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Apple will lose 0.7 percent of its iPad profits to give the workers that assemble its device a 20 percent raise. Workers at Foxconn are currently struggling after a string of suicides and enduring reportedly poor working conditions.  (Source: Kin Cheung/AP)
A small cut to Apple's profit margin may make a big difference in workers' lives

It took a string of suicides to spur it to action, but Apple is finally taking a big step towards trying to ensure that the workers who build its bestselling iPads, iPods, and iPhones enjoy a decent standard of living.

Apple's products are almost entirely manufactured by Foxconn, a China-based unit of Taiwan's Hon Hai Precision Industry.  Foxconn builds the sleek devices at its Shenzhen plant in Southern China.  While many companies (Microsoft, HP, Dell, Nintendo, Sony, etc.) utilize Foxconn's manufacturing services, the Shenzhen facility primarily serves Apple -- and it's also the site of all of the recent suicides.

The suicides were perhaps foreshadowed by an internal probe by Apple that revealed that several of its international manufacturing partners were committing abusive employment practices, such as using child labor or demanding unpaid overtime.  According to reports, the latter was particularly common-place at the Shenzhen facility.

According to a report by Chinese news organization Sina, Apple has now quietly committed a dramatic gesture, offering to finance the majority of the 20 percent raise in pay to the Shenzhen workers.  The raise was long promised to workers, but had remained undelivered for some time now.

The 20 percent raise will cost Apple a little, but not very much.  It is estimated to raise the costs of labor for the iPad from 2.3 percent of the cost to 3.0 percent of the cost.  Apple still looks to make hundreds in profit off of each unit sold (breakdowns estimated Apple makes at least $200 per iPad sold).

For the Foxconn workers living in the factory city of Shenzhen, though, the raise will make a world of difference.  While some will question why Apple didn't push for higher wages in the first place, it's important to appreciate that it is at least taking action now.  One can only hope that HP, Dell, Microsoft, and others step up to the plate and offer to subsidize similar raises at their manufacturing locations -- even if they haven't been struck by the spate of suicides that occurred at Apple's plant.

Apple has not yet officially acknowledge the report, though it has previously stated that it was concerned about the working conditions at Shenzhen and that it was evaluating its options.

In other news, a fire broke out at the Shenzhen plant this week.  It reportedly was unrelated to the suicides.  The fire did not do any major damage to equipment, according to reports, and is not expected to impact Apple's production schedule.


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A First?
By ltcommanderdata on 5/31/2010 10:49:54 PM , Rating: 0
Has any major company ever given the workers of a third-party contractor a direct profit share in the products they make before? It may not be a huge amount to Apple or people may try to dismiss it as damage control, but it will make a big difference to the workers. Ideas like this that help workers may well be better examples of "Think Different" or "magical" than the products themselves. Hopefully, Foxconn doesn't take measures to redact the pay increase through other means and other major companies take policies like this into consideration.




RE: A First?
By eman007 on 5/31/10, Rating: 0
RE: A First?
By icanhascpu on 6/1/10, Rating: 0
RE: A First?
By eli2k on 6/1/2010 2:58:37 AM , Rating: 5
I'm more concerned Foxconn decides to hold on to the new money they are supposed to give to the workers, and not give it to the workers. Technically, workers get more money, Foxconn gets nothing, is that right? You're giving Foxconn more money to distribute, hopefully you have a good way of ensuring the workers actually get the money...


RE: A First?
By shogdo on 6/2/2010 5:36:10 AM , Rating: 2
The article made it seem like Apple is making Foxconn raise it's own worker salary and Apple is footing the entire bill. That's not the case at all, and technically it's not possible. Apple is not Foxconn's only customer, and usually, a factory worker will work on Apple products as well as other company's products.
The fact is, Foxconn is raising all Shenzhen factory workers' salary by 20%. Apple is helping Foxconn out agreeing to let Foxconn charge them more (I don't know exactly how much more Foxconn will charge Apple, but I think Apple is only covering part of the 20% raise).


