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Does Apple Have a Foxconn Problem?

Is {complink 379|Apple Inc.} building its roaring success on the back of poorly paid Chinese workers assembling the company's products in conditions that don't meet international labor standards?

This question has dogged Apple for some years, but a recent series of articles in The New York Times paints a powerful picture that casts the world's most valuable consumer electronics company in a highly unflattering light. The articles detail conditions at factories operated in China by {complink 2125|Foxconn Electronics Inc.}, the main contract manufacturer for Apple and many of the world's leading high-tech companies.

Supported with anecdotal evidence as well as reports from human rights organizations and interviews with unnamed current and former Apple executives, the articles essentially hold Apple indirectly responsible for some of the labor violations at Foxconn facilities. The violations include “involuntary labor, under-age workers, record falsifications, improper disposal of hazardous waste and over a hundred workers injured by toxic chemical exposures,” according to the NYT.

Like many of its peers, Apple makes most of its products, including the Macintosh computers, iPhones, iPods, and iPads, in China, and therefore is open to criticisms. Some of the criticisms are valid. However, it's also clear that the company has taken steps in the last years to improve conditions at the facilities that make its products.

Despite its prior actions, though, the NYT articles clearly indicate Apple has a problem that won't go away easily. Let's not mince words: Foxconn makes Apple products in China because it can do so cheaply and faster than in Western plants. The contract manufacturer has endured many negative publications in recent years, including the suicide of some employees.

Foxconn has an image problem. So does Apple. The problem has been associated with Foxconn, while Apple has managed to avoid many of the negative implications. Until now. In a follow up blog, I will be focusing on how this is a bigger problem for the entire electronics industry.

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36 comments on “Does Apple Have a Foxconn Problem?

  1. Barbara Jorgensen
    January 27, 2012

    I continue to marvel at the fact that Apple has not suffered from a negative consumer reaction to the reports regarding Foxconn. I think it is, in part, a testament to the zeal of Apple's customer base. Companies are boycotted all the time for big disasters (Exxon, BP) and small missteps (“What I meant to say was….”) by management. Apple so far has been immune to the backlash. And you are right in saying this isn't just Apple's problem–Foxconn is a service provider to just about any electronics brand name on the planet.

  2. Cryptoman
    January 27, 2012

    Foxconn electronics is a contractor to Apple. It is not owned by Apple. Therefore, Apple cannot dictate how Foxconn runs its business. Apple uses Foxconn's services because it is of acceptable quality at an acceptable price and it is fast.

    How Foxconn is able to provide this service is not Apple's concern. It may be unethical, unfair and may have labour violations. The body who needs to be concerned with such matters is the regulatory bodies in China controlled by the government. The Chinese government needs to care about its people first so that they are not exploited. If the government of a country does not care about the welfare of its citizens, how can a private company bringing business in be blamed for the unethical practices in that country? Objectively speaking, I think this is unfair.

    The only reason Apple is under the spotlight is purely because it is commercially very successful and is huge. Also, it has strong competitors who spend day and night trying to push it out of the game. That is the reality of capitalism unfortunately. There are thousands of other smaller companies who are using the services of Chinese companies that have even worse working conditions and unethical practices but they are not in the radar as much as Apple is. Such companies never get criticised, do they? We never read about them, do we?

    Of course, Foxconn should be audited and penalised in the heaviest possible way if it is guilty but such actions should be taken by the state. Trying to force Apple's business away from Foxconn so that the company has less business and therefore the level of exploitation automatically goes down, is the easiest and the most unfair approach in my opinion. Actually, this is not a solution, it is a short-term “workaround”.

  3. Barbara Jorgensen
    January 27, 2012

    The Chinese government needs to care about its people first so that they are not exploited. If the government of a country does not care about the welfare of its citizens, how can a private company bringing business in be blamed for the unethical practices in that country? Objectively speaking, I think this is unfair.

