Foxconn's Founder Opens Up About Making iPhones

eldavojohn writes "Bloomberg Businessweek has an article of interest resulting from a three-hour interview with Foxconn founder Terry Gou (single page), whose company manufactures 137,000 iPhones a day. The article profiles Gou's rise to Foxconn but also offers some interesting tidbits you might not know. On why he is not opening factories in the United States, Gou frankly states, 'If I can automate in the US and ship to China, cost-wise it can still be competitive. But I worry America has too many lawyers. I don't want to spend time having people sue me every day.' If you're interested in how a modern day Henry Ford thinks, you can read the rest about the man steering the ship of the world's largest producer of electronics components and China's largest exporter. This unprecedented transparency was part of an agreement Gou made with his customers during his delayed response to an increasing number of Foxconn suicides."

Comments

Exploitation for the win!

[jandrese]

If I can automate in the US and ship to China, cost-wise it can still be competitive. But I worry America has too many lawyers.

He's basically worried that if he tried to pull the same shit he gets away with in China, he would be shut down. This is undoubtedly a valid concern, but it does cast a depressing light on outsourcing. Basically the US is losing manufacturing jobs because we don't let business completely stomp all over the rights of the workers anymore.

Re:Exploitation for the win!

[MBCook]

Really? I read that line as a worry of a massive unexpected cost. If you can automate a whole factory, and then the UPS guy says he gets injured on your premises, you can lose 20 million easy.

No one would run a factory that was, even with the supposed horrible conditions, in the US. The labor costs alone (even if you only paid minimum wage or less) would be staggering. You'd replace as many people as possible with robots to keep costs down.

But then someone decides to sue you for something ridiculous, and your legal bills are huge. You settle or spend years spending tons of defend it. Or maybe it's a real issue, but instead of the $30k for medical bills and more for pain and suffering, they get some some like $10 million that is completely out of line relative to their injury.

His view sounds rather sane to me. And the last pages of the article point out just how good Foxcon is compared to many other Chinese employers. Conditions there don't sound anywhere near as bad as some of the stuff that when on in the US during the industrial revolution.

Re:Exploitation for the win!

[spun]

These ideas did not help make America great. They helped make robber barons rich and delayed reduced the greatness we could have achieved without robber barons leaching off all the wealth. China may be a different culture, one that has very different ideas about authority and conformity and has for longer than we in the west have been civilized, but they trade with us and what they do is an unfair trade practice. We should sue them, and if they won't change their ways, impose tariffs to address this unfairness.

Re:Exploitation for the win!

[leromarinvit]

Tidbits from TFA:

"a harsh environment is a good thing"
"hungry people have especially clear minds"

This man is a sadist. The sad part is that (mostly) unregulated capitalism, as it exists now in China, essentially forces him to either be an asshole or go out of business.

Re:Exploitation for the win!

[thePowerOfGrayskull]

While I don't agree with the practices in place for humanitarian reasons, I also can't agree with this:

, but they trade with us and what they do is an unfair trade practice. We should sue them, and if they won't change their ways, impose tariffs to address this unfairness

Their culture allows them to do business differently than we do; unfortunately this puts us at a disadvantage. Instead of finding better ways to compete, you're suggesting that we sue them into changing their culture - bringing them down (or raising them up, depending on perspective) to our level simply because we can't keep up?

That kind of argument scares the crap out of me, because I get the feeling people are starting to take it seriously.

Re:Exploitation for the win!

[localman57]

But they're not doing it the way we did. You're missing a fundamental difference. Our society, our expectations, our laws had time to change as technology evolved. They're going through 150 years of technological advance in a few decades. Their big problem is not what is happening to the people today. To put it in savage terms, they have enough people that they can economically afford to treat them terribly.

The problem is that they are mortgaging the future by doing horrible, horrible things to their environment. Eventually, they'll have to fix them in order to become a 1st world nation. Take a look at Los Angeles, and what the California Air Resources Board has done to try and improve the air. Then take a look at photos of Wuhan or any of dozens of other industrial centers. You can't build a stable long term economy in a place where the air itself is debilitating. Same goes for water and soil pollution.

Take a look at Times Beach Missouri ( http://en.wikipedia.org/wiki/Times_Beach,_Missouri ) to get an idea of what they'll be up against in the future. I'm guessing that at its worst, Times Beach was less dangerous than residential areas in China today.

Re:Exploitation for the win!

[geekoid]

NO, it doesn't. It does give him an excuse to be that way.

Re:Exploitation for the win!