RE: A First?
By sebmel on 6/2/2010 1:12:07 PM , Rating: 2
Apple is covering the full raise.

It is not difficult for a factory to pay one production line more than another, if that is what Foxconn choose to do. Any farm sets a wage dependent on what workers do.

This issue highlights several problems: China's citizens' rights; the consequences of CEOs' negotiations on price; work/life balance; the problem producing of satisfying work and career paths on production lines.

Since the 1980s it has been trendy to encourage business students to be ruthless and consider only the bottom line. The successes of Victorian Cadbury's, UK and the John Lewis Partnership, UK, have been forgotten, ignored & even vilified in the US as 'evil' socialism. These are the consequences. The profitability of those two companies actually showed that it was good capitalism.

Incidentally, the level of suicides at France Telecom have been higher than at Foxconn but the story is a similar one. The company has hidden behind France's high suicide rate (double that of China for men). A far cry from the pleasure workers expressed at working in the Cadburys Bournville factory in 1879.

I'd like to thank Jason Mick for the most balanced article I've seen him write on this subject. I hope see get to read many more like this one.

An insightful extract from Time:

"In mid-May the Chinese newspaper Southern Weekend ran a story by a young reporter who spent a month working undercover at the factory. Liu Zhiyi wrote that the workers all dreamed of wealth, but felt that they had few opportunities outside the company. The workplace wasn't a sweatshop, Liu wrote, but the assembly-line work slowly dehumanized the employees. "It seems as if while they operate the machines, the machines also operate them," the story said. "Parts flow by, and their youth is worn down to the rhythm of the machines."

Read more: http://www.time.com/time/world/article/0,8599,1991...


RE: A First?
By shogdo on 6/3/2010 1:10:14 PM , Rating: 2
Hi, I wasn't really sure how much Apple is contributing to the raise after reading this article so I thought I try to find out more.
If you do a search of news about Foxconn raising factory worker wages (the raise if wage is now up to 30%), none mentions Apple covering any of Foxconn raise except for this article in DailyTech by Jason Mick. The Chinese article referenced in this article actually says Apple "might" contribute to the salary of workers who works on Ipad products. Foxconn is raising the salary of all factory workers in Shenzhen (estimated 400k people), not just Ipad workers. Foxconn's stock price took a big drop after the announcement of the wage increase because of concern about its impact on company's profit.
I'm not siding with Apple or Foxconn on anything, just having some doubts about the accuracy of this article.
Anyways, saying "Apple is covering the full raise" is NOT accurate. And I'm not so sure this article is so "balanced" as you say.


RE: A First?
By Hieyeck on 6/1/2010 10:20:00 AM , Rating: 3
DT a news authority? </snicker> If you truly believed it, you wouldn't be a Mac fan, not with all the stories of Apple/Macs screwing up.

It's a news aggregate/blog. I come here because I'm too damned lazy to troll two dozen sites. DT is my 'interesting stuff to read' filter. I don't think I've completely read an article here for months.


RE: A First?
By Hiawa23 on 6/1/2010 10:12:40 AM , Rating: 2
So, is this how it works? Why would anything get made in the United States, when American workers want decent salries plus benefits, when you can farm out the work to foreign countries or foregn companies who pay the people pennies on the dollar & probably work em more. No wonder their suicide rates are very high. Their govt tried to say the suicieds were tide to the individuals personal problems. K....


RE: A First?
By rpip on 6/1/2010 11:10:02 AM , Rating: 1
Go price cars made by unionized US labor and cars made by non-unionized US labor. Next, examine the quality of the two products. Then examine the price of the two products. Notice the $3,000 to $5,000 union tax for lesser products. Yet, the US employees at the non-unionized auto plants are happier with their work even though they take home slightly less pay once you figure union dues and higher taxes in unionized states.

Now, look at the business taxes and the capital gains taxes in the US as compared to the rest of the world. Yup, we're the highest in the industrialized world. Now try to understand that business does NOT pay these taxes, the consumer does. None the less, the cost of the product is raised by these high taxes.

