The Human Price of Apple’s Success

5 Feb

As an Apple fan, I’m sure you won’t like the report but as an old-school person like me who doesn’t have a smart phone or a Facebook account, I’m fine with seeing the stark fact behind the Apple’s phenomenal success…

 

http://money.msn.com/investing/the-human-price-of-apples-success-moneyshow.aspx

New reports document how the consumer electronics giant’s reliance on Asian suppliers — particularly those in China — has had devastating effects on factory workers there.

“Joy, enlightenment and phenomenal success come at a price: The iPad and the iPhone are manufactured in some of the world’s worst electronic sweatshops.

Recent articles in The New York Times have revealed as never before how Apple’s development of a largely Asian supply chain in the past decade helped the company turn out tens of millions of gleaming new devices in record time while largely bypassing the U.S. workforce.

But the Chinese factories on which it relies, particularly the massive complexes run by Foxconn Technology Group, have been riddled with problems — low pay, long hours and terrible working and living conditions, which have resulted in suicides and deaths and injuries from industrial accidents.

Apple has tried to hold its suppliers to higher standards in recent years, but two experts I spoke with said it hadn’t done enough. The company’s critics accuse it of squeezing suppliers’ margins to make higher profits and constantly pushing for quick turnaround of new products, which almost guarantees safety won’t come first.

The articles said, in short, that Apple has become reliant on a global chain of suppliers like Foxconn, a Taiwan-based electronics manufacturing giant, whose massive complexes in several Chinese cities each employ hundreds of thousands of workers. Foxconn manufactures about 40% of the world’s consumer-electronics products for companies such as Dell (DELL -0.06%, news), Hewlett-Packard (HPQ -1.07%, news), Microsoft (MSFT -0.13%, news) and Sony (SNE +1.20%, news).

Conditions can be brutal. Workers routinely work 12-hour shifts six days a week and are paid less than $20 a day. Many live in overcrowded dormitories where several are crammed into small rooms with no air conditioning. There have been many reports of underage workers employed there, although a recent Apple audit of its suppliers found that number had decreased.

Work is repetitive and stressful: 17 Foxconn workers in China have committed suicide over the last few years. So, Foxconn installed huge nets to break would-be jumpers’ falls.

Workers also were exposed to toxic chemicals and dangerous levels of dust, which caused a fatal explosion in Foxconn’s Chengdu, China, plant last year.

So, why single out Apple if Foxconn and other suppliers manufacture products for so many other companies?

“On paper the company has instituted programs that we see among the better performers,” said Meggin Thwing Eastman, a senior environmental, social and governance analyst at MSCI who specializes in technology and telecom companies. “(But) I have some doubts about the execution. We see things at Apple that we don’t see at other companies.”

Apple’s secretive business culture makes it less responsive to outside organizations, Eastman told me. But more important was Apple’s squeezing of suppliers, giving them very thin profit margins and thus little incentive to improve workers’ pay or plant safety. As the Times reported: “You can set all the rules you want, but they’re meaningless if you don’t give suppliers enough profit to treat workers well,” said one former Apple executive. “If you squeeze margins, you’re forcing them to cut safety.'”

 

Here is what I like about the report, the conclusion of it:

Wouldn’t it be great if Apple set aside a little bit of its $100 billion cash hoard to improve conditions at its factories or maybe buy stakes in key suppliers? What else are they going to use all that money for? Buying Yahoo (YHOO -0.63%, news)?

My cellphone contract ends late this year, and I was looking forward to buying a new iPhone. I was hoping the iPhone 5 would be out by then. Now, I’m going to wait to see if Apple improves its practices before I make the switch.

If it doesn’t, I’ll stick with my Android for a while. Ultimately it all comes down to what you and I demand, and in this area I think we can demand that Apple do more to set things right.”

 

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