Apr 252012

One of the most popular categories of Apple bashing is based on the theme that Apple has too much cash. From the ample cash on hand that Apple enjoys (currently over $110 billion), we get the evergreen “what Apple should do with all that cash” positioning by pundits (buy TiVo) and the more humanitarian cries from misguided groups like SomeOfUs.org that Apple must show us that it’s not a greedy megacorp and invest in its supply chain. My response to all the grousing has always been straightforward:

Engage coping skills on my mark

It’s refreshing to see some people put some actual work into Apple’s embarrassment of riches. In a recent paper, three academic authors from the UK’s Centre for Research on Socio-Cultural Change attempt to put Apple’s use of the Chinese leg of its supply chain in the larger context of global “financialization”. The paper is titled “Apple Business Model: Financialization across the Pacific”. What is financialization, you ask? Aside from being a word my spell check refuses to acknowledge, the term can have a bunch of meanings. The most generic is the movement from a market dominated by people making things to a market dominated by financial institutions. What does this have to do with Apple? Aside from the attention guaranteed by putting the most successful company on the planet in the title, not much. The paper takes an early turn and equates the pressure of financialization with a company’s desire to increase shareholder value by all means at their disposal. In Apple’s case, it means outsourcing the bulk of their kit assembly to China. This is bad because it takes jobs from the U.S. economy and exports them to countries where labor is cheap and prone to exploitation while the company using the practice enriches itself. For purposes of the paper, financialization is a force that causes abuse of foreign supply chains. Financialization bad.

The paper is actually pretty well written, mostly well-cited and dense with context. The point at which the wheels fall off the cart comes when the authors jump on the Apple brand and use it as the poster child for supply chain abuse, a model designed to enrich corporate America with little domestic upside. Then the cart starts on fire and explodes when the authors suggest that Apple could just transplant its supply chain to the U.S. and still achieve awesome margins. I could pick on a bunch of factually incorrect statements leading up to the piece’s money shot, such as the statement “Microsoft the utility software provider directly employs 90,000 globally which is more or less exactly twice the 46,000 employed by Apple whose hardware plus software offering is inherently more labour intensive.” (their business is 90% software and their hardware is assembled in China), but I want to focus on the ridiculous setup for the “domesticating the supply chain” scenario.

I could use the note on 2 of the figures used in the paper, “Figures 5 and 6 are based on industry tear down analysis by iSuppli of the Apple iPhone 4G (sic).”, and stop there, leaving readers to laugh their asses off at the folly of the authors, but I want to be thorough here. So let’s see how our academic friends break out the cost of building the iPhone 4:

I’m sure Apple would be thrilled to be getting 72% margins from their phones; unfortunately they don’t. People who put thought into their work know that the iPhone’s margin is closer to 45% . Where’s the missing 27%? Probably lining the greasy pockets of Apple’s executives. Or it could be the delta between a shitty model and actual research – one of the two. There’s also the issue of how long it takes to make an iPhone. The paper says it’s 8 hours. Citation needed. Then there’s the issue of how much 8 hours costs in labor – as of 2010 it was $14.65, or twice what the paper claims. According to Marketplace reporter Rob Schmitz’s exclusive tour of Foxconn, that price doubles again, as wages double “after a couple of years”. So from the outset, we have a margin calculation that’s over 20% off and the labor component of the paper’s equation is off by a factor of 2-3. Let’s not let egregious math errors cloud the point of this exercise.

So how would Apple’s grossly unnecessary margins look if we plugged in a domestic labor rate?

Not bad, right? Sure, if they took into account anything but the basic wage rate of $21/hour. This number is cited as “the average wage in the US electronics industry” by the paper. No citation. Doing a little digging, you can find that jobs with descriptions like “manufacturing process engineer” typical land in the $28/hour range. And what doesn’t this rate include? I’d bet that it doesn’t include benefits that have to be paid by the employer – be they Apple or the mythical domestic manufacturer. This can add anywhere from 20-30% on top of the base salary. And then there’s the infrastructure costs of moving your entire manufacturing operation to the U.S. If Apple were to move its assembly stateside, I’m sure there’d be plenty of manufacturers willing to partner with them, but it won’t be free. We’ll also have to assume that Apple will have to pay more to have the parts made in China shipped to the U.S. location. Plugging in an “average wage” and using that as the basis of your non-material costs is obscenely irresponsible. Academics.