[vux984]

You want to do something that threatens the endless supply of cheap, pointless shit lining the shelves at WalMart? I think you underestimate the popular consumer backlash that would create.

Meh, the consumer backlash would sort itself out, due to the sudden rise of employment, manufacturing, and so on in the US. They'd piss and moan that tube socks cost more, but they'd get over it. Once upon a time we used to repair holes in socks and other clothing instead of chucking it an buying it new...this is thanks to the absurdly low cost of new thanks to exploited labour.

It really wouldn't be the end of the world if we returned to a paradigm where things initially cost more and got repaired instead of replaced.

The real backlash would come from Walmart and the other corporations.

Re:Exploitation for the win!

[spun]

Simple fix, lower taxes on those making under $1 million per year, to make up for the increase. To make up for that, raise taxes on those making over $1 million.

Re:Exploitation for the win!

[geekoid]

We can't compete because we believe in a madle class, fair wor wages, and competition in the work force.

So either we remove all regulations and let people be indentured servants living in horrible conditions; or we raise the price for them to sell in the US unless they meet a min. standard.

THAT'S the solution to having a global economy that creates a middle class and no just exploit the poor making them poorer.

Re:Exploitation for the win!

[rakuen]

The United States relies far too much on cheap Chinese goods, because people demand lower prices. You can't get lower prices by making things here, because we also demand higher wages. Higher wages get passed on to the consumer as higher prices.

With the obvious out of the way, what you propose would shake both economies severely. People are willing to pay for the price of goods as they stand right now, which is with cheap foreign goods on the market. If these goods suddenly take a hike due to a tariff, then people will be less inclined to buy ANY goods, whether they're Chinese or domestic. Not only have you cut off Chinese revenue from exports, but you've also cut off revenue retailers over here make by selling those goods. In addition, if retailers can't sell stock, they won't order it, which negatively impacts the shipping industry. Also, if there's no demand for Chinese goods, then they will produce less, utilizing fewer resources, which impacts the raw materials market. Raw materials affects gathering and manufacturing jobs. Those in turn affect manufacturers that make the tools they would utilize. Etc, etc, etc.

It sounds like one hell of a slippery slope, but the global economy is such that one ripple can generate an enormous wave. There is no such thing as a "one size fits all" solution to the problem.

Re:Exploitation for the win!

[Anonymous Coward]

human rights are not something that should be culture-dependent - the Chinese just lack the experience of having them. Give them the rights and they will not want to surrender them ever again.

Re:Exploitation for the win!

[thePowerOfGrayskull]

Is it so unreasonable to focus instead on producing the same products with less labor (and thus less cost) than those willing and able to propagate such practices? I'd rather be able to lead by example. Instead of legislating or regulating them into compliance, why not develop improved manufacturing technology and capability -- demonstrating that it's possible to make competitive products without "exploiting" the poor?

THis is aside from the fact that - at least from TFA - working conditions might not be quite as bad as the media hysteria has made them out to be.

Re:Exploitation for the win!

[Antisyzygy]

Agreed. What made America great (when it was great) was the buying power of the US citizen after World War II and Roosevelt's New Deal. Fair wages, fair tax laws, abundance of jobs. 70 percent of the wealth used to be in the hands of 90 percent of the people, now 70 percent of the wealth is in the hands of 10 percent of the people. This is due to reducing taxes on the rich, tax loopholes for the rich, wages not keeping up with inflation, decrease in benefits for American workers, Jobs moving overseas because of cheap labor (and cheap view of lives). It simply is not right that one person should have billions of dollars or even hundreds of millions. Should a corporation have access to billions of dollars? Yes so that they can mobilize resources. One person? Absolutely not. They simply do not spend enough of it on services and products the average person gets paid for to make a difference in the rest of our lives. Philanthropy and true capitalism is dead.

Re:Exploitation for the win!

[spun]

That is just fine, the more useless leaches "Go Galt" and flee the states, the better. We don't need those parasites. If they want to do business here, we still get to tax them until they bleed. And if they don't, great! Less competition for real American businesses.

Re:Exploitation for the win!

[spun]

It isn't really about human rights or pollution. It really is about unfair trade. Having lax environmental and worker safety laws amounts to the same thing as directly subsidizing your industries, which the WTO frowns on.

You forgot D) China complies with worldwide standards and practices fair trade.

Re:Exploitation for the win!

[Cornelius the Great]

Less competition for real American businesses.

Let me get this straight: you want to tax corporate interests so much that they want to leave the US. And when they do, somehow you feel that's a good thing as there is "less competition for real American businesses"?

Do you honestly believe that would be the result? I don't believe you thought your cunning plan all the way through.

