Design Con 2015

Will Apple, Foxconn, & Sweeteners Satisfy Labor Activists?

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Mr. Roques
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Supply Network Guru
Re: Foxconn wages
Mr. Roques   2/24/2012 4:27:42 PM
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Do you think the relationship between Apple and Foxconn is too big now? (is there something as too big? or too dependant?) 

Foxconn has to do what Apple says, and Apple has to go with what Foxconn can do. They basically depend on each other, I don't know which one relies more on the other.

Bolaji Ojo
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Re: Foxconn wages
Bolaji Ojo   2/21/2012 12:53:52 PM

Nemos, I must admit that I didn't quite understand the reason Stephen Elop advanced for moving Nokia's manufacturing to Asia. It was more on the line of "everybody did it so we should." The rest of the industry began this outsourcing more than a decade ago and it is more or less fully advanced. The problem Nokia faced was more than just manufacturing or cost. It was related to consumer acceptance of a rival's product. The shift of manufacturing to Asia won't resolve this.

Nemos
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Re: Foxconn wages
Nemos   2/21/2012 10:51:15 AM
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No I don't blame the system, and I believe also in the free business movement. The ability to move your "factory" anywhere you Like. However, considering the Nokia case (The Ceo took the decision to move out and to go in Asia ) it will not help because the problem is not on the production cost and this decision was taken without thinking.

It is like to have in my house a broken window, and instead of fix in it ,I move out to a new house because of that.

Bolaji Ojo
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Re: Foxconn wages
Bolaji Ojo   2/20/2012 7:56:05 PM
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Stochastic, Henry Ford manufactured primarily for the American consumer. As a local manufacturer it made sense to include his employees in the classification of potential customers, hence paying them well enough to purchase Ford cars. Plus, Ford was not alone in paying workers well. The rest of the economy was booming and if Ford needed the employees it had to be prepared to pay them well or they might walk over to a rival, whether this be in automotive or machinery or whatever.

In the case of Apple, the company didn't see China as a potential market for quite a while. It's been many years since it started selling the iPhone and Chinese telecom companies are only now getting their hands on the device. Apple's calculation might be different, though. With more than 1.3 billion people, China represents the biggest potential market for Apple products but knowing the limited purchasing power -- compared with consumers in the West -- the company probably didn't try so hard to cultivate the market.

Still, even one-tenth of this market represents a huge opportunity for Apple. That's why it is making a play for them now but it doesn't have to help cultivate this customer base. It can simply sell to the newly rich in China. Paying its Chinese workers enough to be able to buy the Mac, iPhone, iPod and iPad might just be too expensive for Apple. It might dig into its sweet margins.

Bolaji Ojo
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Blogger
Re: Apple picthing in to pay Foxconn employees
Bolaji Ojo   2/20/2012 7:36:56 PM
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rohscompliant, If Apple is behind the pay increase at Foxconn (and if it is absorbing the extra cost) this will eventually show up in its cost of goods sold. The company can't just hide this. It may show up in lower gross profit margins or operating margins. As a public company Apple may even have to disclose this if the increase is material. Analysts will eventually pick up on this and ask the company about the impact of Foxconn's wage increase on Apple.

As you noted, however, the company has the resources to easily make the added costs look like peanut. With the amount of free cash flow it is generating and the current rate of sales growth, Apple isn't being endangered by the additional cost. Things may look different if it has to pass the extra cost to customers but we wouldn't expect this to hit Apple alone since the rivals patronize the same contract manufacturer.

Bolaji Ojo
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Blogger
Re: Foxconn wages
Bolaji Ojo   2/20/2012 7:08:26 PM
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Nemos, Yes. CEOs take decisions based on what they believe is in the best interest of their company and not what they believe is right for the entire world or even for the employees. It's all about shareholder value. If the entire world goes down the drain later they would still insist they did the right thing. That's why it's capitalism and not communism/socialism. Unfortunately, this winner takes all approach ends up hurting someone or everyone but the impact is never the same.

stochastic excursion
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Stock Keeper
Re: Foxconn wages
stochastic excursion   2/20/2012 3:57:42 PM
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It's true, fairness, and even reasonableness is often a matter of perception.  If you were Henry Ford it meant paying your workers enough to buy the car they produced.

Nemos
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Supply Network Guru
Re: Foxconn wages
Nemos   2/20/2012 2:04:14 PM
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No they don't, and they have a lot of problems to care instead of caring about the wealthy Europe but all the world is like a scale and balancing all the time. A side effect in China may cause instability in the markets in Europe everything is connected. Most of the CEOs takes the decision without considering the consequences of moving a factory unit to another place.

rohscompliant
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Production Synthesizer
Apple picthing in to pay Foxconn employees
rohscompliant   2/20/2012 10:49:49 AM
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Based on Apple's earnings and record profits; it is a fair bet that Apple is 'kicking' $$ back to Foxconn to pay for worker wage increases. This will probably never see the light of day but it makes perfect sense...............it is an infinitesimal amount of $$ Apple would pay based on the fact that they are sitting on more cash than any other company in the world..........wont be able to prove it but that would be my guess.

Bolaji Ojo
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Blogger
Re: Foxconn wages
Bolaji Ojo   2/20/2012 8:45:36 AM
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Stochastic, "A fair deal?" Whose job is it to determine the "fair deal" and would we all agree on what's a fair or not fair deal? I don't know any employee that says "the company is paying me enough". Everyone wants more, always, and so the Chinese workers will probably be asking "more" soon.

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