    Cryptoman–that's a good point and a good “reality check.” In the US, we have come to view athletes, corporations and political leaders as some kind of moral compass for the masses. (Very bad idea, BTW.) The business reality is supply and demand and consumers can vote with their pocketbooks if they don't like a company's practices. I like the idea of corporations as agents of change, but your point about the China government is well made.

  4. Nemos
    January 27, 2012

    And the answer is yes with big letters. “Foxconn has an image problem. So does Apple.” These two companies are linked and connected each other with tight bonds. As far Apple doesn't change its partner is kind of acceptance to what is going on inside the Foxconn. And of course, Apple is not the only one with relative behavior.

  5. Clairvoyant
    January 27, 2012

    Agreed, Nemos. Apple is a large company and providing enough work to Foxconn that they could make a stand against them, yet they are not.

  6. Damilare
    January 27, 2012

    i think its about time apple takes steps to help fix the bad image written all over foxconn electronics because it may gradually affect apples image in general and if the problems continue, its only a matter of time before it drags apple as a whole into negative headlines

  7. ahdand
    January 27, 2012

    Yes exactly it will spread like a virus if no one bothers to clear the bad image which was there on the past. Evey possibility is there for Apple also to get hurt if it happens becasue Apple is kind of a part of it right now. True that customers wont forget easily on what happened in the past but atleast by clearing the present will take off some dirt from foxconn.

  8. _hm
    January 28, 2012

    Foxconn makes products for many organizations. We sholud list all of them, not only Apple. It may be RIM, Dell, Sony and many more.

    Secondly, compare Foxconn with other Chinese manufacturers. They may be equally bad.

    So, issue should be considered from wide angle, not Apple to be center point. Apple may not be able to help much.

     

  9. Clairvoyant
    January 28, 2012

    That is true, hm. We shouldn't forget that this issue is related to many companies. However, with Apple being a large company in this marketplace, they could set an example for other companies and have good headlines in the media.

  10. _hm
    January 28, 2012

    @clairvoyant: Yes, that is very appropriate thing to do. Apple is quite innovative in this aspect and will find very suitable solution without loosing edge over other vendors.

  11. prabhakar_deosthali
    January 28, 2012

    When we visit a reputed restaurant we go by the quality standards of its food and customer service. We are least bothered about how well or how poorly their staff is paid or treated.

    In a professional scenario, one cannot poke his nose deeper or try to see something beyound the scope.

    So why should a contractor like Foxconn's way of treating their workforce affect the reputation of Apple ?

    I am just intrigued!

     

  12. Nemos
    January 28, 2012

    “We are least bothered about how well or how poorly their staff is paid or treated.”

    Most of the people not, but we should care about that also. Furthermore, your example cannot be compared with the situation in Foxconn because we are talking about deaths and not just a mistreating on the workers. So what you suggest to say a big bravo and to continue buying their products?   

  13. Taimoor Zubar
    January 28, 2012

    Given that Apple has a whole pool of surplus cash, it wouldn't hurt if they spend it on improving the working conditions within Foxconn. Rather than taking it as a vendor, Apple can consider Foxconn as it's business partner and look for mutual growth.

  14. Taimoor Zubar
    January 28, 2012

    I agree that Foxconn may be manufacturing for other brands as well but Apple is, by far, it's biggest client. And more importantly, it's Apple whose image gets connected with Foxconn directly whenever something about working conditions at Foxconn is mentioned. Hence, if Apple has to rectify it's social image, it has to fix issues with Foxconn even if it's not the only client.

  15. Ariella
    January 28, 2012

    Some people do care about the situation of the workers. Some people say they avoid shopping at Walmart because they don't approve of the employee situation. See http://listverse.com/2011/09/13/top-10-unethical-business-actions/

  16. Taimoor Zubar
    January 29, 2012

    @Ariella: That's exactly what my point was as well. There are people who have enough ethics to look beyond the price of the products they are purchasing. If Apple doesn't pay attention to these social issues being linked to it via Foxconn, it may face opposition from a large number of consumers at some point in time.

