Report: Apple Cuts 0.7 Percent of iPad Profit to Give Factory Workers Big Raise
May 31, 2010 9:15 PM
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.
"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007
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