Report: Apple Cuts 0.7 Percent of iPad Profit to Give Factory Workers Big Raise
May 31, 2010 9:15 PM
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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
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?
6/2/2010 5:36:10 AM
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?
6/2/2010 1:12:07 PM
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."
RE: A First?
6/3/2010 1:10:14 PM
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.
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