fail parade outside of the slave states, and the money guys want Romney bad.
Yevgraf
@rlrr:
I suspect that every time they hear some of the Mormon hate, they start thinking about Executive Order 44 (the Missouri Extermination Order).
Violet
@Yevgraf:
This is exactly what I was wondering a few days ago in another thread. I think the Mormon community could be very offended if Mitt isn’t the nominee, Gingrich is, and it becomes obvious that anti-Mormon sentiment is a lot of why Mitt didn’t get the nomination. I could see Mormons defecting by either voting for Obama or staying home.
different-church-lady
This is the first writing I’ve seen on this issue that singled out Apple for good, logical reasons, rather than reasons symbolic, emotional, or click-baiting.
In the end, I think people are making far too large a linkage between behavior and money. The real solution to the problem is not for Apple to pay more or to make less: it’s for Apple to care more, and try harder. Improving conditions in those factories is not going to take a billion dollars — it’s going to take reform of the additude of the people who manage them. That doesn’t have to cost a ton of dough. You could pay those workers twice what you pay them now and still need the suicide nets if nothing else changed. (And yes, you could also pay them twice what you pay them now and still make obscene profits, so hitting the problem with all the prongs on the fork would be a good way to go.)
burnspbesq
@Amir Khalid:
Apple could probably afford to buy Hon Hai (Foxconn’s parent company). Doubt it will happen, for a lot of quite sensible reasons.
Villago Delenda Est
@Brachiator:
It’s just yet another example of the self-centered, short term thinking that permeates this society, and is why I think it’s eventually doomed to collapse unless changes in attitudes are made.
IT is particularly prone to this type of thinking, as most of these idiots have no idea how their fun little gadgets came to be. They take them for granted, as if they sprung out of the head of Zeus or something in a spontaneous manner.
Yevgraf
@The Moar You Know:
Of course, then it circles around to the Mormon hate, and depressed GOP turnout.
What’s the magic number of white folks that have to vote GOP this cycle – 70%?
daveNYC
@Maude:
And the reason the product isn’t going to be made here is because we don’t have those parts. Changing something like this that is so interdependent is difficult at best.
burnspbesq
@different-church-lady:
The only leverage that Apple might theoretically have in trying to improve conditions at Foxconn’s factories is the threat that it would fire Foxconn. That isn’t a credible threat at present, because there is no viable alternative, and both Apple and Foxconn know it.
If a US company were to lobby the Chinese government for changes in Chinese labor law, that would be perceived in China as a threat to its sovereignty, and would almost certainly get nowhere.
Yevgraf
*guffaw*
Tom Delay kicks Gingrich in the ribs.
http://thinkprogress.org/politics/2012/01/26/412071/tom-delay-newt-gingrich/#comment_link
This beats the shit out of WWF, WWE and the MMA broadcasts.
Maude
@Amir Khalid:
Apple is a good poster child for greed. It comes down to human rights.
The pile of cash is worthless in a way, because it just sits. It isn’t working cash. That is stupid. This will eventually be a real problem for Apple because they will stop innovating and start being a dinosaur.
Brachiator
@Villago Delenda Est: RE: It’s funny how there are tech weenies who just want their gear, and they couldn’t give a rat’s ass whether the country falls down around their head economically.
We’re doomed. We’ve always been doomed. But we will muddle along. Selfishness is a human trait, but it has always been offset by others. I don’t see much about contemporary life that is spectacularly different from the past.
I agree in part. But it applies to people who play video games, and to blog commenters as well. There is a lot of sincere thoughts posted here. I do not doubt that for a minute, nor do I slam anyone here for being a hypocrite.
But we strip the planet of rare earths to power our tech gear, and we throw away millions of tons of stuff when we buy the newest stuff, creating huge quantities of electronic waste that poisons people in Bangladesh and other countries. We have exported some of our energy costs and pollution to China as we reap the benefits of their manufacturing goods for our delight.
Some dilemmas remain, whether we manufacture and assemble here or ship it overseas.
Mark S.
The size of that factory blows my fucking mind. 120,000 employees, 70,000 living in company dorms.
China’s going to blow up someday. It’s not going to be pretty.
Maude
@daveNYC:
What do you think they do at a car company when they change the line for a new product?
They make new parts.
Elliecat
@nancydarling: am I reading this article right, that there is no metal detector or security in the Missouri State Capitol building? Or was the Senator quoted referring to a separate office building? How is that possible in this day and age?
different-church-lady
@burnspbesq: They’d have to decide to give a shit in a major way then. As in taking active steps to developing alternatives to Foxconn.
Whether the threat of such would ever change things at Foxconn is a question, especially considering that Apple’s way is not to issue threats but to simply go come up with the alternative in secret and blindside everyone. In other words, the threat would never be issued in the first place.
Tim Cook, are you listening? Will Apple evolve?
I’m not up enough to know whether this is specific to Foxconn, or common among Chinese manufacturing. And certainly I have no hope of learning such on political blogs, where any instance of anything will immediately be conflated into global evil.
The Moar You Know
@Yevgraf: m_c is the go-to person for those stats, but I think it would have to be at least 60% just to equal the dismal numbers that McCain got.
The GOP needs a Reagan or a W and they just don’t have one. Mittens is as exciting as a glass of stale warm milk before bedtime and Gingrich has nothing now that he’s had his fangs pulled by the powers-that-be. Neither one can pull the numbers that are needed to win.
different-church-lady
@Brachiator:
Agreed: far too many blog commenters treat blogs as “fun little gadgets” too much of the time.