Re:Exploitation for the win!

[spun]

I'm sick and tired of the rich blackmailing us like this. We do not need them. Where would they go, anyway? Would they really be willing to give up such a lucrative market? If they leave, it's not as though the demand for goods and services disappears. We really don't need their investments. We can borrow from ourselves and pay it off by growing our economy.

Re:Exploitation for the win!

[Anonymous Coward]

What society has had 4-5 generations of ease and plenty behind it? Certainly not ours in the USA. The vast, vast, vast majority in the country can find long-term abject poverty in their family if they go back 0-3 generations. China's regulatory system and worker's rights are somewhere between the Wild West and the 1930's, but gaining fast. They just recently had their first labor strikes because people notice that they're busting their asses for a sociopath who's raking in billions. They make the natural conclusion: there's excess profits being wasted on some asshole who doesn't even know or care how much he has. If he doesn't know or care, he won't mind much when we strike and take some more of the fruits of our labors. Class warfare's come to China. Hopefully that'll get exported back to the USA someday.

Re:Exploitation for the win!

[RightSaidFred99]

Exactly, was going to post something similar. This should be a driver for us to get better at manufacturing efficiencies, not get into a trade war we can't even possibly come close to winning.

Re:Exploitation for the win!

[spun]

And those places have LOWER taxes than we do? The fact is, the rich are already investing there and developing markets. There is no sense in developing markets here, the rich have already taken all the middle class' money. Why would they invest here when there is no demand? The American rich feel absolutely no loyalty to America or her citizens. They are already screwing us over, and the common wisdom seems to be that we need to lay back and take it, or they might leave us. Yes, please, my ass is feeling pretty chapped.

I'm tired of being the abused wife defending her retarded alcoholic husband when people point out that he's beaten her senseless.

Re:Exploitation for the win!

[mdarksbane]

How do you propose to grow an economy without someone to finance the businesses?

Economies grow through entrepreneurship. Apple and Google grow the economy. Whole foods grows the economy. Random guy with a family owned food mart who never expands does *not* grow the economy. The economy grows through businesses expanding and finding or creating new markets. You need rich people to do that! That doesn't mean they shouldn't have to live under the same rules as the rest of us, but what kind of communist fantasy-land do you think can maintain a modern economy without someone getting rich off of it?

Re:Exploitation for the win!

[Anonymous Coward]

I hate this stupid concept that something has to "grown" in order to be worthwhile. It's economics, not vegetables.

If Apple never made a cent of profit but paid all of their manufacturers, all their rents and all their employes... would you still view that as bad for the economy?

Whatever they teach in economic schools is bullshit. You can't grow the economy forever. And if the only way for a company to survive is to grow, then one day the company will stop growing because they will be the only company left on the planet. And it'll die, even without competition. How fucked up is that?

Re:Exploitation for the win!

[chrb]

or we raise the price for them to sell in the US unless they meet a min. standard.

That is kind of what the European Union does with respects to its member nations. In exchange for becoming part of the EU and getting access to the EU single market, countries have to implement EU Directives into national law, including human rights and employment rights, and basically cede authority over parts of their legal system to EU courts. Freedom of movement means that workers in a less prosperous country, or a country with objectionable work conditions, can easily move to a more prosperous one. The model has worked pretty well - wealthier countries have gained access to cheaper labour and new markets, and poorer countries gain access to cheaper services and technology. In contrast, free trade agreements that involve no aspect of human rights or employment rights often mean that work flows to those countries where workers are subject to the most unreasonable working conditions, and lack of freedom of movement means that inhabitants of those countries have no choice but to stay there.

Re:Exploitation for the win!

[spun]

They should pay more, the system works for them and the benefits they get from it obviously far outweigh what they pay. None of us would be worse off without them because they don't do very much. We would all be far better off with a more equitable spread of wealth, rather than having ownership concentrated in so few hands.

Re:Exploitation for the win!

[spun]

Some imbalance in wealth is not only unavoidable, it is desirable to most people. In my experience, people like it when excellence is fairly rewarded, even if they know they themselves are not excellent. People who aren't hypercompetitive assholes, anyway. Equality of opportunity should be maintained, but it is equitable, not equal outcomes I am looking for.

When we as a society allow too much of an imbalance in ownership to occur, we can not maintain a true democracy, and we can not maintain a true free market. That kind of imbalance necessarily means that the rich do not play by the same rules as the rest of us, and it is a fantasy to think they do.

Re:Exploitation for the win!

[Wyatt Earp]

So you'd what, hammer them till they left, so a post industrial Zimbabwe deal.