  17. Anna Young
    January 29, 2012

     It is correct to say that accusations or any issue connected with working conditions of any sort is a cause for concern. In Apple's case, it is surely a matter of moral obligation – isn't it? Still  Apple has come out unscathed.

    I think the only moral obligations for Apple was the large profit margin its generated and still generating on the back of cheap labour regardless of its working conditions. (It's products are still selling like hot cakes – so why the fuss?) Afterall Apple is not the only one  connected with related issues of this sort. Foxconn is only a supplier and not directly managed by Apple – isn't it?  But the difference for Apple is, its a reputed market leader in the technological industry – hence the pressure for change is obvious plus the bad publicity this has generated for Apple.

    It's pluasible to note that ( although it's a forced change) Apple has set aside its conflicts of interest and now upholding much desired moral values.  I applaud Apple for the changes.

  18. Nemos
    January 29, 2012

    “Foxconn is only a supplier and not directly managed by Apple – isn't it?”I don't agree with that, because it is not only a supplier, it is the main factory unit which all the Apple devices been constructed there. So we can not say it is only a supplier. Furthermore, without a factory unit you don't have a product.

  19. bolaji ojo
    January 29, 2012

    Nemos, Correct. You can outsource production but you don't outsource responsibility for your products. We can do all the fine tuning but Apple is in the end responsbile for its products and for the condition under which they are made. The products carry Apple's label,not Foxconn's. That's why Apple audits the suppliers to make sure they are in compliance with its terms and standards.

    Where did the company fail? In not making its contractors and suppliers abide by its own code of conduct. Period.

  20. ahdand
    January 29, 2012

    Well it changes everything. I think you need to have a positive morale on these things. If not the whole business will sink.

  21. Ashu001
    January 30, 2012

    Guys,

    I don't get it.Most of these problems at Foxconn were present for many years previously,why is that they have suddenly geared immense traction???

    is it because suddenly Apple has become the most Valuable Listed company in the world (besides being No.1 in its field)???

    What is it about Human nature that instead of celebrating extraordinary success(outside of Sport) we tend to demonize it???

    Lets face the facts,Apple is doing what it should do-Deliver the best quality products at the best prices and also generating record profits for shareholders.

    If you want to blame anybody then you should blame the entire Supplier Industry who has gotten it very wrong here.

    Still,Regarding employees,lets face the facts-Nobody forced these Chinese employees of Foxconn to work there-If they feel that the working conditions are unsatisfactory/not upto the mark;They can very well leave and find alternative employment.

    Its not like someone has held a gun to their heads and forced them to work for Foxconn aka Slave labor???

    So why make such a fuss???

    Instead celebrate Apple's success here.

    Regards

    Ashish.

  22. Ashu001
    January 30, 2012

    Nemos,

    A better definition for Foxconn would be that they a Business partner for Foxconn.

    And I am sure its within Apple's ability to put sufficent pressure on Foxconn to raise the game regarding Employee issues.The thing is primarily this-

    Are Senior Execs at Apple even remotely interested in whats going on with the employees at their Chinese Business partners???

    I don't think so.

    And from looking at latest Sales figures& crowds to get hold of an Iphone in China,I don't think the Chinese public cares either.

    Regards

    Ashish.

  23. Ashu001
    January 30, 2012

    Taimoor,

    How would you rather Apple spent the Cash pile-WHich brought about improvements in Foxconn???

    Would you rather they bought a stake in Foxconn and forced management to change business/manufacturing practices???

    Or would you that they just threathened management with taking their business elsewhere???

    Or some other way,like giving Foxconn an interest-free loan/goal to improve employee working conditions??

    How would you do it?

    Ashish.

  24. bolaji ojo
    January 30, 2012

    Ashish, You are correct that Apple's Top Dog status has brought unwanted attention. It was inevitable and the company should have anticipated this. Apple's success was bound to attract this focus.