US employees (not workers) CAN make many tech. products, especially on the high end. We would just have to put envy and outdated notions of employer/employee relationships aside...


RE: A First?
By eman007 on 6/1/2010 6:01:02 PM , Rating: 2
My earlier statement was under the assumption that Foxconn will actually get the money to the employees.


RE: A First?
By MrBlastman on 6/1/2010 8:35:38 AM , Rating: 2
Twenty Percent is a joke. This was just done for publicity and reduction of bad press. It costs Apple squat to make this tiny pay raise that in reality, is miniscule at best. They could have done far more, but, as is commonplace, do the minimum to make the impact while doing the maximum to keep profits sky high.

Think different? There's nothing about thinking different with this. This is old line business mentality. Profits are a GOOD thing, don't get me wrong, businesses are money machines, however, as par for the course, do the minimum that you need to achieve the maximum impact to profitability and PR on the bottom line.

I suppose, the only thing I'm against is the measly wages the people in China receive. Compared to the rest of the country, they are well paid, but, more money can not totally make up for horrid working conditions. There is far more that impacts the worker than their pocket book.


RE: A First?
By Hiawa23 on 6/1/2010 10:19:22 AM , Rating: 2
PR stunt by Apple, as this is just to look good to the public. Sweat shops I guess are common for these huge companies. I thought being an American company who make all these over priced Ipads, Ipods, Macs meant they were made in the States. Hey, if you can pimp out a segment of people in another country getting your products made as cheap as possible, more power to you. That's all that matters, profits over everything else. Isn't that what almost cost the world economy to come crashing down? If everything goes for the big corporations how do all us Average joes get a piece of pie?


RE: A First?
By Shadowself on 6/1/2010 1:47:02 PM , Rating: 2
Foxconn workers have been paid at least twice, and by some accounts three times, the national average. Now they are getting a 20% raise above that. A raise that is 40% to 60% of the national average pay is definitely NOT a joke.

By "first world" standards the working conditions are deplorable. This will change slowly. If you check back a bit you will find that many of the positive changes were driven by Apple. True, it was to avoid bad publicity more than to really help the workers, but the positive changes were driven by Apple, not Foxconn.

Additionally, Apple is not the only company building equipment at Foxconn -- not even the only company building equipment at that factory. The fact that Apple is willing to directly pay for this raise indirectly supports non Apple companies. How many companies do you know will pay for a raise for workers to build equipment for another company? How many companies actively, financially clean up other company's messes? Why didn't Nintendo, among others, step up and shoulder their share fo the raise?

Finally, by the World Health Organization the suicide rate at that factory is less than 20% of the national average of all of China. The suicide rate will never be zero, but Apple being such a lightning rod for publicity (both good and bad) even a single suicide will make the news. There is no amount of money or changes in working conditions that will make the suicide rate zero.


RE: A First?
By Solandri on 6/1/2010 2:36:45 PM , Rating: 2
Yeah, I'm decidedly anti-Apple these days. But what this story boils down to is Foxconn being criticized for not making their workers happy enough. You've got a company which takes the average Chinese citizen, pays them far above average for the region/industry, and increases their happiness to the point where their suicide rate is significantly lower than even the U.S. suicide rate. And somehow they're the bad guy?

Increasing the living and working standards in China needs to encompass the entire country (better yet, all of SE Asia). Singling out one company for criticism will just drive that company out of business as their market share gets eaten up by other companies you aren't criticizing. People really should be directing their ire towards the lower paying companies with worse working conditions. Not a company that has just about the best conditions in the region, even if those conditions are relatively poor by our standards. You improve things by encouraging those who are doing better than their peers, not by bashing them for not doing enough.


RE: A First?
By YashBudini on 6/8/2010 12:45:14 AM , Rating: 2
"Foxconn workers have been paid at least twice, and by some accounts three times, the national average."

Twice nothing is still nothing.


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