Violet
@Yevgraf:
I posted that upthread. It’s not just DeLay. It’s other folks like Coulter, the National Review, etc. Very entertaining. The long knives are out for Gingrich.
And he’s admitted he lied at the last CNN debate where he said he’d offered people to ABC to counter the ex-wife’s story. Tonight’s debate is on CNN. I hope they don’t let that issue slide. I wonder who is moderating it.
Belafon (formerly anonevent)
@The Moar You Know: According to m_c, the Republican will need 65% of the white vote if minorities vote at the same rate they did in 2008.
jibeaux
@burnspbesq: I don’t think that’s the end of it. Apple isn’t going anywhere. I’m pretty sure they plan to keep printing money as long as they possibly can. If they feel like it — if consumers can make them feel like it — they can certainly generate a list of reforms they’d like to see, on pain of starting to shop around for other suppliers as they become available. And let that information become known. In terms of changing course quickly, the Chinese private sector seems to me to the be the Anti-Senate.
addition: because if the cost-benefit analysis is “some improvement to worker standard of living/safety” v. “losing Apple’s business”, I know which side I’d err on…
amk
OT
@ burnsy – What do you think of Obama’s peeps saying FU to that GA’s judge’s ‘summons’ on birther issue ?
jibeaux
@Belafon (formerly anonevent): I hate to sound like a cudlip, and that sounds like a reasonable guess, but any chance there’s another source on that? I’d be interested in reading the analysis.
Villago Delenda Est
@Brachiator:
We can always check in with the Mayans at Copan, or Easter Islanders, or the Greenland Norse and see how well they overcame those problems.
jibeaux
@Villago Delenda Est: Ha, I’ve got that Jared Diamond book too. Haven’t finished it.
Brachiator
@Maude:
Bull puckey. It is lazy and absurd to single out Apple, or even to accuse them of excessive greed. They are not the only company, by any means, to make use of China for assembly.
And nobody who posts here is getting PCs from Nonprofit Green Tech and Unicorns.
True. What are you willing to do about it?
Raven
@Brachiator: Bitch and whine on a blog?
CarolDuhart2
Speak for yourself. Every computer I’ve owned has been used. Re-use decreases demand for a while, and maybe if enough of us do, we could cut down on the exploitation a bit.
ice weasel
@Cargo:
FTW
Elie
@Villago Delenda Est:
You nailed it…
That squeeeze downward that everyone is feeling is real…We now know what the basement looks like and that is where we are headed to a large extent. Our shrinking state will impact everything from how we invest to keep our kids educated, where and how we live and yes, even how much we fight with each other for the crumbs…
There are a lot of mouths to feed on this planet and someone is going to have to go hungry unless we can find the collective will to a) control our population numbers and their impact on all the earth’s resources and b) redistribute some of the goodies from the haves to have nots…Apple is just illustrating what is the reality across the world for all products and services…
Emma Anne
So not true. First, shareholders cannot possibly sue for things that are clearly within the discretion of management. I suspect this was exaggeration for effect, but it isn’t even kind of true.
Second, Steve Jobs couldn’t possibly care about sucking up to Wall Street for share prices, and I certainly hope the new regime is just as contemptuous of that game.
And third, Apple is by no means the only company that has that attitude. Check out Costco – so not about treating employees (or suppliers or customers) like shit. Wall Street tut tuts about how Costco should be Walmart, and Costco gives them the finger (again – hope the new regime has the same attitude.
(Disclaimer – proud Apple and Costco shareholder since 1999)
Mark S.
@Belafon (formerly anonevent):
I don’t know about 65%, but it might be 60%. Here’s an interesting table of exit polls from the NYT.
Brachiator
@Villago Delenda Est: RE: I don’t see much about contemporary life that is spectacularly different from the past.
The Mayans had iPhones?
Belafon (formerly anonevent)
@jibeaux: I believe a couple of times she has put sources up for it. You might try searching for 65% through the BJ archives and see what you find.
opie jeanne
@Yevgraf: I’ve noticed a bit of it from one of my Mormon cousins and a Mormon friend who is working overseas. The cousin is full of despair, the friend is laughing his ass off.
burnspbesq
@amk:
Works for me. Wingnut bullshit should be called at every opportunity. Challenge the authority for issuing the subpoena. Challenge the relevance of the subpoena’ed documents. Challenge the whole proceeding on res judicata grounds. Challenge every thing that can be challenged.
I’d like to see this ALJ hold Obama in contempt and send the Gerogia State Patrol to the White House to haul his ass off to jail. That would be the comedy highlight of the millenium.
The Moar You Know
@Maude: Please share with all of us where you bought your American-made computer.
burnspbesq
Speaking of OT:
Goin’ to the chapel and we’re …
Congrats to Barney and Jim.
burnspbesq
Barney in Vera Wang. There’s a concept for ya.
srv
No other company could make an iPad for the same money Apple does. Everybody else making tablets is losing money. That difference is in your pocket to spend domestically.
Ed Burtynsky has been documenting for a decade:
http://www.wired.com/science/planetearth/multimedia/2007/06/gallery_burtynsky_china?slide=1&slideView=7
But life at the machiladoras hasn’t been any better for the last few decades:
http://blogs.umass.edu/brunell/files/2011/01/maquiladoras-.jpg
wasabi gasp
Apple can’t fix China. They can fix iPhones. Sometimes it may be economical to just buy a new one.
Anonymous At Work
Mastermix,
From all accounts that I have read, Apple does audit, does report offenders, wags the finger at them, and keeps walking. It doesn’t fine, drop, or otherwise take action against violations of its own code.
