A human rights watchdog agency has called for Apple Inc. to produce its first "ethical" iPhone -- the iPhone 5 -- by this summer. Apple has recently come under fire for the labor practices, deemed abusive by Western standards, at one of its largest manufacturing partners, Foxconn Electronics Inc. More than a dozen workers at Foxconn have committed suicide, allegedly due to working conditions, and an explosion at one factory has been linked to unsafe levels of flammable dust.
An ethical iPhone 5 is clearly not going to happen. Apple, Dell, Hewlett-Packard, and dozens of other top-tier electronics manufacturers have outsourced their manufacturing operations to EMS companies. These companies, such as Foxconn, have migrated to areas where labor -- one of the lesser components of an electronics product's total cost -- is a fraction of rates in the Americas and Europe.
Charlie Barnhart, principal of EMS consultancy Charlie Barnhart & Associates, provided the following information in an email to EBN about how long it usually takes for an OEM to engage with an EMS provider -- and how long it takes to end the relationship.
On average, it takes a little over five quarters for the typical OEM to implement a new outsourcing supply solution (initial internal discussion to first products delivery). Obviously, there is a big range around this average depending on the scale, approach, and complexity of the project and the experiential level of the OEM (I've seen engagements launched as quickly as three to four quarters and other stretch on for as long as seven to eight quarters).
On average, it takes a little less time for an OEM to disengage from an existing outsourcing supply solution, i.e. typically three quarters. Obviously, there is a range on this data point as well, but that number is extremely hard to pin-down as it's much more complicated to determine when the "initial internal discussion" (re: the disengagement) actually took place. Plus many of the failed cases we study drag on for several years due to material liability issues, legal proceedings, warranty related claims, etc.
Therefore, when I'm modeling an outsourcing initiative with a client who is "changing solutions," I use an eight-quarter timeline in the project plan.
At the rate of release for any typical consumer product -- let's say six months for an updated or upgraded version -- an OEM would have to start disengaging with a non-compliant EMS partner two years before the product's release date, while ramping up with a new partner at the same time. The result would be an unprecedented amount of redundancy -- a big no-no in the supply chain -- as the OEM transfers its designs, bill-of-material, contracts, etc., to the new partner.
Given Foxconn's size -- Barnhart counts Foxconn among the "Goliath fringe" of EMS companies -- a seamless transition to another EMS is impossible. Apple, Dell, and others would have to divide their business among Foxconn's nearest competitors. According to IHS iSuppli, the combined revenue of the next nine companies in the EMS hierarchy is half of Foxconn's.
As much as many of us would like to stand on principle, just do the math. Bringing Chinese wages up to Western levels would increase the cost of a typical i-product by 35 percent. And that won't improve working conditions.
I think the issue is even more fundamental than "can we change?" The question is "should we?" I am personally torn between two points of view: limiting a business relationship to a straight demand-supply agreement, versus businesses as a moral compass. I continue to struggle with this one...
I really agree with the comment, it is not so easy. I am wondering why for istance, in technical fields, common or shared position among several members have been usually achieved, but for topics really important as per discussed within Barbara editorial, difficulties are still there since a long ago.
Tim Cook wrote an internal memo to employees about the bad publicity Apple is getting (see Bolaji'g blog on the response) but nothing has been said publicly that I am aware of. Apple rarely speaks to the press unless it can control the message. I think this time it is a bad move for Apple to not publicly respond to criticism.
Then again, this is the company that when users complained the iPhone didn't work when you held it a certain way the response was "then don't hold it that way." In other words, the problem is us, not them.
That is right, summer is around the corner and we cannot expect a drastic change in this short time. BTW, Do you notice any sign from Apple that they have been listening to people concerns about how their contractors treat their employees? I wish what that did not fall in deaf ears.
A couple of good points from readers: Apple is by no means the only OEM working with Foxconn. Dell has acknowledged it in their CSR reports, and news reports say that IBM, HP and a number of Asian companies all use the EMS. The conditions we are hearing about are directly influenced by Apple's size and visibility, but a cohesive effort by all the major OEMs would go a long way toward improving conditions in foreign factories. Another point--we don't know that Foxconn is the only manufacturer operating below par--they are just the biggest.
I see electrn_lyf, it is a good point you have outlined. In my opinion, it sounds as another step forward to do, because certification process needs to be recognized abroad in line with political rules of each one country that decides to achieve it.
every one talk about apple because they are the biggest customers of Foxconn. Otherwise there are many other companies engaged in EMS services with Foxconn. I hope the working condition will improve once there is a common body to certify the EMS companies.
It could be an approach HH; but I would like to put on the table a question. Right now, major focus is continuously on Apple and labor condition for OEM outsourced people. Are we really convinced labour conditions for other major players in the sector are different? Has anybody heard about?
I think EBN/UBM can raise the voices in public on behalf of the community. Somebody has to raise the voices against such things; otherwise most of the companies are considering it as grant for success.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.