Report: Apple Cuts 0.7 Percent of iPad Profit to Give Factory Workers Big Raise
May 31, 2010 9:15 PM
comment(s) - last by
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
at the Shenzhen facility.
by Chinese news organization
, 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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RE: A First?
6/1/2010 1:47:02 PM
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?
6/1/2010 2:36:45 PM
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
. 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
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
paying companies with
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?
6/8/2010 12:45:14 AM
"Foxconn workers have been paid at least twice, and by some accounts three times, the national average."
Twice nothing is still nothing.
"And boy have we patented it!" -- Steve Jobs, Macworld 2007
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