Last quarter Apple churned out extraordinary profits: $13.06bn of them. But according to a New York Times article, Apple achieved these amazing profits on the backs of Chinese workers, who are subjected to punishing work conditions to ensure high-quality iPhones and iPads at the lowest possible price. While the company claims …
You don't need to pay more
They are making record profits
think they would absorb the extra costs out of their already massive profits?
Or just put it on the price YOU AND I have to pay?
Will they then put 'FAIRTRADE' logos on the packaging?
Deep down you all know the answer.
I agree with you in principle
really, they could take a marginal hit on their profit margin and make a huge difference for their work force, but they won't. We have a system which rewards good quarterly and end of year results at almost any cost. OK, I'm pretty sure they don't lubricate the assembly lines with the blood of murdered puppies, but you get the idea. Bluntly, they'll do the minimum they can get away with.
And it's not like they're paying any dividends at the moment, so to their shareholders would see no difference.
"They'll do the minimum they can get away with"
No, actually they'll do less than the minimum. After the explosion at Foxconn, Apple moved some of their iPad manufacture to Pegatron - who have an even worse record for workers' rights, if such is possible. Apple don't give a damn, so long as their devices are made for the cheapest price and they make the most money.
Incidentally, during the trial production run at Pegatron there was another minor explosion. It is believed that both explosions were caused by aluminium dust catching fire. Other manufacturers use aluminium backs on their tablets, so why is it only Apple who have assembly-line fires?
Apple's situation is interesting. They clearly operate on the lines of charging the very most that the market will accept and are making hay whilst the sun shines. Clearly at some point in the future this will come to an end. The market (in size) will no longer be prepared to pay their premium and they will once more become niche. Their competitors currently do not innovate as much as they need to and the company itself is once more becoming a touch too arrogant. End it will, but who knows when. I speak as someone who has bought their products but is rapidly getting pissed off by their attitude.
If they had to pay more to the workers it would not only impinge on prices for consumers it would impinge on Apple's profits because less people will buy and Apple want as big a cut as possible. I would imagine Apple have a pretty hefty markup on their goods. Apple like any other company looks to sell something built as cheaply as possible at the highest price people are willing to stomach. If Apple were to sell their wares at prices only marginally higher than the cost of manufacture and shipping I doubt it would be anywhere near what they actually charge for it.
It's simple really. People want cheaper electronic goods. Company X wants as much profit as possible. Why do you think they make it over there in the first place? Labour costs are much much smaller obviously. If you want to even up things then perhaps you should be asking them to make the damned goods in America and boosting US jobs instead.
UNIT COST OF IPHONE 4S is
Less than $80.
That is an undisputed fact and includes all costs, development, marketing, transport an materials.
So you tell me if the markup is excessive or not?
A quick Google for 'iphone 4s unit cost' indicates that your choice of adjective is excessively optimistic; the second result says $188 just for parts, the third says $203 for same. Where's your sub-$80 figure coming from? (Even iSuppli says $188 just for BOM!)
A cost analysis was made here in the UK , £91 all in and they retail at £600, so that is a lotta profit.
@ Matt Asay
So, you want *Apple* to do this, but you're pretty much indifferent to all the other tech giants doing the same thing?
And for the lazy sod who claimed this: "I would imagine Apple have a pretty hefty markup on their goods. "
If that were so, the PC clone manufacturers should be able to apply their one and only business model and undercut the iPhone and iPad on price for the same quality and specs. So where are these devices, then?
@Anonymous Coward @ 20:02 GMT
Please post the source of your "undisputed fact". Everything I've seen says those component/product price guessing sites gets it wrong.
No verifiable attribution = not a fact.
Forgot to take off caps-lock for the title? To distracted by making shit up. You've been caught out for that before...
Fuck off with your tl:dr, you've obviously come to the wrong place, Reg readers are not put off by an article with more than 140 chars.
PS Is "citation needed" the end of research as we know it?