Elizabelle
C-Span 1: Obama speech at UPS facility in Las Vegas on natural gas policy. Live now.
burnspbesq
@Anonymous At Work:
Apple does more than most.
See also comment 88.
WereBear
I’ll take this kind of hair-splitting and garment-tearing seriously when the bulk of consumers exhibit a tendency to NOT walk over starving orphans to save a buck.
Like, Wal-Mart going out of business.
daveNYC
@Maude: Yes, they retool factories to make slightly different frames and dashboard chunks, and their suppliers have to retool to make slightly different smaller widgets that are stuck into those widgets.
Now what do you do if you are trying to make an iPhone in an area where there isn’t anyone who makes the not-fucking-car-sized pieces of metal and plastic that are required to build that iPhone? The concept that changing a brake factory to make different brakes is less complicated than somehow converting it to make circuit boards and <1cm screws should not be that difficult to grasp.
Gus
@JPL: If the Republicans get their wish and manage to push right to work legislation in all 50 states, we might get manufacturing back in this country. With FoxConn like conditions of course.
Gus
@Amir Khalid: Maybe they should buy Greece and retire to the Islands.
brewmn
@The Moar You Know: you obviously don’t know anything this issue. A shareholder somply cannot sue a corporation for failing to maximize profits by any and all means necessary. The officers of a corporation have wide latitude in deciding how to run their businesses without threat of a shareholder lawsuit. It’s called th “business judgment rule;” you should look it up.
Odie Hugh Manatee
@Brian S:
I never said that they were a “super-progressive” company.
Apple gets what they want in China because they are the WalMart of computer companies, they can demand lower prices and costs because of the volume they move.
/that ought to fire ’em up a bit…
;p
Martin
Understanding what Apple could do here I think requires understanding the degree of power that companies can wield against one another.
Yeah, Apple had a huge quarter, and they certainly can afford to do better, but in order for Foxconn to raise standards to appease Apple, they have to make a calculation of whether it’s better for them to spend the money to appease Apple and keep that business, or lose all of the non-Apple business that might go somewhere else.
In other words, there’s an opportunity cost here for Foxconn that Apple needs to cover, so if Apple demands that Foxconn raise wages by $1 per hour, then Foxconn effectively needs to balance that against the cost of not raising every other worker doing stuff not for Apple by $1 per hour.
Remember, these aren’t Apple employees, they’re Foxconn employees and presumably the work they do for HP and the work they do for Apple get intermixed to some degree by the employees (they may move from iPads one week to HP laptops the next) and their salaries aren’t going to bounce around depending on whose doodads they’re assembling today.
So, Apple doesn’t really get a lot of power until they’re so critical to Foxconn that Foxconn can’t afford to lose them as a customer. Apple is becoming in more and more markets a monopsony. They’re such a large buyer of, for instance, flash memory, that every seller on the market has to work with them, because if you don’t work with Apple, you lose about half of the market right there. Same for touch screens. Becoming the same for more and more things. It’s not yet true for assembly, but it’s gotten a LOT closer but only in the last year. Even earlier in 2011, Foxconn got more work from HP than from Apple, and if HP doesn’t want to pay, Foxconn would be more inclined to dump Apple than dump HP. That’s just how it works in this game. One reason why Apple has been able to get more traction on their supplier rights over time is because they’re more and more powerful in the market. Don’t want to clean up your aluminum milling operation? Fine. Apple will back out and you’ll lose 75% of your business. But when Apple was only 25% of their business, cleaning up the operation risked the 75% of the other customers, and Apple would have to tread carefully or lose that. Apple’s growth has been VERY fast, so a lot of this power has come VERY recently.
This isn’t a dynamic we’re unfamiliar with. This was the same dynamic that led to the auto and bank bailouts. They wielded enough power over the national economy that we couldn’t face not keeping them as part of the economy. Apple may now have as much power over Foxconn as the Chinese central government does, because the contracts Apple is signing now are way the fuck bigger than the ones they signed last year, and probably 2x the size of what HP or anyone else is writing. (For each year that the iPhone has been on the market, Apple has sold more phones than all previous years combined. That is, in 2011 Apple sold more iPhones than in 2007+2008+2009+2010. They’ve done this each year and could do it again in 2012 as they hit all the major Chinese carriers and enter Russia, India, and Brazil.)
The point is that the profits are nice, but they don’t give Apple influence over Foxconn. They give Apple the ability to go somewhere else, but there really is nowhere else. The work is too precise and a bit too technical to automate or turn over to unskilled labor. And nobody can train and rally hundreds of thousands of worker, deal with all of the supply chain issues that would result from relocating, and so on – at least, not without completely killing Apple’s momentum (which would defeat the purpose – Apple can only be asked to change this if they still have the power to do so. If you hand that power back to HP, you wind up back where you started).
I think the best opening here for change is automation catching up with labor – which is happening. We’re pretty much on the verge of being able to replace those assembly workers with robots. That’s inevitable, so don’t cry over it happening now vs later. If Apple pours components into one end of a factory and gets precise iPhones out the other end, it doesn’t matter if there are people or robots in there, provided the result is the same. In any economic system where you have that, the people will be pushed out and asked to move into endeavors that are better suited for people. Get over it. Compare it to their retail stores where they pay a premium on labor – there’s no replacing good workers there, and they don’t try to. If Apple can automate large chunks of the assembly process, then things open up. The jobs shift from piecemeal work to setting up, programming, maintaining the factory – which is much better work, and quite a lot of it. And there’s a greater opportunity for that work to move to the US, provided that the supply chain can work. China has really gamed the system in their favor there, though. If Apple did open up a US factory and ran out of something, it’d be a day before they could restock, because the stock is almost all made in China, or Japan, Taiwan, etc. With assembly in China, that delay is at most hours, and often minutes because a lot of the components that to into their products come out of the same damn Foxconn plant.
