Two weeks ago, “This American Life” retracted an episode of its show that contained a report by Mike Daisey. “The Agony and Ecstasy of Steve Jobs,” Daisey’s report regarding the now well-known Foxconn factory in Shenzen, China, was one of many reports by news outlets covering the factory’s controversial working conditions.
Foxconn and its relationship with Apple’s production line have been in the news for years due to a string of suicides at the factory and evidence of horrid conditions.
Coincidently or not, Apple CEO Tim Cook visited China earlier this week. Cook met with Chinese business moguls and officials to resolve an issue with the iPad trademark as well as reach an agreement with Baidu, a popular Chinese search engine. Additionally, Apple’s CEO visited a Foxconn factory where iPhone and iPad units are manufactured.
Just days after Cook’s visit, the Fair Labor Association published a report claiming Foxconn was violating China labor laws, including overtime and hourly workloads. The report was Apple-commissioned.
Apple and Foxconn appear to be cooperating fully with the report. “We are committed to work with Apple to carry out the remediation program, developed by both our companies, that has been presented along with the FLA audit findings and we will continue to support Apple’s initiatives to ensure that its business partners are in compliance with all relevant China laws and regulations and the FLA’s Workplace Code of Conduct,” Foxconn said today.
The FLA report stated that 14 percent of workers have not received all of their overtime pay due to 30-minute increments. For example, those who worked 45 minutes would only receive pay for 30 minutes, receiving only 66% of their earned compensation. Additionally, the FLA cited blocked exits, hazardous working areas, and corrupt management.
Controversy regarding the Foxconn factories has been stirring since June 2007, when a worker hanged herself in a bathroom. Since then, 22 suicides have occurred at Foxconn factories. Apple has faced increased pressure from the public and media as the story becomes more popular. Apple has yet to comment on the FLA’s report, but the company has been very public about its supplier responsibility, specifically with regards to Foxconn, documenting its efforts on a dedicated web page.
While Foxconn’s compliance with the FLA will improve conditions and hopefully combat the suicides, it has factory workers and investors worried.
The FLA report states that the overtime limit at Foxconn factories will be lowered from 64 hours a month to 36 hours a month. Reuters reports that Foxconn workers are up in arms. One worker told Reuters that “we are here to work and not to play, so our income is very important.”
Sanford Bernstein analyst Alberto Moel says the FLA’s current examination of Foxconn will inevitably mean higher costs for Apple. However, consumers should not feel the effects of the FLA’s findings.
Nomura’s Peter Liao told MarketWatch that rising labor costs have already been budgeted by Apple. Liao also said that Apple has already raised iPhone prices with small-scale harm to its market share.
The FLA’s findings are most likely to hurt other customers of Foxconn, which Samsung, Dell, Amazon, Nokia, Microsoft, HP, and Sony. These companies have smaller profit margins than Apple and may experience a bit of karma since they have largely avoided the PR mess that is Foxconn, while Apple, the largest of the companies, bears most of the blame.
Ultimately, the FLA’s findings raise more questions than they answer. How long will changes to Apple’s suppliers, like Foxconn, take to implement? Who will pay the price for fair labor at Apple’s suppliers? Will Apple strengthen its diversification of labor to Brazil from China? Given that Apple has commissioned the FLA to investigate Apple’s 134 other suppliers, such as Pegatron, Qualcomm, and Wintek, what will the FLA find? Will other technology industry leaders follow Apple’s example and commission their own supplier examinations?
It’s better for everyone, including Apple, that people be taken care of. A resolution to Apple’s supplier mess will add even more value to Apple’s brand. As an Apple stockholder, I am certainly willing to pay an extra $50 for the next iPhone. I’ve made money from Apple and would be glad to see workers benefit as well.
With legal and ethical supplier flaws, in addition to stockholders’ recent demands, Apple is learning the hard way what problems may stem from a high profile earned by creating cherished products and earning tremendous profits.
Steve Jobs made the company successful and launched Apple’s flagship products, will Tim Cook be the one to maintain that success?
Jessica Vascellaro, WSJ:
In recent weeks, Mr. Cook has tended to administrative matters that never interested Mr. Jobs, such as promotions and corporate reporting structures, according to people familiar with the matter. The new chief executive, 50 years old, has also been more communicative with employees than his predecessor…
Assorted Slices is an editorial-based publication covering Apple Inc. and similar topics.