And what about the jobs leaving China? Manufacturing assembly is a way for agrarian workers in China to significantly improve their lives. What will replace that? I’d wager that the Chinese workers at Foxconn prefer making $14 – $28 a day over pushing dirt with sticks. You’d think the Original Imperialists in the UK would understand some of the upsides to “exploitation”.

Exploiting foreign supply chains is bad. This is the strawman that anyone with an axe to grind against Apple – or aspiring academics looking to gain some notoriety -prop up. Apple is not innocent on all counts, but their commitment to their workers abroad is documented in the numerous audits it conducts and the pay raises it continues to subsidize. The global marketplace is complex and a lot of the messages contained in “Apple Business Model: Financialization across the Pacific” are thoughtful. The point is lost entirely when the authors choose to use an iSuppli breakdown of manufacturing costs and compound the error with incorrect assumptions about wages. The extra step of transposing these costs domestically without consideration for what it would take to support a quarter million new manufacturing jobs in the U.S. takes the work from embarrassingly inaccurate to absurd. If you’re going to bang the Apple drum, at least sharpen your fucking pencils.

Maybe we should call this trend of poorly-substantiated screed against Apple’s supply chain the “financialization of good research”.

Apr 082012

In a couple of my prior posts, I had asked why Apple’s competition didn’t get any milage from all the heat the company was taking over Foxconn. This is an industry that thinks having Flash on their tablet constitutes a legitimate competitive advantage and these guys didn’t trip over each other to pile on actual bad press? Isn’t that curious?

Actually, no. All of Apple’s competitors either use Foxconn or any number of other Asian manufacturers with less savory reputations than Foxconn. The first one to cast a stone stood a chance of being called out for their supply chain’s labor practices. This, of course, assumes that anyone cares about these practices when the company suspected of them isn’t named Apple or – after lying fraud Mike Daisey’s antics – the public even gives a shit about the issue at all.

So what would happen if a Times reporter went ahead and asked these companies about the labor practices of their supply chains? You’d find out as much as I did when I went digging through Samsung’s PR sunshine enema. Actually, when the Times asked Samsung, they didn’t get an answer at all. Barnes & Noble issued a “no comment”, Amazon punted to a third-party auditor – one that doesn’t report its findings publicly. Several cited their membership in the Electronic Industry Citizenship Coalition (EICC) as though it meant something. And what about HP – that paragon of good corporate behavior that the Times used as its shining counter-example to Apple in its notorious January 25 hitpiece?

A report on Hewlett-Packard’s Web site, which was so hidden that it took me several hours to find, details working conditions from 2010 but has not been updated since. In the report, the company notes that more than 51 percent of the factories it works with were in violation of working hour labor laws.

You mean there’s no reports documenting statements like the one Zoe McMahon made to the Times for the piece on the 25th that HP’s suppliers “…let us know when they are struggling to meet our expectations [on pricing], and that influences our decisions [about how much we’re willing to pay]?”

Of course there isn’t. When it comes to nebulous statements that can’t be fact-checked, Apple’s competitors come out of the woodwork to help yellow journalists bash the company, then remain silent while Apple takes all the shit for practices they’re at least as guilty of. And when they’re asked pointedly about their practices? They scatter like cockroaches.

Mar 302012

The FLA has performed a preliminary audit of 3 Foxconn plants and by looking at my RSS tech feed, it doesn’t look good. Ars Technica reports “Apple supplier in violation of labor and safety rules, outside audit says”, trusted news source Gizmodo says “Overworked and In Danger: The Full Foxconn Labor Report” and even The Unofficial Apple Website (TUAW) tells us “Fair Labor Association finds multiple violations at Foxconn facilities”.

Holy shit: Mike Daisey was right!