Apple reportedly is looking into buying a very large number of assembly robots. I think some of what they want to do is again outstrip the ability of their competition to keep up. If they can move to an assembly that humans simply can’t do, because components are too small, too tightly placed, etc. then their competition needs to make the same investment. Apple simply plans to outspend the competition on advancements – something they’ve always done as they could afford. Estimates are perhaps a million assembly robots, deployed around the world. Lots of markets are protectionist – Brazil, Turkey, India. You want to sell in those markets, you need to have a foot firmly planted in their labor market to do it, but many of them suffer from the same problem as the US – not enough trained workers, etc. (India has the workers, but has other issues which have been problematic for US companies.) Apple would effectively airdrop robots in, hire support staff, and go. We’ll see if it happens or not. The new CEO is their old operations guy. He’s considered to the best operations guy on earth and he’s got $100B to play with. If Obama wants to change manufacturing in the US, there’s a guy in California with the expertise and money to change it. I think Apple wants to change it. I don’t think they know how to solve half of the problems, though.
@Emma Anne: Apple shareholder since 99? Bold call. They still looked like shit in 99.
Emma Anne
Odie – Heh. If I had invested my entire (tiny) IRA in Apple at the time I would now be a multimillionaire. Instead I invested a token amount as an ode to fan-girlism, and AAPL has still been very very good to me.
Also – good post, even though I am the only one around still to read it.
Brachiator
Chinese Citizens Comment on Foxconn, Apple, and Being From the Birthplace of the World’s ElectronicsFrom gizmodo
Martin
@Odie Hugh Manatee:
Sorta. There’s more choice in there by the other companies, which you skip over. Apple has never sold more phones than Samsung, but Apple gets better prices than Samsung because Samsung sells 50 different models of phone with 20 different screens, 50 different keyboards, 10 different CPUs, etc. Apple typically hasn’t sold more overall, but because Apple was willing to limit their phone introductions to ONE model per year, instead of 50, they could take a more limited volume, concentrate it, and achieve better economies of scale. Look at the retina display Apple introduced in the iPhone 4. They sold about 70 million phones with that screen prior to the iPhone 4S. But they used the same screen in the iPod Touch over that time, so they sold another 30 million devices with that screen. Then the 4S came out and is using the same screen again! Another 40 million units with that screen just last quarter. Apple will probably ship 250 million units using the same screen before they retire it.
Even when the iPhone was <20% marketshare last year, they were still winning on economies because of the specific design decisions they made. Nobody could place an order for 100 million screens. Shit, nobody could place an order for 20 million. Apple knew they'd keep using this screen and could pre fund the screen suppliers billions of dollars to build out new plants and capacity, and have that money paid back interest free in guaranteed orders. Apple gets an unbelievable price on phones, the screen makers get free capital to build out capacity *and* a guaranteed order to keep that factory running, and Apple kicks their competition out of the price market and guarantees that they also have supply because nobody can outbid them. When the tsunami hit Japan, Apple sent executives to Japan the next day literally with cash in hand to personally pay for rebuilding for their key suppliers and guarantee orders.
Edit: I should note that Apple gets better prices than Samsung, even when Samsung is fabricating Apple’s CPU (in Texas) and Samsung makes their own screens and CPUs. Apple gets better prices than their own supplier does.
Don't discount the nature of the decisions Apple made to get here, and the nature of the decisions everyone else made. Even when Apple was smaller, they were coming out ahead.
jh
IMO,
We should have never started doing business with an undemocratic, totalitarian, regime like China in the first goddamned place.
Isn’t that the point of tariffs, blockades and trade agreements?
To curb injustices of the sort which take place at Foxconn and every other developing world contract manufacturer, and prevent them from being profitable to the extent that reform becomes mandatory?
Isn’t that why Apartheid South Africa was boycotted and pressured in the UN for all those years?
Or is it just that the profits are too great for our corporations (and end consumers) to bother themseleves with petty concerns like people working crushing hours, for a pittance, in Dickensian conditions?
Becasue from where I stand, this issue is the same issue that has dogged our civilization since the days of chattel slavery.
Placing profits over people.
Everything else is just sophistry.
dollared
This really isn’t that hard. We need to enforce labor laws at our border. The supply chain issues are a fallacy, as the Brazilian iPad shows.
Inspect, enforce, import. Labor and environmental laws. We are a sovereign nation, we have every right to have standards about what we consume.
As for the Balloon Juicers who think the magical free market and The Power of Shareholders cannot be defeated, why do you bother reading the blogs? If the world cannot be changed for the better, you don’t belong on the liberal/progressive/Democratic side of the aisle.
pseudonymous in nc
I’m basically with Martin here. You have to accept that rapid industrialization is, in terms of work conditions, pretty rough, while being mindful that there’s a century and more of industrial history that sets a precedent for what should happen in China, and that it won’t take anywhere near as long as it did in the developed world.
Apple is the standout because it is a full-service operation and because it’s making massive profits. It can and should do more from that position, but there’s only so much it can do.
CDWard
F**k Apple and it’s apologists. I have never bought an Apple product and I never will.
Martin
@dollared:
Brazil shows one, and possibly two different variables in this.
