Friday, January 27, 2012

The Apple of our eyes

                                                              From The Telegraph
We all were wowed this week when Apple reported profits of $1 billion a week for its latest quarter, "blowing past Wall Street expectations on robust holiday sales of its iPhones and iPads," gushed MSNBC online.

From October through December, Apple sold 37 million iPhones and 15 million iPads.

Incredible numbers for incredible, must-have products.

It's a sign of American ingenuity and a rare source of pride during these tough economic times.

Coincidentally, the New York Times has a series this week about "The iEconomy" that everyone should read.

Beware, though, the stories are devastating. They call into question our values, priorities and the nature of capitalism itself.

Although, the series focuses on Apple products, the same could be said about our televisions, video game consoles, clothes and much of the produce we eat.

Much of our well-being these days, unlike in the 1950s, is dependent upon the terrible exploitation of others.

But, Apple is by far the richest, most glamorous player these days and so it gets the scrutiny in the media. As well it should.

For a time Wednesday, Apple was a more valuable company than Exxon Mobil.

The Times' first article focuses on the iPhone and probes the reason why Apple products will never be made in America again. The second article is headlined: "In China, Human Costs are Built Into an iPad."

"Last year, (Apple) earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google," the story notes.

Apple employs 43,000 in the U.S. and 20,000 overseas. But, Apple contractors, primarily in China, employ 700,000.

China's Foxconn City, where the iPhone is assembled, has "230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn's work force lives in company barracks and many workers earn less than $17 a day."

In 2007, when Steve Jobs demanded a glass screen for the iPhone, it forced a scramble.

From the Times' article:

"... after a month of experimentation, Apple’s engineers finally perfected a method for cutting strengthened glass so it could be used in the iPhone’s screen. The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones. Within three months, Apple had sold one million iPhones. Since then, Foxconn has assembled over 200 million more."

Working conditions are hazardous with toxic chemicals, dust and smoke.

“We’re trying really hard to make things better,” said one former Apple executive in the second Times' piece. “But most people would still be really disturbed if they saw where their iPhone comes from.”

Unions, by the way, are illegal in China. In other words, Republicans here consider China an employers' paradise.

“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. 
“Workers’ welfare has nothing to do with their interests,” he said in the Times.
The second Times' article notes “... right now, customers care more about a new iPhone than working conditions in China.”

Is it any wonder then that at one Foxconn plant the worker turnover rate is 24,000 -- each month.

It was either quit or commit suicide. In fact, suicide is a way out for some workers. 

This from The Telegraph in England:

"A suicide cluster in 2010 saw 18 workers throw themselves from the tops of the company's buildings, with 14 deaths.

"In the aftermath of the suicides, Foxconn installed safety nets in some of its factories and hired counselors to help its workers."

But, employees figured out that threatening suicide was a way to improve their lot in life.

Earlier this month, about 300 workers at a Foxconn Xbox factory in Wuhan threatened mass suicide unless their wage demands were met. Apparently, they were met  since the workers didn't kill themselves.

The Times series goes into great detail how the economies of scale and supply chains in China mean that it will rule this iEconomy for years to come. Plus, China has four times the population of the U.S., so it stands to reason that it will always have bodies to fill its factories.

Again from the Times' story:

"It is hard to estimate how much more it would cost to build iPhones in the United States. However, various academics and manufacturing analysts estimate that because labor is such a small part of technology manufacturing, paying American wages would add up to $65 to each iPhone’s expense. Since Apple’s profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward." 

But, profit margin is what drives the stock market price of Apple and there is no incentive to decrease that margin, only increase it.

“We shouldn’t be criticized for using Chinese workers,” a current Apple executive said. “The U.S. has stopped producing people with the skills we need.”

What he meant was that we no longer produce people willing to work 12-hour shifts, six days a week at any hour for $17 a day.

Meanwhile, Tim Cook, Apple's new CEO, made $59 million in 2010. He was also given stock grants, vested over 10 years, which today would be worth more than $430 million.

1 comment:

  1. Apple is also sitting on $90 Billion in cash that is currently held in off shore accounts so they don't have to pay the taxes in the US.