Because I’ve been burned in the past by the “truthiness” of tech blog headlines in relation to actual facts, I actually took the time to download and read the FLA report. Turns out they did find violations of their “10 Principles of Fair Labor and Responsible Sourcing”, but maybe not as egregious as some of headlines would have you believe.


The most-often cited violation, as you probably guessed, involved the amount of overtime worked. You’d think that’d be cut and dried, but it’s not. You see, there are 2 standards relevant to the amount of overtime worked in China. The FLA upholds a standard of a maximum 60 hour work week (40 hours + 20 hours overtime). Curiously, the Chinese law states that maximum consist of 40 hours + 36 hours overtime per month, or 9 hours a week. Why would the FLA standard be higher? Maybe China has more interest in the number of people working than the number of hours people work, or maybe their government is just a big ol’ teddy bear after all.

Anyway, the 3 Foxconn plants visited by the FLA had at times violated both the FLA standard and the more stringent Chinese standard, most flagrantly during the months of November – January. The average work week was just over the FLA maximum of 60 hours (61.05 hours). There was also violations of the “7 consecutive days working without a 24 hour rest” standard. 11.57 days was average of those surveyed when asked what the longest number of days they worked consecutively. Sounds like Foxconn didn’t get the memo on that one.

Interestingly, the FLA also asked workers if they thought they were working too much. Half those surveyed (48.4%) said their hours were reasonable compared to 17.8% who said they weren’t. The other 34%? They said they’d like to work more to make more money. Guess those people aren’t going to like the plan Foxconn has for complying with the FLA’s findings. They’ve pledged to pare back overtime hours (and therefore hire more people) to comply with the more stringent Chinese law by July 2013.

There were also issues with the handling of internships and the benefits covering interns. Apple and Foxconn have agreed to a number of steps that will better integrate interns into the benefit system deployed for the larger worker population.

Sadly, the FLA did not find any incidents of underaged labor, so Mike Daisey: still a liar.


Despite the doomsday scenario painted in some headlines, issues with worker safety were almost exclusively those of worker perception as opposed to actual observed conditions that were a danger to worker safety. To explain, in addition to auditing conditions, the FLA surveyed thousands of employees. The questions about safety involved how “safe” the workers themselves felt. I though one particular question, “Have you ever experienced or witnessed an accident in this factory?” was particularly leading, sort of like “Were you ever or do you know anyone who was the victim of a violent crime?”. Of course a majority of the respondants are going answer in the affirmative. In this case of Foxconn, 43.3% responded “yes”. I would be more interested in “Have you ever been the victim of an accident while working?” as a indicator of actual safety conditions, but I guess that’s why I’m not in China doing audits for the FLA.

As far as actual violations, the report mentions miscellaneous infractions by way of summary such as “blocked exits, lack of or faulty personal protective equipment, and missing permits”. It was also noted that these many of these conditions “have already been remedied.”

As you can imagine, the FLA also paid particular attention to the issue of aluminum dust:

Our assessors did identify some machines at which sensors, hoods or barriers needed to be connected to automatic cut-out mechanisms to prevent workers from reaching into the machines, and they also flagged the use of compressed air in some sections where it could pose a risk.

Again, it was noted that “A number of these issues were rectified immediately.”

Wages & Benefits

Another focus of the report, pay and the administration of benefits was covered extensively through direct observation and survey. Although the FLA did find that the credit of overtime needed some re-tooling (Foxconn’s policy was to pay in 30 minute increments (i.e. if you worked 28 minutes, you didn’t get OT) and worker meetings were not thought to qualify for OT when they should), compensation was deemed adequate. Of course workers surveyed were split in their opinions about how well they felt they were compensated (only 35.7% felt that their wages were “sufficient to cover basic needs”), something I think that many of us can identify with personally. The FLA recommended a “cost of living” analysis for each of factories to see how far apart perception and reality are.

I’m not going to say much about how the myriad benefits are applied, because their application is convoluted by the transferability of rights of migrant workers have (mostly don’t have) in their home provinces. It’s an situation that both Foxconn and Apple have committed to studying, if not improving.