1) Brazil is protectionist, so Brazil has made the cost of entering their market high enough to overcome the supply chain costs. So, in order for Apple to get into Brazil, they need to convince Foxconn to go into Brazil, or partner with a Brazilian manufacturer.
Now, Brazil is a large labor market, but they don’t have skilled labor enough to become a big export market for Apple. Basically, they’ll cover manufacturing for sales within Brazil, and possibly some of their neighbors, but odds are Apple will still need to rely on China to produce iPads destined for much of South America.
2) This is the newer variable which is coming with Apple’s size. Apple makes a fuckton of money, but they really aren’t that large. The only market they have no headroom in is iPods. They own that market. For phones, Apple still has less than 5% of the market in terms of units (they have ~60% of the profits). They’d have to sell in the billions to dominate the market. For computers, it’s about the same (and about the same on profits). For iPads, it’s a new market, and nobody knows how large it will get, but tablets outsold PCs in the US last quarter, so half a billion units per year seems not outrageous. Apple sold less than 10% of that last year.
So, Apple has cash, but volume is just starting to come to them. And for things like supply chain, volume is what matters. Apple’s really just now getting large enough in volume to run multiple supply chains efficiently, and we’re starting to see them change due to that. New plant in Brazil is part of that (they’ve wanted to go in prior to this, and certainly had the cash to, so the thinking is that the volume wasn’t there). They’re opening up new facilities in Israel as well. So Apple may feel that they are now large enough that they can start to steer that supply chain. But I don’t think they felt they could do too much prior to now.
I know it seems a given, but Apple is doubling volume every year. That’s HUGE growth, and just holding the ship together when you grow that fast is pretty damn hard, let alone changing course, particularly given Apple’s management model. The iPad isn’t even 2 years old. The iPhone isn’t even 5. This has all happened VERY quickly.
One thing that nobody has bothered to take much advantage of yet, is that Apple is the only company in the industry that lists all of their suppliers. Nobody needs to go through Apple to find out about labor, they can go straight to the suppliers. Why aren’t they?
Martin
@CDWard:
Nobody asked you to. It’s a phone. Buy what you want.
But don’t get pissed at us when we point out that the non-Apple PC, tablet, and phone that you buy was more than likely built in the same goddamn Foxconn plant as Apple’s PC, tablet, and phone, under the same working conditions, by the same employees.
dollared
@Martin: Hi Martin, I’m not sure where you and I agree and disagree. Truth is that assembly can be done anywhere there are 1)people and 2) a port and 3) an airport. Rail service and roads are nice too, but less essential.
And assembly is always where reconstruction of the supply chain begins. And the US, where the nVidia chips are made and the products are sold, is the easiest place in teh world to reconstruct the supply chain.
It is not about supply chain. It is not about Apple or Dell or the ODMs. It is about US manufacturing and importation policies, which are fucking stupid and harmful to the well being of the American people – and the national defense, by the way.
jh
It’s a simple as right and wrong.
We are having people subsidize our consumption with their own misery.
Openly, brazenly and without apology.
We don’t tolerate it within our own borders at least not to the extent that we tolerate it elsewhere, and for for good reason.
It’s inhumane, exploitative, unethical and in the case of China, taking place at the expense of workers in the west who shed a lot of blood to obtain decent working conditions and wages, only to have the rug pulled out from under them in the name of corporate greed.
I will say it again, why are we allowing anyone to do business with these people?
China (and the other nations seeking to ape their “success”)shouldn’t have been granted the priviledge of becoming the de facto manufacturing workshop for the world without having been required, on a macro-scale to meet some miminum level of standards for a civilized nation.
People are speaking as though it is an inexorable force of nature that cannot be stopped, curbed or controlled but in reality, this is the direct result of conscious decions made by industry and government.
THAT is what has to change. The laws governing who we will trade with and under what conditions.
That is the only way the playing field will be level. As it stands, Chinese industry has zero incentive to change.
Judas Escargot
It’s beginning to be generally accepted among serious people that Peak Oil has arrived. Shipping costs will only rise, which will disrupt the current manufacturing/shipping model.
Meanwhile, in 15-20 years, things like iPhones (or their then-equivalents) are going to be “printed”… eventually to order. And automation/robotics technology continues to advance, apace, driving wages further down.
Put these three trends together, and one realizes that the Chinese government has made a lot of promises to its 1.3 billion+ people that it simply will not be able to keep. And this, in the culture that basically invented the peasant-riot centuries before the US even existed.
If the current Chinese government keeps putting all its proverbial eggs into the basket of manufacturing, it’s not going to end well for them.
Tom65
*Shrug* You want someone to blame? Look in the mirror. Anyone who says they’re willing to pay more to salve their guilt is absolutely full of shit.
dollared
@Tom65: You are the 1%’s wet dream – hopeless and powerless.
jh
@Tom65:
The current arrangment of our political and economic system makes it impossible to purchase consumer goods without in some way, subsidizing, enabling or abetting injustice here or abroad.
This is far moreso a political problem, than one of personal choice. Monied interests have such pull in our political system as to nullify anything that will have an adverse effect on their accumulation of wealth.
That being said, it is necessary to acknowledge that we are all guilty to the degree that we have allowed money, rather than rational debate and responsible citizenship to be the fuel that drives our democracy.
