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.
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.
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.
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.
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.
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.
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.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
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.