I’d encourage people to download the report and draw their own conclusions. I personally didn’t find any “holy shit!” moments, but my bias is obvious in the name of my blog. Two things I’d like to mention in closing. First, this was not an official FLA audit. Apple requested that the FLA come in immediately to get a lay of the land, so these conditions were documented cold. I like that Apple did this, because it will give them a better starting point, but I do feel that many of the issues documented would have been resolved if the FLA’s insertion wasn’t so sudden. I expect conditions to improve markedly as the FLA becomes a fixture at these facilities. Second, I’d like to invite all of Apple’s peers to enlist the involvement of the FLA. Or they could continue to hide behind what Apple does and remain blissfully mute about the conditions on their own production lines.

You can probably tell which of these two scenarios I think will play out.

Mar 162012

Well, well, well. It seems as though the gods of the Internet are making up for my lack of new iPad disposable income with the news that one of my favorite one man shows has been shown to be a little less than truthful. NPR’s This American Life went so far as to retract a January broadcast featuring Daisey’s Agony and Ecstasy of Steve Jobs. Brought to you on the wings of angels by the good people at MacRumors:

In a remarkable reversal, This American Life has now announced that it is retracting its January broadcast of Daisey’s content, citing a number of fabrications discovered in a follow-up investigation on his claims.

Paging shocked eTrade baby! Please report to graphics stat!

Mike Daisy's Apple claims found to contain fabrications? This is my shocked-but-not-really face.

I’m sure Daisey has a perfectly legitimate explanation for the fact that the interpreter that accompanied him on his trips to Foxconn “disputed much of what Daisey has been saying on stage and on our show”:

For his part, Daisey acknowledges that some of the information he presented was not entirely truthful, arguing that his monologue was created for theater. Consequently, he agrees that it should not have been presented as journalism, although he stands behind the intent of his work.

And for my part, and on behalf of the Apple community you’ve been gaming to make money off of Steve Jobs’s memory and the company he built, I stand behind my claims that you’re a liar and a fraud and respectfully request that you crawl back under the rock housing the rest of Apple’s baseless detractors.

God, this is almost as good as a new iPad.

Feb 222012


No one? Well, as a mindless fanboy, it’s my duty to throw out some irrelevant facts in an attempt to obfuscate the reality of Apple’s horrible labor practices in China.

One of the arguments upon which the current toxicity of anti-Apple venom is based is that Apple releases products that are so utterly compelling (yet not really, but we’ve all been duped into main-lining whatever the company produces) at such a breakneck pace that we can’t help but toss our old kit in favor of the One More Thing. If that’s a strike against Apple, it’s a game’s worth of outs against their competitors. In 2011, Apple released the iPhone 4S and the iPad 2. Apple’s competitors were a little more aggressive: both HTC and Motorola released 5 shartphones; Samsung released 12.  HTC released the Flyer tablet, Motorola introduced 2 versions of their XYBoard tablet, while Samsung put out 3 major versions of the Galaxy Tab.

2011 also marked major operating system releases for Android and iOS. iOS 5, released in October, will run just fine on a 2009 iPhone 3GS. Google also released its v4 of Android, Ice Cream Sandwich, when it announced its third “Google phone”, the Galaxy Nexus in October. Adoption of the Android 4.0 has somewhat lagged  behind its iPhone counterparts: 40% of all iPhones run iOS 5; around 1% of all Android phones run Android 4.0. But all the manufacturers and carriers have plans to upgrade…most…of their phones, so that’ll totally change any day now.

So on the one hand we have a manufacturer that releases one version of its smartphone and tablet offerings per year and offers OS upgrades instantly to phones they made over 2 years ago. On the other hand, we have manufacturers that vomit multiple versions of their shartphones and tablets into the market every year. The vast majority of these phones and tablets ship with out-of-date operating systems and the total adoption of their most current version is a rounding error.

I guess you don’t get to be a focus of scrutiny if your shit doesn’t sell, never mind all the models you fling at the wall in an attempt to get them to stick. But maybe all the criticism is directed at Apple because all of these other manufacturers do such a good job monitoring their supply chains. Let’s take a look at Apple’s chief competitor, Samsung.

