The recent handwringing over poor labor conditions and practices at Chinese factories that make electronics devices is hypocritical and misplaced. We are all guilty of owning products manufactured under conditions most us who live in the West would never accept.
The New York Times recently featured a series of exposť articles using Apple Inc. (Nasdaq: AAPL) and its biggest contract manufacturer, Foxconn Electronics Inc. , as examples of how Western OEMs benefit from labor conditions at Chinese factories that would be considered appalling in Europe and North America but that are readily accepted and defended by the companies' management as well as government officials in China. I discussed these on Friday in Does Apple Have a Foxconn Problem?
The reports are damning, but nothing here is new. We've all turned our collective eyes away from what we know is happening in Chinese manufacturing plants, since the products they churn out are made more cheaply, faster, and often better than at comparable Western facilities. China is the world's manufacturing center not just because of the lower labor costs -- so stop believing the hype -- but also because Chinese manufacturers can get away with practices nobody would accept in the West.
You still don't believe me? OK, please answer these questions: Would you sleep where you also work? Would you send your teenage children to work in a factory where they live in hostels (stuffed 10, 15, or more to an apartment)? Would you work at a plant where safety rules are regularly violated at the expense of your health? And would you work for a company that systematically practices forced overtime but denies it when cornered?
That's just the tip of the iceberg. The truth is that manufacturing companies in China squeeze their supply chains for higher and higher margins to boost profitability and satisfy the demands of companies like Apple.
Foxconn has a mega facility in Shenzhen that is bigger than many American cities and where it employs more than 400,000 workers. The company has at this site its own security, restaurants, movie theaters, swimming pool, fire stations, and other facilities found in any modern city. Yet, for all its wonders extolled by Steve Jobs, the late CEO of Apple, few of us would want to work at a facility like this. Here's what Jobs had to say once about the Foxconn plant, according to a report:
You go in this place and it's a factory but, my gosh, they've got restaurants and movie theatres and hospitals and swimming pools. For a factory, it's pretty nice.
I wonder, though, if Jobs himself would have taken a job here. He never had to. As a Westerner, Jobs lived under different standards rigorously enforced by regulators, monitored closely by human rights organizations and constantly scrutinized by lawyers. Any of the violations and numerous injuries reported in the press would have attracted a swarm of lawyers.
But not in China. That's partly why companies like Apple, Dell, Hewlett-Packard, Motorola Mobility, and Nokia make their products there. The workers at these plants have limited options. Many people point to the fact they wouldn't have a job at all or would be making a lot less, had Apple and its competitors not outsourced production to the likes of Foxconn.
That may be so, but that argument amounts to still a lot of BS. We who buy the products should have at the back of our minds the knowledge some of the devices manufactured by the electronics industry in China were produced under unsavory conditions. We should have this at the back of our minds when we buy Apple shares and celebrate the stock jumping another double-digit percentage point each time the company announces another record sales and profits.
Industry executives have known about these situations for a long time, and they are quite aware their bonuses depend on squeezing more gains out of the supply chain by outsourcing production to areas where the total cost of production is constantly being tamped down. That squeeze is at the expense of someone, and the claim that this is not the case -- by Jobs, his successor Timothy Cook, other electronics vendors, and the consuming Western buyer -- is hogwash.
They are not the only guilty ones. In fact, if guilt could be weighed and measured out by portion, I would suggest depositing the heaviest portion at the doorsteps of the Chinese government. It wanted economic growth, and that's what it's getting. But its citizens are paying an awful price with their health and personal freedom.