Yea, I'm so not in favor of that.

Re:Exploitation for the win!

[Wyatt Earp]

If Microsoft told the German government they'll move lock stock and barrel for a tax rate lower than the US, how long would it take Germany to pass that law?

A week?

Same for DuPont, Apple, Intel, etc

Re:Exploitation for the win!

[JPriest]

Well Oracle is suing Google, and Paul Allen is suing everyone, even Apple, who is suing HTC who is suing etc. ... I can't imagine where he would get that crazy idea.

Re:Exploitation for the win!

[Type44Q]

How do you propose to grow an economy without someone to finance the businesses?

Economies grow through entrepreneurship. Apple and Google grow the economy. Whole foods grows the economy. Random guy with a family owned food mart who never expands does *not* grow the economy. The economy grows through businesses expanding and finding or creating new markets. You need rich people to do that! That doesn't mean they shouldn't have to live under the same rules as the rest of us, but what kind of communist fantasy-land do you think can maintain a modern economy without someone getting rich off of it?

Why does it always have to be about growth?? How about the health of the economy? Wallstreet spouts the bullshit notion that a healthy economy is one based on [unsustainable] growth, fueled by borrowing and spending. Nevermind where it actually leads us (i.e. right where we are now)...

Re:Exploitation for the win!

[Anonymous Coward]

Having a minimum level playing field is the only way a global economy can work without dragging people into the lowest tiers of poverty.

Minimum level playing field? Fuck you and your morals, seriously. Poverty is relative, and the sooner you realize that, the sooner you'll stop preaching from your cushy couch.

yeah, right, the lawyers are the blame!

[macbeth66]

More likely tat he wants to exploit the worker

More reasons

[moeluv]

not to do business in the U.S. we have all those pesky organizations like OSHA, and those weird fair labor standards laws and anti child labor laws that get in the way of a really stellar profit margin. (Yes there was some sarcasm in there)

he's not a modern day Henry Ford

[YesIAmAScript]

Ford wanted his workers to have a living wage, to be able to afford the products they made.

Foxconn doesn't even employ workers long-term, they hire on a week-by-week basis.

I actually don't even dislike Foxconn, but it's not the same as the middle-class building that Ford did.

Re:he's not a modern day Henry Ford

[Grishnakh]

He did figure out that by paying a bit more and helping with education and health he ended up with a lower turnover which helped his bottom line.
Of course that made more profit for him too so no doubt that makes him evil in your eyes.

What's weird is that modern-day capitalists haven't figured this out yet (that turnover kills profit). You think it'd be self-evident, or that they could at least look at what Ford did, but no, they mistreat their workers, create crappy working environments, suffer from high turnover, and then sit around and bitch about it but do nothing to fix it.

He has a point about lawyers

[EmagGeek]

Gou has a very good point about why manufacturing in the US is not feasible.

The moment a company becomes successful, there are lawyers lined up to look for any way they can sue to get a piece of the pie without working for it. If the lawyers fail, the government is next in line to punish the success of the company in the name of "economic justice."

America used to be the land of opportunity, but now there are so many barriers to success, one almost has to go to another country to have any chance.

Pot meet kettle.

[codegen]

In one part of the article it talks about him involved in a libel suit over the suicide reports and then he talks about being scared of lawsuits. Hmmm.

Too many lawyers? Or too many laws?

[blair1q]

I worry America has too many lawyers. I don't want to spend time having people sue me every day.

99% of what goes on in those lawsuits is righteous protection of workers and customers from the bad or evil decisions of managers.

The other 1% is still covered by your insurance, Terry.

Your problem isn't too many lawyers (you just get your own lawyers and then it doesn't take up your time), your problem is there are laws that will keep you from doing things in ways that you deserve to be sued for.

But I'm sure your deployment of nets to catch suicidal employees is a tacit expression of your understanding that your company is somehow culpable for its own behavior and the culture it engenders in the people it aggregates to perform work that makes you an impressively rich man, hyper-impressively considering China's supposed to be a communist country... So you know that you're either doing something very right, or many things very wrong.

Re:Where's my anti-Foxconn?

[thePowerOfGrayskull]

I'm still waiting for an iPhone manufacturer that pays its workers a decent wage and respects meaningful safety standards. I'm willing to pay an extra $100+ for my iPhone to not have a guilty conscience. C'mon invisible hand, supply my demand already.

Because you and the other twenty people willing to do this do not a market make.

Re:Plus

[Fred IV]

the US isn't a corrupt 3rd world country that you can bribe epople to get your way.

True...we're a first world country where you can have lobbyists bribe people for you to get your way instead.