    By the way, many people have been writing or focusing on this issue for years, if not decades and the focus wasn't always Apple. Human rights and labor rights activists have been working on this and trying to get companies like Apple to do what everyone believes is right.

    You said “celebrate Apple's success.” That's a worthy goal. Read recent coverage on Apple and you'll see how extensively its successes have been trumpeted by the media and shareholders. This doesn't mean we close our eyes to its faults.

    As to your comments on China's workers, throughout history, the weak has always needed an advocate. We can't condemn them for wanting to work for Foxconn and a “take-it-or-leave-it” approach is neither in their interest nor in that of Apple/Foxconn. There has to be certain boundaries that companies must not cross.

  25. LCR-Skeptic
    January 30, 2012

    Apple may not be the only demon here, but they are the most visible.  They can't present themselves (and their products) as revered gifts to humanity, and then ignore their responsibility to ensure minimal levels of humanitarian rights in their….and their partners'….workplace.  Not to mention enivironmental and other guidelines to which US companies and the rest of the free world adhere.  You don't see nets on the sides of the buildings in Cupertino to catch suicide leapers.

    You're right that no one is holding a gun to the Foxconn employees' heads, but what if they were?  Would it still be ok to earn an almighty dollar (or $400,000 per employee as the case may be)? 

    Applie could easily open their own factories in China or elsewhere, but they choose not to for obvious reasons.  They get to enjoy low cost without “owning” the responsibility.  That's the same motivation that drives so many other US and European companies to turn their heads while their distributors are breaking every rule to sell products in China. 

    BTW….I am a stong proponent of capitalism and I am also lured by the power of cheap and innovative products. I'm a proud owner of an iPad, iPhone, and MacBook.  I just want an even playing field.

  26. bolaji ojo
    January 30, 2012

    LCR-Skeptic, Is this so hidden to the whole world? You put it so well I wonder why so many people just want to kick up dust and pretend violations are not occurring and that the manufacturers don't have a duty to do what they know is right.

  27. Ashu001
    January 30, 2012

    LCR,

    What you say here is  neither clear nor coherent.

    For instance what do you mean by this statement?

    Would it still be ok to earn an almighty dollar (or $400,000 per employee as the case may be)?

    I just want to say that The reverse argument equally applies-If you are not happy with Apple's Business practices,Don't buy their products,Its as simple as that

    [Many years back,The World's Greatest Empire -The British Empire was brought down by a simple man-

    Mr Gandhi by simply focussing on a total boycott of British products;I am sure it won't be too hard to do the same with Apple??? After all,you have Twitter and Facebook now which he never did have…]

    I don't think that I ever heard (or saw) Steve Jobs jumping up and down and claiming his products are revered gifts to humanity[AS you point out].

    Its only deluded Apple fanboys who believe in the Hype and bubble originating out of Cupertino who have themselves to blame for this situation.

    And finally,once again here

    “That's the same motivation that drives so many other US and European companies to turn their heads while their distributors are breaking every rule to sell products in China.

    What consumer protection or market rules did Apple break to sell their products in China???

    You want a level playing field for whom???

    As I said at the very beggining not very clear and coherent.

    Regards

    Ashish.

  28. chipmonk
    January 30, 2012

    Last year Samsung was neck to neck with Apple in the sales of Smartphones & Tablets. Where does Samsung assemble their widgets ? So. Korea or some LCMR like China ?

    Does anyone know ?

  29. LCR-Skeptic
    January 30, 2012

    Sorry, Ashish, but I think you miss the point(s).  Mr. Ojo asked a bold question – “Does Apple have a Foxconn problem?”, and I presented you with a hypothetical to challenge the boundaries…e.g., is it ok for a company (not just Apple) to do whatever they want as long as they “Deliver the best quality products at the best prices and also generating record profits for shareholders” as you state?

    I don't expect Chinese workers to enjoy the same benefits, salary, and living conditions that we enjoy here (USA), but there must also be an agreeable baseline (aka “playing field”) from which all countries build. In our mad rush to manufacture products in low cost regions, we ought to remind ourselves that this has ramifications – both positive and negative. 

