Apple’s Suppliers and the Price of Fair Labor

March 30th, 2012 · 1 note · #apple #china #cook #foxconn #ipad #iphone #tim #investors #brand #fla

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.

Apple Reveals More iCloud Details

August 8th, 2011 · 14 notes · #MobileMe #Apple #iCloud #iTunes #Match #iOS #Mac #OS #X #Lion #iPhone #iPad #Mac

Apple has been releasing more information to developers about iCloud, it’s upcoming service that will store email, calendars, documents, and media in Apple’s cloud and sync it across users’ Apple devices. The Cupertino-based computing company plans to open iCloud to the public in the Fall. 

Developers have exclusively learned through their paid accounts that Apple will be providing former subscribers of MobileMe, Apple’s older and current version of iCloud, an extra 20GB of free space in their cloud. The free space will last until June 30, 2012 unless iCloud users choose to subscribe to the service and pay for the additional storage. 

The news comes as a friendly gesture from Apple, whose stock fell more than 20 points Monday morning amid the S&P downgrading crisis. Analysts have suggested buying AAPL, along with other technology stocks, as recent economic activity does not reflect the performance of the technology sector. “Apple could buy Bank of America,” CNBC reporters said.

iCloud is currently in beta and only available to registered developers of Apple’s program. However, Apple has announced the service will launch in the Fall along with iOS 5, Apple’s new operating system for iPhones and iPads. News outlets are also reporting an iPhone 5 release during the same time period, suggesting that Apple wants to get the three products out in time for the holiday season. 

Comments Apple’s Second Quarter Results

April 20th, 2011 · 6 notes · #apple #q2 #quarter #second #results #earnings #revenue #iphone #mac #ipad #itunes #ipod

Apple PR:

CUPERTINO, California—April 20, 2011—Apple® today announced financial results for its fiscal 2011 second quarter ended March 26, 2011. The Company posted record second quarter revenue of $24.67 billion and record second quarter net profit of $5.99 billion, or $6.40 per diluted share. These results compare to revenue of $13.50 billion and net quarterly profit of $3.07 billion, or $3.33 per diluted share, in the year-ago quarter.

Apple’s subtitle for the earnings report highlights a strong March, so surely a nice chunk of these earnings are from Verizon iPhone 4 sales.

Gross margin was 41.4 percent compared to 41.7 percent in the year-ago quarter. International sales accounted for 59 percent of the quarter’s revenue.

The international sales figure really puts Apple’s reach into perspective. I can’t think of any other consumer technology or business technology company that is as popular as Apple is world wide. It’s also worth noting that the United States is no longer responsible for more than half of Apple’s revenue.

Apple sold 3.76 million Macs during the quarter, a 28 percent unit increase over the year-ago quarter. The Company sold 18.65 million iPhones in the quarter, representing 113 percent unit growth over the year-ago quarter.

Suddenly, these ground breaking increases in sales are no longer that shocking to us. We expect incredible growth from Apple no matter what and they’ve been delivering solidly for a decade.

Apple sold 9.02 million iPods during the quarter, representing a 17 percent unit decline from the year-ago quarter.

See my post on the future of iPod.

The Company also sold 4.69 million iPads during the quarter.

This brings the total amount of iPads sold to 19.48 million iPads.

“With quarterly revenue growth of 83 percent and profit growth of 95 percent, we’re firing on all cylinders,” said Steve Jobs, Apple’s CEO. “We will continue to innovate on all fronts throughout the remainder of the year.”

It appears that Steve Jobs was on the call. This is fantastic news. When the audio goes live on iTunes, it will be interesting to hear his voice. Hopefully he is healthy.