PPS I could find out myself, but it's much easier to append "Citation needed" & let some other fucker do it for me :-)
@ No verifiable attribution = not a fact
Attribution my arse, you're definitely of the wikipedia/facebook/twitter generation, maybe that's your problem.
Try finding out stuff yourself, you know, like, come on: use a library, "google" (verb) the fucker even!
Thank you Mr. Lazy
The Economist quotes $275 as the total production cost of an I-pad, 2 % of which goes on Chinese labour:
Doesn't strike me as to wild to think of I-phone costing around a quarter of this to make.
Matt Asay talking out of his arse by saying that better standards would push the price up. What is saying is is that he is open to some emotional black mail. Foxconn can double everyone's salaries and it would add at most $10 to the price. Call it a round $100 and everyone's happy. Well, except the Foxconn employees who still cannot bring their kids to the city or take part in the local healthcare scheme. But that must be good as we all know universal healthcare is the spawn of the devil. I'll put it in terms that even the reddest of redneck might understand: Foxconn employees have to shop at the company store.
Much as I detest economists who think that economics has the solution to all problems, I detest even further half-baked business plans by people who have not the slightest grasp of the subject.
All over the place. They just don't have an apple logo on them. My PC was home built and I have a lot more bang for my buck then any MAC. My android phone does everything your iJesusphone can and it cost a lot less.
But only $8 for the manufacturing??
Whether the BOM costs $180, $188 or $203 isn't really the issue here... its the fact that they're only paying $8 for the whole of the manufacturing process - this is what the factory workers get paid from...
I work in electronics in the UK and that's an incredibly low figure - it should be more like 10-15% of the BOM costs - so more like $18-25 to be reasonable and 'fair'.
If you want "fair trade" then talk to Apple about social responsibility and corporate responsibility and paying a pair amount to get the assembly work done... if they took $10 from the sticker price and moved it to the manufacturing cost they (Apple) would still make billions and those that actually 'make' it, working on the shop floor, would be hugely better off AND the price would stay the same.
So nothing to back up your claimed cost (and remember iSupply etc were talking about the raw cost of parts, not the assembled, packaged, delivered cost, along with software, licensing and certification expenses on top of that) and you ignore that the UK price is actually £499, £99.80 of which is VAT (sales tax for the folks from the US). The margins are nothing like those you are claiming.
Apples margin for the entire company (profit/revenue) is 44.7%. This is not unit margin, this is after all the overheads and indirect costs are taken into account. So the unit margin (gross profit/revenue) will be considerably higher. It's all in their last annual report.
As for the cloners. There are two big differences between Apple and the PC world.
1. Superior design and marketing - no one's been able to match their products, although the various android vendors are getting closer
2. IP and patents - which Apple guard viciously. Just ask Samsung
When you get to Apple-like target markets
you're catering largely to people who like to buy the expensive product (a variant on the 'you get what you pay for' demographic, that presumably believe expensive and rip-off are mutually exclusive terms), so the market for cheaper high-quality products likely isn't so great that these other exploiters of human vice would want to spend more than they do for the products they already make.
@EWI: Clones can't undercut Apple on their product because,
wait for it,
unlike IBM, Apple have IP protection out the wahzoo to prevent them from doing so.
They can do it as soon they want
With their profit margins, they can start being 'nice' to people as soon as they want. Its a matter of will and determination versus greed and shareholder value. They don't need another $10 extra from the shiny-shiny brigade.
Not to be a fanboi but..
I've had a lot of outsourcing/BPO experience in the last five years and if you saw the quality of some of the operations I've seen, you'd be giving Apple a pat on the back.
Lets get one thing straight. These aren't Apple employees, they're simply a company servicing Apple. It's really the responsibility of the outsourced company owners to ensure workers are getting a fair deal. Regardless of this, Apple steps up to the mark, carries out inspections, sanctions itself and improves the conditions of those companies.