Re:Kill all the lawyers!

[TheDugong]

"If some stupid old lady spills lukewarm coffee into her lap, she should NOT get a billion dollars in damages."

Third degree burns on 6% of her body, lesser burns on a further 16% of her body (that is almost a quarter of her body burned), 8 days in hospital, a skin graft and 2 years of further medical care is far from frivolous. I'd argue that any beverage that has the potential to cause injuries serious enough to require a skin graft is slightly beyond "lukewarm".

http://en.wikipedia.org/wiki/Liebeck_v._McDonald's_Restaurant

The United states of sue you

[EEPROMS]

Actually Terry Gou must have read Made in Japan" written by the founder of Sony Akio Morita. There is a section were Akio Morita talks about Sony setting up manufacturing facilities in the USA and how Sony was sued by competing (and in some cases companies Sony had a close business relationship with ie suing their own customer) for the most insane reasons. The view that Akio left me was when dealing with the USA have a large legal dept because everyone will try to sue you to stop you competing in the market. Akio also compares the the US legal system with Japans and explains how most of the cases being bought forward in the US would never have got of the ground as the lawyers would lose to much money if they lost. So I can see were Terry Gou from Foxcon gets the view that the USA is not a good place to manufacture, not good news for the US manufacturing industry now that unemployment is heading past the 10% mark. On another note, for those who think this is all about wages and conditions, explain to me why South Korea has a huge ship building industry that leaves the US in their dust but the workers actually have higher wages!! Simple, South Korean workers are dedicated to their job and the bosses dont get multi million dollar kick backs and unlike US CEO's dont just see the stock price but also the products they are making today and in the future. This is why the USA is failing, to many directors looking at the stock ticker and ignoring the "product" that is being made now and what they will be producing in 10 years. Go to Toyota and they will happily show you products they have slated to be made in the next 2, 5 ,10 and 20 years.

I Don't Hear Anything

[Anonymous Coward]

Seriously, I don't hear any of the "thousands of iPhone buyers complaining about bad working conditions".

I have heard lots of complaints about the excessive cost of iPhones and for a brief period Antennagate. But, nary a whimper about Foxconn working conditions.

Perhaps you should expand your horizons and get a better grasp of the world around you. Which is almost precisely what Guo meant when he said "New York bankers who see the Hudson River and say, 'I'm a king of the world.'"

Cue the replies of 'the irony of my post'...

We read day in day about US litigation ...

[jotaeleemeese]

Oracle sues Google.

Netapp sues Sun,

Apple sues Nokia.

Nokia sues Apple.

SCO sues IBM, Novell, my aunt and your granny.

And lets not forget Amazon's "one click"....

and that is only IT for starters.

Almost daily we have news about frivolous lawsuits related to patents (software patents!) and copyright.

You may want to say whatever you want about this guy, but please don't tell me he does not have a point to make .....

Re:Kill all the lawyers!

[satoshi1]

There's also the fact that she was a moron and didn't think about the fact that "coffee" and "hot" are best buddies.

Makes complete sense.

[MaWeiTao]

His comment about the uselessness of business degrees is spot on. I'm convinced that American corporate over-reliance on business degrees, and marketing, are amongst the biggest problems facing American corporations.

American corporations are saddled with a bunch of business majors who, for whatever reason, have been deemed to be the best suited to manage despite the fact that they barely understand the details of what their company actually does. They haven't worked in the trenches, they haven't actually been directly involved in the product or service but they're first in line to run things. This is a far cry from Asia where engineers and designers routinely are the ones who get promoted to management positions. It ensures they can make informed decisions and employees can't get away with BS. Managers in Asia can be just as self-centered, just as concerned about the next Mercedes they're going to buy. But they're also more likely to make the best choices for the company.

The second disaster is marketing. American companies seem to have adopted the attitude that you don't actually need a good product, you simply need to convince consumers you offer one. By the time the consumer realizes they've been had you have their money. And they've risen to have such power because of stupid suits who don't have enough confidence in the strength of their product. And marketing is entirely self-serving. It doesn't matter how wasteful a marketing campaign is a marketing department/agency will find a way to skew the data to claim it was actually a success. It's rather shocking how much money companies dump into marketing especially considering how low the response rate actually is.

This is not to say there aren't other issues. The cost of labor in the US is exceedingly high, and work ethic is crap. Couple that with entitlement culture and you've got real problems. And topping it all off we've got a government that mismanages and misdirects regulation. Instead of making decisions that are best for the well-being of the nation their policies almost always seem intended to pander to special interests or push certain agendas.