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Foxconn Workers Getting Raise With Apple Subsidies
hackingbear writes "Workers at Taiwanese electronic outsourcing manufacturer Foxconn are getting a pay raise after a series of 13 suicides, including three in three consecutive days. According to an article by state-run newspaper China Daily, Apple concluded that the main cause of the suicides is low wages. (The media has also attributed the suicides to a variety of other factors — everything from the semi-military style of management, to long overtime, to China's one-child policy, and Foxconn paying too much compensation to the family of suicide workers, thereby encouraging copycat suicides.) Apple plans to subsidize raises using its own products (Google translation; Chinese original here) — the first one being the iPad. This would raise the outsourcing cost from 2.3% to 3% of the iPad's sales price. The article does not say the amount of the raise per worker, but it is rumored to be about 20%, according to other Chinese news sources."
I got curious as to how Foxconn's suicide rate compared to other groups. The United States' suicide rate is 11.1 per 100,000 people. Foxconn employs somewhere around 800,000 people(!) which means by the end of the year, you'd expect a death count by suicide of around 90 people.
If the current rates holds, there'll be 50 more Foxconn employees alive at year's end than there will be Americans from a comparably sized city.
For reference, other major brands who use Foxconn include:
Intel
Dell
Zoostrom
Sony
Nintendo
Microsoft (yes, all 3 major consoles come from Foxconn, at least partially)
Motorola
Amazon Kindle
Cisco
Hewlett-Packard
ATI
Most have issued statements regarding the number of suicides at the factory. But none other than Apple, as far as I'm aware, have taken steps this large and publically towards resolving the problem.
The ______ Agenda
Because despite the fact that FoxConn make stuff for all sorts of people in the consumer electronics world, all the bile and invective seems to fall on Apple's shoulders.
No doubt, Apple actually trying to help will be seen negatively too - let's see if any of the subsequent comments say so (my money's on yes...). Honestly, the anyone-but-apple brigade make the fanboys look calm, collected, and sane.
Simon
In Finland, all these Foxconn suicides have been reported as happening at a "Nokia contractor", no word of Apple in any of the news posts.
None of them give a shit. Slavery was always the goal. We outlawed it in the US.. but not overseas.
The US Workers who demanded a modest life style, home and health care... were sold out by those companies who would rather employ slaves, then Americans because its more profitable and slaves are easy to abuse.
More like the corporations are hostage to their financial performance and stock price. Who holds them hostage? The retirement plans with billions invested and expect their 10 -15% ROI. The beneficiaries of those plans? Grandmom and Granddad who retire comfortably at 55, 60, 62... You can't demand exceptional financial results from companies and corporations and handcuff their options to deliver those results. It's called Capitalism - the only incentive that gets people to produce more time and again is personal financial gain.
There's no question that Apple products carry a higher average price than similar products at other companies, but it's absurd hyperbole to claim 2-3x higher, especially based on gross margin. The logic fails entirely since all of this data is part of their corporate financial reports:
Probably because Apple products are 2-3x more expensive than those of their competitors.
That would imply that, given other manufacturers having a profit margin of 1%, that Apple would have a gross profit margin of 51 to 68%. Given another manufacturer's more realistic gross margin of 25%, that would mean that Apple's profit margin would be 63%-75%. That is of course not the case.
Apple's gross margin is closer to 40% (which is indeed higher than most competitors), which means that assuming identical production costs and business costs, Apple's prices are about 15% higher as an absolute cap.
But gross margin isn't net profit, and it's net profits that are the subject of so much jealousy--gross profit less overhead, in other words. Apple does a lot of its engineering work in house (hiring an OEM to make something you designed is much cheaper than buying something someone else designed from that OEM), and a simple walk through their SEC-reported financials reveals that they also have lower per capita business costs than Dell or Acer, which amounts to a price savings--we'll say it's in the 5% ballpark (though in reality, it's probably a bit more).
That makes for an 'Apple tax' of at most 10% in shelf price--hardly "2-3x" and similar to the higher-margin premium lines at HP and Dell that subsidize their unnaturally discounted rock-bottom lines.
It's well-known that Apple's profit margins are extremely high compared to their competitors,
Even if it were double the gross margin of their large competitors (and the difference isn't that large), it would amount to a price difference of ~25%, about one-quarter to one-eighth your claim.
In other words, if a product costs Dell $100 to make and grosses 25%, with $13 overhead, net profit is $12 of the $125 sales price. The same product costs Apple $98 to make and grosses 40%, with $10 overhead, making net profits $29 of the $137 sales price. The consumer pays just about 9% more at the store (nowhere near double), but Apple ends up with more than double the profit in dollars.