Look at how many companies outsource the making of their products and have absolutely no idea about the working conditions of the employees. They simply pay that outsourced company a specific amount per manufactured item.
Yes the working conditions might not be ideal but Apple are trying to make things better. A lot of commenters don't seem to realise that they're often risking a LOT of peoples jobs by "helping" these poor employees have a better working life. The better the conditions, wages, benefits, and so on, the less money the company has. If they increase prices by too much then they're likely to lose the contract because they're no longer undercutting US manufacturing enough to make it worth the hassle of outsourcing. With fewer contracts and less money coming into the company, employees start getting laid off. So great, you've improved the life of 30 employees but 70 other people have just lost their jobs.
tldr: Apple are doing above and beyond what they're obliged to and a hell of a lot more than a lot of other companies. Credit where credits due.
I have to echo these sentiments
And also wonder why these complaints only stick to Apple, and not FoxConns other customers. After all it's FoxConn who run the factories, employ the staff and are responsible for everything... And it was a Microsoft production line that prompted the mass suicide threat.
Do Apple have a role - sure, but lets not forget they aren't the ultimate bad guy here. If apple pay Foxconn more I doubt they'd do nothing different but pocket the change.
Apple is so sweet and kind.
Companies outsource in part so they can ignore how costs are reduced through working conditions. The very same mentality that allowed for prison labor. "I don't care how you do it, just meet the target output numbers."
Apple may be doing more than they are legally obliged to do, but that doesn't avoid moral obligations and avoiding responsibility by outsourcing or subcontracting.
Unfortunately, the dominant world financial systems don't quantify these extra costs, and the dominant legal systems allow responsibility to be passed off to someone else, anyone else.
Here's the thing
I simply don't agree. Companies that outsource to third world countries are creating a lot of employment opportunities and really improving peoples lives.
You keep pushing for better working conditions, wages, benefits etc and you'll drive up prices so much that outsourcing wont be cost effective anymore and then the people you're trying to 'help' will all be unemployed.
I'm fed up with how many people complain that X employee is only paid $y a day and how terrible it is. If you take into account cost of living, food expenses etc. then you'd realise that it generally balances out. We may get paid more in the UK but then we pay more for our rent, food, and so on.
What happened to home first?
If that were the case, why not look closer to home first? You'd be saving the shipping costs and helping people who are more likely to appreciate your efforts since they're a lot closer to home. It says things both ways about us, but people everywhere have some degree of "hometown pride" in them.
So, again, if companies are creating jobs, why aren't those jobs at home, where unemployment is a going concern?
you sound like santa claus 'Here's the thing'
Why do companies outsource, to be kind? to be nice? to be altruistic?
Ha ha ha, they do it for PROFIT, nothing more nothing less and they go to these countries because LABOUR IS CHEAP.
Primarily to reduce costs, yes.
Reducing costs doesn't always mean increasing profit. Some companies get to the point where they're making a loss and the only way to even continue is to outsource. Yes some people will lose their jobs but then a lot of others will keep their job BECAUSE the company is able to continue operating by outsourcing.
Yes I think we need to focus more on helping ourselves but it's hard when there are so many (low paying) jobs that are going untaken because people see signing on as a better prospect that earning minimum wage doing a terrible job.
Apple reduces operating costs and gives a tonne of jobs to people who are barely getting through life. A tonne of jobs that most people in the UK simply wouldn't be prepared to do in the UK because the wage wouldn't be high enough to make it worth them getting up each morning.
I see what you're saying, but...
Isn't that just making a virtue out of being a little bit less shitty than others? It's not virtuous; it's still shitty. The fact that Apple make their suppliers wade through shit that's only waist high as opposed to chin high doesn't alter the fact that everyone is still covered in shit.
I've no real idea how much margin Apple makes, but I am willing to bet that kicking 10% of that back down the chain would make a monumental difference to people's lives. But that's not what it's about is it?
