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."

Comments

We can only hope...

[deathcow]

That enough of their souls are still poured into these incredible, sleek products to maintain the extremely high level of magic and wonder we've become accustomed to finding in each amazingly designed box.

Apple-haters in 3,2,1,...

[Space cowboy]

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

Re:Apple-haters in 3,2,1,...

[King_TJ]

Exactly! These people were building products for Dell too (among other well-known computer companies). Wonder if we'll see Dell step up to the plate and offer a larger percentage of their profits to these folks as a pay increase? (I'm betting not.)

Re:Apple-haters in 3,2,1,...

[morgan_greywolf]

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.

Probably because Apple products are 2-3x more expensive than those of their competitors. It's well-known that Apple's profit margins are extremely high compared to their competitors, and that makes people think that perhaps Apple is a bit greedy.

I'm not saying it's deserved or anything like that, but I can definitely see why people think that way.

Re:Apple-haters in 3,2,1,...

[mooglez]

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.

Re:Apple-haters in 3,2,1,...

[mr_matticus]

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.

The dark, Satanic mills of Apple

[Animats]

You can do anything you set your mind to when you have vision, determination, and an endless supply of expendable labor.

What about..

[JonJ]

The other companies that are getting their components from Foxconn? Are they doing anything?

Dang

[oldhack]

I wish my coworkers jumped off the building.

By comparison

[jmichaelg]

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.

Re:By comparison

[thoughtsatthemoment]

Nonsense. How can you compare workers with the general population?

Re:Well this sucks!!!!

[oldspewey]

Why should we let Apple (or any other company) abdicate responsibility for their supply chain? If Apple chooses to work with Foxconn, then Apple is on the hook for ensuring Foxconn is a reputable and humane supplier.

Or is it okay to let a company like Apple accrue the benefits of outsourcing (i.e. lower prices, more flexible manufacturing, etc.) while ignoring negative consequences (i.e. environmental damage, inhumane working conditions, etc.)?

Re:How about reduce their hours by 20% instead...

[butterflysrage]

ok, but why are they working massive overtime? Is it because the job requires them to ("do it or you're fired") or is it the pay that requires them to ("If I don't pick up 6 extra shifts I can't pay my rent next month").

While the 20% will not help the first case, it would make quite the impact on the second...

Re:Well this sucks!!!!

[cgenman]

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.

Re:Well this sucks!!!!

[BitZtream]

You do realize pretty much every computer on the planet has components from Foxconn in it ... right?

I guaranty you that the computer you used to post has components they make in it.

Unless you plan on no longer using a car, your PC, probably your TV and several other devices, you won't be doing a damn thing to 'stop the problem'.

Apple benefits from Slavery.

[Jackie_Chan_Fan]

Nuff said.

When you outsource to foreign lands that force workers to sleep on the assembly lines, and in the factories... for 65 cents an hour, you're supporting slavery. (This is the common work condition of chinese labor)

I'm sorry. Apple wanted to cheat the economic system by not hiring Americans, because we have lives and high expenses due to the cost of living in America. Why pay Americans who only want to work and have a home and healthcare, when you can hire Chinese slaves who are easily replaced no matter how many of them commit suicide.

Fuck every corporation that sold America out.

Re:Well this sucks!!!!

[RAMMS EIN]

``Why should we let Apple (or any other company) abdicate responsibility for their supply chain?''

Well, I see it like this: Apple (or any other company) wants something manufactured. So they approach some manufacturers to make them an offer. Foxconn (or any other bidder) says "We can do it for so and so much." Among all the bidders, Foxconn has the most attractive offer, and Apple believes they will be able to make good on it, so they sign the deal.

Is that all there is to it? Well, pretty much yes. If Apple didn't trust Foxconn enough, they probably wouldn't sign the deal. This trust can cover anything from fear that Foxconn might go belly up before having delivered, to causing negative press for Apple. In the end, there is no real way for Apple to be certain that such events will happen, or will not happen, if they sign the deal with any of the bidders. The best they can do is make a risk assessment, pick the winner of the bid, encourage them to do the right thing, work with them to help them do the right thing, and help fix things if things still go wrong. And it seems to me that this is exactly what they are doing.

``If Apple chooses to work with Foxconn, then Apple is on the hook for ensuring Foxconn is a reputable and humane supplier.''

I think that's debatable. Certainly, you may _like_ Apple to try its best to ensure that every supplier they work with is reputable and humane. And maybe they are doing that. They are, after all, paying extra to support the plan to curb the suicides. But even if Apple do their best, there is only so much they can do. They don't control Foxconn, and, last I checked, Apple didn't have a standing army or a special ops unit that could force Foxconn to do what Apple would like them to do. So it's really Foxconn that has to fix things - Apple can only encourage them, help them, and, if that fails, walk away from Foxconn and distance themselves from Foxconn's practices should Foxconn not clean up its act. So I really thing "ensuring" is too strong. Apple can't do that, so it's unreasonable to expect that of them.

American Workers Just Can't Compete...

[stbill79]

Remember this story the next time you try to defend our all-mighty corporations' choice of offshoring every single job possible with the simple-minded argument of American workers just can't compete; they need to toughen up, take a lower standard of living, work harder, become better educated, etc, etc...

In a globalized world, there will always exist a shit-hole even worse than the last. Uless your idea of being more competitive really means accepting conditions so poor that death seems a valid alternative to a rather significant portion of the work-force, you might want to start thinking of a better argument.

Re:Well this sucks!!!!

[Starmac]

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.