Martin
@pseudonymous in nc:
I think there’s an unintended consequence of their management model here. Apple’s model is basically ‘do everything in the executive suite’. That is, there’s very few people that carry full responsibility for the company. If something goes wrong, or they screw up a market, or miss earnings, or whatever, I can tell you the name of the people responsible. Apple doesn’t have independent divisions, with division heads, and so on. If the new iPad has a battery problem, the CEO was involved in the design and production of the device, and the CEO Tim Cook along with Bob Mansfield and Jeff Williams carry 100% of that responsibility. There’s really no room to pass bucks at Apple. There’s no competing for markets between divisions and that kind of crap, because there’s no divisions.
The upside is that the CEO knows everything that’s going on, because everything happens in his office. He knows every product, and why every product is the way it is, every store, and why every store is where it is. If you want a model of executive accountability, Apple is highly desirable – and it’s kept the company very drama-free. There are no real scandals there. There’s no division gaming the books. It’s all very clean and linear and lots of black and white lines.
The catch is that the executives have very limited bandwidth, which is why Apple has very few products. The only way to scale up and sell 50 different models of phones is to delegate those decisions out of the executives suite and instead have the executives focus solely on intangibles, like balance sheets and so on. That’s not going to happen at Apple. That is the DNA of the company since Steve’s return.
The downside is that change is extremely expensive and things tend to be all-in kinds of decisions. Other companies may be able to run 30 different manufacturing plants in 30 different countries with 30 different sets of import/export/labor laws without a problem, but it’s going to be a problem for Apple, which is why they gave that job largely to Foxconn. They just don’t have the executive bandwidth to run a US supply chain to make 20% of their products in the US for the sake of doing it. Money has nothing to do with that. It’s simply a matter of having to choose to either move the responsibility out of the executive suite (which they won’t do) or find a solution that will work with the time the executives have available or leave the situation until a solution presents itself. They won’t do this piecemeal or half-assed, because to them, that’s more expensive – time is their constraint, not money. If they do it, they’ll do once and for all, and whatever variables that were fucking up the tidy solution will get eliminated. Thats why when Apple introduces new products, they tend to eliminate old ones (almost always profitable ones) rather than try and juggle both. They don’t really multitask. They do a few things really damn well.
With that in mind, I wouldn’t bet against Apple just plunking down however many billions it costs to buy a million or so robots to automate assembly, reducing the overall labor complication by a LOT, by putting machines on the front line, putting people in charge of keeping the machines running, and basically turning the whole operation into a big low-end clean room, something that they can plop down in whatever country they need, and have programming and diagnostic support provided remotely if needed. If they can’t find skilled labor in Brazil or wherever, they can still at least monitor and reprogram the machines in California (or more likely from Japan or Germany, until we fix our education problems). Basically, redefine how electronics assembly is done. It’s a very Apple solution to the problem.
jh
And PS,
I just went to Shenzen, China this past May. I’ve seen the factories, and the worker housing. And I’ve tasted the air pollution on my own tongue.
It’s very easy to glibly talk about the “neccessity” of all of this organized suffering until you’ve seen it first hand.
I have seen a great many terrible things in my short time on this earth, but few things have shaken me to my very core as seeing the writings of Upton Sinclair, updated, upscaled and in High Definition 3D for the 21st century.
Judas Escargot
@Martin:
I have four words for you: Michael Spindler. Gil Amelio.
Tim Cook is Jobs’ groomed successor, as close to a ‘brain download’ of the late CEO as is possible with flesh in blood… but who will succeed him when the time comes?
VincentN
What I really hate are the arguments that while the Chinese are working in horrible conditions at least it’s better than what they would otherwise be doing on the farms or whatever.
That’s basically like saying that you shouldn’t complain about being beaten twice a day because you could be beaten 5 times a day like your ancestors instead. Be grateful for your scraps, peasant!
Martin
@dollared:
I don’t disagree. My main point is that we can’t just wish and make that change. We can force it to change through legislation, but if the reasonable forces that have prevented it from happening aren’t addressed, than we’re just going to return to some of the stupid shit we had in the 70s when we were regulating trucking routes.
If the issue is wages, then that’s a straightforward solution – you can cover that through tax policy and so on, and make it just as expensive to pay Chinese employees as US employees. That’s not necessarily easy to get through Congress, but you can balance that equation.
If the issue is you need 700,000 workers and the US doesn’t have 700,000 workers, or you need 20,000 industrial engineers and the US only produces 4,000 per year. Well, that’s a whole other problem.
Yeah, you just need an airport and a port, but even that gets complicated. Apple produces about a 747 worth of goods every hour. But break that down by where goods need to go. Do they need a 747 worth of Apple goods in Ireland? Probably not. So what else goes in that plane? Are there other industries nearby with similar destinations. This is where Amazon solved their shipping cost problems. Basically, they fill the trucks and ensure routes can operate by putting boxes in every route every day, and everyone else pays vastly more for delivery subsiding Amazon, because they don’t have enough guaranteed volume individually to keep a route open. So, what other industries are nearby to fill planes? Or are they all scattered across the country?
And that’s just outbound. What about inbound? Where are all of the components coming from? At Foxconn, a lot of them are coming out of the same plant. Foxconn makes PCBs and other components. The other components are literally coming from plants next door, or across town. It’s not a plane flight away, it’s at most a truck drive away. Does Apple need a 747 worth of light sensors to justify filling that plane? No way. That’s a year’s supply. What else is coming on that plane that Apple needs? What else is coming for other industries in the area?
One of the problems that has prevented these smaller manufacturing (smaller in terms of what they produce) from working as efficiently as larger manufacturing is that they’re less dependent on shipping and intermodal freight. In that model, you can string a port and an railway and trucks together and still get fairly efficient distribution. Electronics is very just-in-time. Components (and outputs) are small enough that they can all be efficiently handled by air. But ULDs don’t lend themselves to those kinds of chains. It’s much more point-to-point so we go backwards a bit here in that concentrated hubs work better, so you really need to try and get a critical mass of industry in one area for it to work out.