And then we're surprised when people set up camp outside St. Paul's.
But it won't go all the way down Duck
Apple don't pay the workers. Foxconn will be more than happy for Apple to pay them more though - given what we do know about them, I think its fairly safe to say they won't be passing it on.
Sticks to Apple because...
This is all being stuck to Apple because... they're making more money than oil companies at the moment. To quote others "with great power, comes great responsibility". The 99% are all looking at Apple's billions and asking why they can shell out a couple of extra dollars per unit on the Chinese workers that make their products.
In an ideal world we'd all pay attention to these things all of the time. Truthfully, if you have no idea if your product is even going to sell, you probably don't want to spend months of your life making sure your entire supply chain is ethical - you just buy parts and services from other (hopefully) legit companies. Once you're making money though, you have a moral obligation to be a bit more diligent.
Of course, we're dealing with Corporate America here, so morals and ethics aren't big on the list. We'll see if Apple end up doing any more than the absolute bare minimum.
I don't see why not, Chad.
Currently, Foxconn are contractually obliged by Apple to meet certain workplace conditions, which, ostensibly at least, they seem happy enough to comply with so there's no reason why employee pay can't be among those obligations. What are Foxconn going to do, tell them to shove the order up their arse? I think not.
As you pointed out, Apple do seem to get an unhealthy share of the blame, partly due to them being an easy target for internet-shouty-man (they're popular and successful, which he, well, isn't) but also because the brand image they've spent ungodly amounts of time and money buffing to a wallet emptying perfect sheen demands that they be cool, or suffer under the label of duplicity. Sweatshops and worker exploitation just aren't cool any more (even if the exploitation is allegedly mitigated by relative local conditions).
The problem with any discussion about 'ethical capitalism' is that it's always met with a sort of weary cynicism that says there's no point in even thinking about making things better because the problem is too big, the players too powerful, and the home-truths a little too uncomfortable. It's a fair enough argument; you can't change things overnight. But you can make small incremental steps in the right direction. An organisation like Apple has the money, influence and marketing talent to not only 'do the right thing' but also loudly point out that they're 'doing the right thing' and make money off that fact.
Will Apple 'do the right thing'? Possibly not. But there's certainly no harm in suggesting that they do.
"Companies that outsource... are creating a lot of employment"
Y'know, back in the day the coffee and sugar industries created a lot of work for poor, uneducated African folk. Gave em free travel to the new world, gave em an opportunity to be part of a new nation! The fact that European (and eventually US) merchants made a tidy profit from the arrangement seems only fair, given the investments they had made, and the cost of feeding and housing their workers. Right?
If you think that outsourcing your legal, financial, environmental and ethical responsibilities is fine so long as you chuck a few pennies the same way, then you represent the most unpleasant face of globalisation. You'd best be trolling.
I'm fed up
with people justifying slavery.
As for unemployment - if Apple was serious about spreading the sunshine around it would be following the old Fordist model of paying workers a higher wage so there's more money in the economy and more people with the spending power to afford consumer goods.
But since Foxconn's workers think they're lucky if they - literally - get an extra biscuit at tea time, it's obvious that empathy and compassion aren't the prime motivators here.
I'm sure the workers were thrilled when Foxconn's CEO compared them to animals and said that managing them gave him headaches. (It must be *terribly* hard for him.)
The difference: African slaves during the colonial era were kidnapped!
Many Europeans did sell themselves into bonded labor in order to pay for the voyage to the New World in the 1500-1600's. They are the ancestors of many "white" Americans today.
I can see it now
Would you like to add $29.99 to the cost of this order for Human Rights Offsetting?
If it was built in the West
I'd be willing to pay more if it was built in the West, but if it is being built in the emerging markets then no I am not.
Sounds harsh, but we have to look out for our own. Our economies are becoming weaker because places like China will accept low wages. If they are going to earn a developed countries wage, then I would want it to be built in a developed country. Jobs are being lost for cheaper products and if they are not cheap, then why have jobs taken away from nations like the UK and US.
