Who Will Pay for Apple Supply Chain Changes?

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Anna young
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Re: Who will pay?
Anna young   2/29/2012 10:10:38 PM
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The Apple & Foxconn story is dying out without a comment from the Chinese government. The story isn't over. Most of this will play out in a theater but that is not going to be in China because the government isn't really interested in the story.

Eldredge
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Re: Who will pay?
Eldredge   2/23/2012 9:42:09 AM
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@Barbara - I would tend to agree. Maybe Foxconn will absorb a token reduction in margin, but certainly won't bear the full cost increase on their own.

Bolaji Ojo
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Re: Who will pay?
Bolaji Ojo   2/22/2012 8:30:00 PM
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Douglas, Even if Apple gets Foxconn wages to triple, the US company will stay make billions in profit. Current wages as reported by NBC News for Foxconn workers come to $1.78 per hour. Few workers in the U.S. will think they've struck the motherlode if they make $10 per hour.

And, as you indicated, all the smartphones are becoming in some ways generic. The idea Apple's ecosystem or Nokia's ecosystem or Google's Ecosystem is better than the competing system is becoming a failed argument. The ecosystem has become commoditized.

Douglas Alexander
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Re: Who will pay?
Douglas Alexander   2/22/2012 9:54:22 AM
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Bolaji, I think I read or heard that an IPhone cost somewhere in the neighborhood of $9.00 to manufacture. Even if the cost triple, won't Apple still make tons of money on each sale? I have the original IPad and just got rid of the original iPhone which I replaced with a Galaxy II Skyrocket Adroid phone from Samsung. All these phones will eventually mimick each other in features so the competitive nature of similar products will eventually determine market share for each competitor. The various Apps are becoming universal as well. There are just so many notepads or contact managers or PDF readers before you've been there, done that syndrome sets in.

Bolaji Ojo
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Re: Who will pay?
Bolaji Ojo   2/22/2012 8:27:05 AM
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_hm, The situation is not Apple-specific. All the companies that manufacture with Foxconn have the same problem. However, Apple is the most visible company and is receiving the greater attention as a result.

You asked if the Apple changes will bring jobs back to the United States. I doubt it. The jobs Foxconn has won't be viable in the US or in other Western countries. At under $2 per hour, Foxconn's workers' pay wouldn't be considered living wage in the US. Plus, the dormitory condition won't be accepted here.

Bolaji Ojo
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Re: Impact of wages
Bolaji Ojo   2/22/2012 7:26:58 AM
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Rich, He's laughing in heaven (and his estate is ecstatic) that you bought an iPad. I didn't buy an iPad for a bunch of reasons, one of which is the price but also because there are alternatives that I am carefully considering. I like Apple products but won't buy any of them as part of a herd.

_hm
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Re: Who will pay?
_hm   2/22/2012 5:04:03 AM
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Is this applicable to Apple products only? Foxxcon and Chinese supplier assembles products for many others. All these organizations will have to pay more to compnies like Foxxcon.

Will this bring back some work to USA?

 

Bolaji Ojo
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Re: Who will pay?
Bolaji Ojo   2/21/2012 7:44:22 PM
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Barbara, I believe you have put your finger on the first symbiotic relationships in the history of the electronics industry. Apple cannot dump Foxconn and neither can Foxconn dump Apple without both parties suffering major harm. They'll figure out ways to get along and share extra costs. I predict, though, that Apple will go back to its old ways of transferring costs to suppliers and selling customers the "ecosystem experience." Why both suppliers and customers put up with it is the real puzzle.

Bolaji Ojo
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Re: Impact of wages
Bolaji Ojo   2/21/2012 7:40:36 PM
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burn0050, I feel your angst. As much as it might be nice to have an iPad, I have refused to buy one. I also don't own an iPhone. I do have an early edition iPod, which an Apple employee at an iStore once told me they wouldn't service because it was so old!

In other words, I have moments when I think Apple's products are overpriced. The company gets extra dollar for the "goodwill" its products generate and for the perceived "quality" as well as the other thing analysts are crazy about -- the ecosystem. Of course, some of this is hogwash but people have bought into it.

Will Apple readily give this up in the new environment where bashing the company has suddenly become "cool"? I doubt it. Although I agree its margins are hefty and it can easily absorb the extra cost of the Foxconn wage hikes and other supply chain makeover it is implementing, it may be difficult for Apple to change its old ways of pushing costs onto its suppliers and extracting the most value from customers.

Barbara Jorgensen
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Re: Who will pay?
Barbara Jorgensen   2/21/2012 7:32:19 PM
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@Bolaji: Given the time that it would take to disengage from Foxconn--anywhere between 3 and 5 quarters by some estimates -- and find a new partner (4 to 8 quarters) I would expect Apple to weigh the pros and cons. I think Foxconn will ask its OEM customers--including Apple--to pay more. In the end, I think Apple will stick with its partner and pass costs on to end-customers. They are a business, and that's what's in the best interest of Apple shareholders.

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