So, how do we do that? Well, there’s no assemblers in the US that could do this, so either Apple would need to drop a fuckton of money on one or more of them to get up to speed, or the government would need to help. You think Congress would do that and cede that whole enterprise zone to one state? I agree with the idea the other day that Detroit should be that zone. It’s got the physical infrastructure to do it. So, who’s going to hand Detroit the money for a quarter million jobs? What companies are going to be able to receive this and get it right (I’ll note here that Foxconn has subsidiaries in the US), who else is going to go in with Apple, and where is all of the money going to come from? And who is going to convince Apple and others that Detroit deserves this given the state of the education system in Michigan, the heavy handed tactics by the Republican governor and legislature, and the fact that just about the only thing to hang the whole training system off of is the still excellent UMich? Tech companies like liberal California for a reason – high costs and all. So we’ve got conflicts of interest here for Congress (nobody is going to want to subsidize Michigan with tax revenue from the other 49 states, except for Michigans senators and congressmen) and we’ve got conflicts of interest between the federal and state levels – and probably local as well once you select Detroit as the zone.
It’s really a tough nut to crack. It just bothers me when everyone tries to skirt around the tough issues and just demand that someone clap louder. China did it by drawing a circle on the map and dictating that everything happen inside that circle, and they’ll pay for it. Done. We don’t work that way. We need the same outcome, but from a process that suggests the outcome is probably impossible.
Martin
@Judas Escargot: But none of that was in Apple’s DNA prior to Jobs return. I think it happened in part due to Steve learning from his failures, and in part from how Pixar operated, which was very similar. At Pixar, the entirety of the company hung on each picture being successful because early on they could only make one at a time. So the entire executive team focused on one thing. That then spread out a bit, but not so much that the model needed to change. Apple has that same model, just applied to gadgets. Nobody else has that model in the industry. Gil and Spindler and even Steve in the first iteration were playing from a much more standard playbook, and the results speak for themselves. The company was 30 days from bankruptcy.
Apple now has a huge string of successes to learn from, and they’ve reinvested massively in reinforcing the management and business model. I think there’s only one guarantee at the company, and it’s that won’t change. They’ll get out of the phone and PC business before they change that. They’ve embarrassed every business leader in the US (and basically all business schools as well). From bankruptcy to the largest US company and still one of the fastest growing companies, in 15 years. You can’t argue with the formula, and they did it basically by telling the MBAs to go fuck themselves.
Who’ll succeed Cook? I think most any of the leadership could. They’ve all been doing this together for years. 4 hours a day they meet as a group. I’d put Scott Forstall as the most likely near term. I think Jeff Williams long term. Schiller probably doesn’t want it. Ive certainly doesn’t. Oppenheimer won’t be tapped because Apple will remain product driven, rather than balance sheet driven.
If you need any more demonstration, look at JCPenny today. Ron Johnson (former Apple retail guy – launched the Apple Stores, left in Nov.) rolled out JCPenney’s new plans. Stock up 20% today. He’s reading from Apple’s playbook from top to bottom.
jh
^^^^Martin,
You just hit the nail on the head.
Things like the Chinese Enterprise zones are extremely hard to enact in a republic like ours when you have multiple states competing for a peice of the pie.
That’s a huge advantage of having a powerful, dictatorial government like China.
In my mind, that’s the biggest nut to crack, bigger IMO than the education or supply chain problem.
There are a WHOLE LOT of skilled blue collar guys who aren’t very busy who would do a bang up job educating a workforce. My ex-father in law was one of them. (Line worker, who went back to school for industrial engineering and did work for both GM and Chrysler. Right now he’s with a DoD contractor and they are begging him not to retire. )
A workforce, incidentally, that we would have no problem mobilizing if people had reasonable assurances that there were a good job with a decent wage and reasonable conditions waiting at the end of the pipeline.
China has been taking marginally educated people out of substistence farming in the rural hinterlands and turning them into factory workers in a relatively short span of time.
We could reinvest in our manufacturing base, but we are going to have to create the legislative framework for doing so while subsidizing the hell out of it.
While I don’t see that happening as long as the modern Republican party is filled with race-to-the-bottom, “right to work” assholes, at some point we are going to have to bite the bullet, let Michigan, or California or Texas or wherever be the “chosen place”, dump money into vocational training, subisidize people seeking engineering degrees and get on with it.
Emma Anne
@Martin:
Do you blog anywhere, Martin? I have learned so much from your posts.
Martin
@jh:
They’re all related to some degree. The US is sometimes overly competitive. And competition can be both constructive and destructive – though we talk about it as only constructive. The competition to spend tax dollars is a good example of it being destructive. Congress earmarking programs to death, and legislatures funneling money into prisons rather than schools are both examples. A lot of the opposition to high speed rail here in CA is coming from the airlines because a lot of our air travel here is regional – and that’s what the high speed rail would replace. But high speed rail could also provide competition against that need to centralize by allow components to be shipped by rail in the same timeframe as by plane, but with greater freedom toward destination. That is, CA could connect the port of LA and the port of Oakland, two of the largest in the country, along with Ontario airport (mostly freight) to cities all up and down the state. Now you have the potential to create a chain of manufacturing hubs all connected by high speed rail, with ports at the end and cargo air terminals along the route. You could spread those jobs from SD to SF and all through the central valley (where land and labor is as cheap as Ohio) and have goods just an hour or so from ports and from each other. And because rail is more modular, you don’t need to hit the scales that air cargo requires to be efficient, but you get the speed that air promises. Doesn’t help the whole country, but it’d make CA look like Germany for manufacturing, and I’ll take that. And it’s something to build off of. The feds could easily extend that up to Seattle and into Canada, out to Vegas, Phoenix, etc. and do the same thing in Texas with the port of Houston and work west, north, and east.