Forging through Samsung’s “About Us” pages to find anything about supply chain reporting – the kind with actual numbers – was kind of an adventure. To Samsung’s credit, the pictures are much prettier than the ones you’ll find in their financial reporting. They have an “ethics charter”.

It comes with its own emblem, which should be standard for all Ethics Charters, IMO:

Samsung Sells Shartphones Assembled by the Seashore

What it doesn’t present is a lot of data about its third-party suppliers. One document  that does look promising is its comprehensive Sustainability Report (pdf), especially the part about “Major Questions” that lists the categories of queries made of the company from stakeholders.

 Looks like we’re getting to the heart of the tough issues Samsung has to address on a regular basis. Let’s see…where’s page 28?

So…how about Foxconn? China? Guess that’s not really a focus of the report – at all.  Of course, this only reflects one reading of the 88-page report. It could be in there somewhere. There’s also no mention of a partnership with the Fair Labor Association. Guess we’ll have to trust that Samsung makes sure its partners do the right thing, despite there not being any quantitative evidence supporting it. But hey: if pretty pictures and socially responsible corp-speak do it for you, Samsung totally nailed it.

It’s also rather telling that in an industry that seizes upon any strategic advantage it can get against Apple (the XOOM offers the FULL INTERNET with FLASH!), the other companies using Foxconn have been strangely silent regarding Apple’s labor practices. Wouldn’t you want to milk that black mark for everything you could? Well, I guess you would if you wanted people to start asking – in ways that can’t be answered with colorful charts and mission statements – about your commitment to supply chain ethics.

As is the case with a lot of issues – from user privacy to responsible management of the supply chain – Apple’s success makes it the subject of an inordinate amount of scrutiny. One of these days, maybe there will be some room under the microscope for other companies that use human capital in China to face more of the breathless accusations that seem to be reseved exclusively for Apple.

But I doubt it.

Feb 222012

I was a little concerned about the piece that ran on Nightline Tuesday night documenting conditions inside Apple’s Foxconn facility, especially when the ABC got through all of its disclosure about the intersection between Apple and Disney’s interests. I thought “they have to slam Apple just to appear impartial”.

In the end, I think it was fair assessment, one that included not only conditions within the plant, but those of the villages outside the plant where a number of its employees come from. Context like that will probably only make student groups and assorted slacktivists howl about smoke and mirrors. Where are the 12 year old workers?! Where are the 15-bed cement tomb dorms?!  I guess they can rest assured that when it comes to Apple, someone will always be looking to cash in off of their westerner guilt or get them to sign another online petition. Keep doing your parts, guys. And by that I mean the parts that do nothing besides make you feel better that your parents have money.

Via Nightline*

*Updated with link to full report.

Feb 172012

As much of a resource as Gizmodo is for the latest Lego news, it’s part of Gawker and, well I guess I can put a period after that. Because they make a lot of their money writing dick things about Apple, the company stopped inviting them to press events long ago. When Gizmodo bought a stolen prototype of the iPhone 4, they were dicks to Steve Jobs when he asked for it back. Their site went on to register millions of pageview from stories about Apple’s stolen phone. The editors involved escaped prosecution for the crime, apparently because they were under 18. The San Mateo County DA had this to say about their journalistic integrity:

“It was obvious they were angry with the company about not being invited to some press conference or some big Apple event…We expected to see a certain amount of professionalism-this is like 15-year-old children talking.”

Unsurprisingly, Gizmodo also reads like 15-year-old children writing. So why would the highly-esteemed Gray Lady share anything with populist hit-whores more interested in pageviews than actual journalism?  For acting like populist hit-whores more interested in selling copy than actual journalism. That’s right: it looks like the New York Times has been Gizmodoed, which can either mean having Apple bitch-slap you with your press card or having your trade show pranked. I’m sure there’s a bunch of other things it could mean, but I’m only halfway through my first cup.