    You're right that the consumer decides, and that I am a weak person for buying Apple and other products without demanding a higher standard.  But then again, I'm addicted….and the herion addict doesn't really care where the poppy is grown. 

  30. Ashu001
    January 31, 2012

    LCR,

    This is a typical problem most Western consumers face.

    Lack of personal responsibility.

    You have the tools right in front of you-Facebook,Twitter,etc;WHich are more than enough to run a sustained campaign to put pressure on Apple to change their business habits.Obviously,the best way to do it is through the market-Stop buying their products.

    But as you point out very clearly,thats beyond you.

    So you have to find other ways to get your points (as a Apple Fan) across to the people at Cupertino.

    Its do-able no doubt about it.

    You just need to show some commitment.

    Regards

    Ashish.

  31. Ashu001
    January 31, 2012

    Chipmonk,

    Its China.All China…

     

  32. Ashu001
    January 31, 2012

    Guys,

    Here's another interesting issue.

    Apple works with a company called PowerON to safely recycle used Apple products

    More details here

    http://www.apple.com/recycling/gift-card/faq.html

    How about using the end-material/output[Especially Metals like Gold,Silver,Copper and other Heavy metals] from the recycling back in the Apple Manufacturing process???

    I am sure it would require some money spent on re-integrating these things together,but for sure,its do-able.

    This will instantly(by getting reflected in the bottomline) put pressure on Apple to re-use as much metal as is possible from their old products.

    Also,it will mean a dramatic drop in unsafe recycling practices done in Countries like China,Nigeria and other parts of Africa.

    What do you think?

    Regards

    Ashish.

     

     

  33. Anna Young
    January 31, 2012

     Apple's management should have taken steps to rectify the unacceptable conditions and safety standards the workers at Foxconn factory were subjected I agree. I resonated this by stating that Apple's  “conflicts of interest” obscured it's moral obligations. 

  34. dalexander
    January 31, 2012

    Anna and others, My experience of using CMs overseas, includes the placement of employees of my company being placed in key positions watching over the various aspects of production and Quality Control. This cuts down on communication problems and allows for a program management that is immediately kept up-to-date on critical developments. If Apple had these key people on site at Foxconn, then they would have been acutely aware of any abuses and certainly able to have some impact on the employee conditions and treatment. If they turned a deaf ear and a blind eye, then they should be questioned and held accountable for not insisting on better working conditions. I think Foxconn execs would rather make a few quality of life changes for workers rather than lose Apple's business. Apple is in a major leverage position and can assure the needed changes without being charged more from Foxconn.

  35. t.alex
    February 1, 2012

    The basic question is still whether Apple is the cause of all these negative publicity or Foxconn is. Is Apple pressurizing Foxconn too much?

  36. Ashu001
    February 13, 2012

    Crypto,

    Very,very good points here

    How Foxconn is able to provide this service is not Apple's concern. It may be unethical, unfair and may have labour violations. The body who needs to be concerned with such matters is the regulatory bodies in China controlled by the government. The Chinese government needs to care about its people first so that they are not exploited. If the government of a country does not care about the welfare of its citizens, how can a private company bringing business in be blamed for the unethical practices in that country? Objectively speaking, I think this is unfair.

    It underlies the core of the argument and thinking that there is only so much Private entities can(& should do).When it comes to issues of National importance(like this issue of Supposed Labor violations or otherwise) the State has to step in and clear things up decisively.

    What has not escaped anyone's understanding is that Chinese workers needs and aspirations have grown in the last decade or so(not to mention their cost of living as well).They expect much-much more from their companies than before[Wage inflation means most Western manufacturers think twice before investing in China today].

    The Chinese state also has failed to take care of their own people today.Thats what happens when the Chinese State has a vested interest(through their personal investments) in maintaining the status quo.

    Regards

    Ashish.

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