The training is hard. The logical place to do it is at the community level, and that’s the hardest level for large multinationals to deal with, and the hardest to get money down to. If the work is already there and you’re training up a workforce for change, it’s easier. But we’re talking about entering a new market – and there’s no relationship there. That’s usually where government needs to do the heavy lifting until that interdependency between the industry and community develops and can self-sustain. That just seems impossible given the assholes that keep getting elected.
The mobilization is still hard. Our penchant for home ownership means that there’s a lot of inertia to overcome to mobilize the workforce. Don’t discount that. A $200K house costs $12K out of pocket to sell. That’s $6 an hour for a year labor- basically minimum wage. That’s a LOT. If you’ve taken a gain on the house, it’s easier to swallow, but if you haven’t, you need to pay before the job happens. And that excludes the cost of moving your stuff (couple dollars per pound). And that also excludes the intangible costs of moving your family (spouse may have a job, kids in school, etc.) And when you land, you need some assurances that the job will hold long enough to cover the cost of the move (if the employer doesn’t pay for the move itself). So either you need to put money up front to get the worker, or you need a guarantee on the back end, or you need social policy to bridge that gap. Americans will be mobile with those in place which they tend to be for high paying professional jobs, but that’s hard to get for manufacturing jobs because the fixed cost of the move is so large relative to the workers wage.
What makes this work for China still, if you read the articles is that the workforce Foxconn, etc. are relying on are young, single people. They aren’t retraining older workers. Their one child policy created a generation of young people that are expected to single-handedly carry their family out of poverty. That’s really the catalyst for this. In the US, we do it in reverse – we still carry our kids even after college. There are 6 houses on my street and 4 of them have adult children living in them. 3 of them have at least 3 generations in the house and one of those has 4. So the size of the mobile Chinese workforce is roughly the size of their 20-something workforce. Nobody there is packing up homes until the money is earned. That’s a very different scenario to what we’re facing, and what people are advocating for.
And another problem we’re seeing here in the US is the complete collapse of skills training of young people. It used to be that you could expect a certain percentage of students going to college to know how to weld or operate tools – stuff they learned from their parents and grandparents, and they could train their classmates, etc. Just basic safety, physical dexterity, kinds of stuff would be known. That’s almost totally gone now. The generation that did this as a standard practice is dead and it’s not getting passed down. So the training really needs to start from zero, and that’s hard. It’s hard not just to do, but also to motivate, because there’s a lot of young people you ask to go stand at a drill press and they’ll look at you like you asked them to jump to the moon. It’s a harder sell than you might think.
Odie Hugh Manatee
@Martin: “For phones, Apple still has less than 5% of the market in terms of units (they have ~60% of the profits).”
They have less than 5% of the phone market and yet collect around 60% of the profits?! Apple may be one smart company but their iPhone owners stupid as fuck. Actually, that’s a pretty good business plan.
As they say, a fool and their money are soon parted. ;p
Martin
@Emma Anne: No. I keep being asked to, but I haven’t gotten around to it.
I invested in Apple in 1997, right about when Steve took back over as CEO. It was my first stock pick and I still hold it. I have a sort of anti-diversification investing attitude. I’m pretty diversified, but for individual stocks, my attitude is that either you know what you hold, or you don’t – and if you don’t you shouldn’t be in it. So, most of my money goes into the S&P 500 because someone might know what Walmart is doing, but I sure as hell don’t, so I should just spread it out as far and wide as possible and trust that the whole stock market doesn’t implode (2008 had me questioning that wisdom, btw). But I invest all of my time in Apple. I’ll know one stock and I’ll know it well enough to know when I should be in or out.
I’m not so much of an Apple fanboy as I am an AAPL stalker. I finally broke down and bought an iPhone when the 4S came out. Hauled a shitty Sony Ericsson around until then. I’ll buy an iPad when the next one ships (no point buying an iPad until they get a retina display). But what’s most interesting to me about the company is the management structure and the business model – and particularly the retail/consumer experience side of that. People really don’t understand at all why Apple is successful because it tends to run completely counter to what the MBAs espouse, so they get this bullshit ‘cult’ label attached to them because the business experts can’t seem to figure out why Apple is eating everyone’s lunch.
But yeah, I know way too much about Apple. There’s a lot of bad consequences there, but when you look at how events play out and the realities of what everyone in the market is doing, you realize that those bad consequences rarely result from bad intentions. Sometimes good intentions lead to bad consequences, and sometimes the bad consequences are simply out of your control. That said, Apple has an opportunity here. They’re becoming the horse more than the cart, and if they really want to do something here in the US, there’s a political opportunity that they won’t usually get. If anything holds them back from that, I’m afraid it’ll be that they’re very introverted. They probably need Obama to come to them, because I don’t really see them reaching out.
Elie
@Martin:
An amazing analysis Martin…
Thanks
Mr Furious
Fascinating stuff, Martin. Thanks.
JoeShabadoo
@Martin:
They know why. Seeing why Apple is successful is easy. Other companies reacting in time is the difficult part because of their different structures, not understanding why Apple is successful.