You might be the only one...
It's not Apple, it's the consumer. Time after time we see that people would rather buy a crap product for 90% of the price rather than pay extra for a good one. We get this sort of twaddle when ever protectionist tarrifs come up. The tarrif (in this case paying more to workers) gets passed onto the consumer. If the consumer was willing to pay it companies would already be manufacturing localy and not dealing with transportation costs, unstable governments (lets give congress the benefit of the doubt for now) etc. But they are not. Fix the consumer and the companies will follow. As long as we collectively don't care where our cheap widget came from..
How much more?
This topic has been in the news lately, but I don't recall seeing any kind of informed opinion or well educated estimate of how much the price of an iDevice would increase if assembly were moved to the US.
That still leaves the component manufacturing happening overseas for Apple to address later, but would assembling iPads in the US add twenty dollars or two hundred dollars?
Workers are not interchangeable, except to the extent they are wholly owned and in bondage. You must believe in Social Justice before you can do the calculation and neither Apple nor anybody else in Silicon Valley believes in Social Justice. In China they have Slavery, in Silicon Valley they have Indentured Servitude ("no poaching"). The Business question (cost minimization) can be solved if you assume the culture permits slavery, and the answer you get presumes slavery - there is no reasonable way to back out the assumption.
St. Steven parked in Handicapped Spots. Are you surprised now, or were you then.
Apple is THINKing no DIFFERENTLY than anybody has for the last 6,000 years about a business method which has existed no differently for the last 6,000 years.
If you want to really think differently, try this:
I'd say about 10x the price if in the UK
The cost per unit wouldn't increase much more, but then allow for the shortages, because we'd make half in the same amount of time, then all the returns because it was made on a Friday. Mondays are out because half the staff would fail to turn up for work and throw in the odd strike every now and then for good measure.
Could be worse could be made in the Med....or the US.
There, have I insulted enough people yet?
should just pay the workers more.
"Thoughtful about the consequences"
means jack shit, you know. If you've got a point to make to Apple, why not take it to them? "Please charge us more money" seems like just the sort of consumer request to which they'd be most at home.
Americans only care about price
Americans haven't given a damn about quality for at least 12-15 years that I remember. All they care about is price. Given a choice between a good tool/boot/laptop for $100 and a crappy one that'll break in a week for $95, they'll take the $95 one in a heartbeat. I've seen friends buy 3 of a crappy $60 car jack, when the $80 one would not have broken.
This is why places like Walmart prosper.
It makes it difficult for folks like me willing to fork out a little extra for something that'll last and function well. For example, Sears now stocks mostly off-brand crap tools and the good Craftsman stuff is now hard to find because it doesn't sell.
Be interesting to know whether it is out and out cheapskating bastard behaviour or as the result of declining incomes (disposable or otherwise) caused by rising costs elsewhere.
Additional Culpable Party Not Mentioned In Article.
There is an "unnamed co-conspirator" also bearing responsibility for the situation mentioned in this article and it is the Chinese government itself. They are *easily* capable of passing laws which, if not remedying the situation entirely (they after all do not want to discourage investment and economic growth) would at least ameliorate the worst of the abuses.
A good question to ask is what is preventing the Chinese workers from unionizing. Is it because the workforce is too closely surveilled and any such activity is immediately met with sackings (or threats and intimidation of various kinds), or are there laws there prohibiting them from organizing)?
Western consumers can (and I am sure that many of them do) shield themselves with the idea that products which they buy have appeared on the shelves of retail stores, both physical and virtual, by a long process of legal actions and transactions in many legal jurisdictions, and that each of those jurisdictions have outlawed any egregious abuses, or have given their workers the ability to unionize and thereby ameliorate the abuses themselves - although obviously they do not explicitly reason it out like this. In an ideal world, this chain of reasoning would be admissible and correct. But in the real world...