The real victim here is Times tech guy David Pogue, who was locked out of the Mountain Lion preview given to dozens of his tech press peers, and – how do I say this kindly – some people that were not. He was reduced to pulling impressions from other writers before he could get his hands on the developer preview, which was made available to all the unwashed through Apple’s Developer Center yesterday ($99 annual membership to ADC required). The shame is that Pogue’s reviews do right by Apple and he had enjoyed a Mossbergian level of access prior to the hilariously unsourced singling-out of the company for its labor practices with Foxconn in China. He should check in with those Business Section guys and thank them for “breaking out the gimp” on his career.

Update: Gruber confirmed what commenter Spade mentioned: Pogue had the same level of access as the rest of the technorati. Apparently he was next in line for an interview with Schiller.

Feb 152012

There’s a lot of stuff covered on the Apple beat daily, usually by multiple blogs. Because I tend to dwell on one topic and post infrequently, I’m going to try something a little different: taking some of the headlines from my RSS feed and commenting on their gist. The news items are plucked somewhat randomly, as 12 other blogs usually post something on the same issue within 20 minutes of each other. Some other pieces are thrown in for “color”. I’m hoping this is a way for me to add a small amount of original commentary on topics I’d either never get to or before they are processed to death by the technorati blogging machine. Comments/suggestions are always welcome.

RantSS for 2-15-12

Your iPhone’s Privacy Sucks Because of Apple—and Even Steve Jobs Agrees – Jizzmodo

We’re taking the address book permission issue and blaming it on Apple, because Google Analytics tells us that baiting people in possession of common sense accounts for 93% of our traffic. We even found a video of the brilliant dead guy who ran the company being quoted on a somewhat similar issue out of context.

Did Samsung just reveal a Galaxy Note 10.1 for MWC? – The Verge

Samsung makes a 5.3″ Galaxy Note, which is a giant phone with a stylus; they also make a 10.1″ (7″ and 8.9″) Galaxy Tab, which are tablets. The “10.1” Galaxy Note” is either a PR screw-up created by the confusion inherent in maintaining a product line consisting of a bajillion undifferentiated knock-offs or of jamming a phone into a 10″ tablet is sheer deperation. Both possibilities are even money.

How Realistic Would a Robot Have to Be for You to Have Sex with It? – Jizzmodo

Read about the trending topic at all the Jizzmodo IRL meet-ups.

Apps uploading address books is a privacy side-show compared to DPI – TechCrunch

Deep Packet Inspection is a lot more intrusive than what Path did. Here’s a bunch of companies that do it now! Did we mention that more than 50 other apps do what Path did? Have we covered how Apple’s address book permission policies allow Path and others to do these things? Did we mention that TechCrunch enjoys 100% editorial independence from potential influencers like CrunchFund?

Video: Photoshop CS6 Content-Aware Move, Extend Makes Us Drool – Mac|Life

Here’s one feature that you can use to justify spending $600 on a program that’s now 90% feature redundant with programs costing 5% as much. Remember to fasten your bib prior to buffering.

News: Realmac Software releases Clear – iLounge

Absolutely every other tech site has reported on this app and I’m stumped as to why this is. It’s maybe the 12th most useful and 3rd prettiest app in the most crowded category of the App Store, but I predict it will be upheld as an example of app excellence because you can pinch, spread and pull to manipulate the UI. For this reason it will also be a deserved object of competing platforms’ ridicule.

FLA head describes Foxconn plants as ‘way above average’ – MacNN

/cue Change.org response about 1. the FLA being paid plants with no objectivity, 2. use of the term “average” and a warning to guilty westerners that “average” in Chinese means life-threatening and/or soul-sucking. 3. Apple having too much money, gotten through arbitrary means and compounded at an interest rate derived from the value of the souls and backs of cheap, exploited labor.

Congress Wants Answers From Apple On Apps Stealing Address Book Contacts – Cult of Mac

Dear Mr. Cook:

I really don’t have a clue about technology, but I do know that your company receives the vast majority of technology coverage in the media today, which means my political future could stand to benefit from your answering my questions relating to an ongoing issue that has only recently been getting media attention. Apple has a track record of answering inquiries issues from elected officials, so I have a better than average chance of being able to parley this letter into some future favor among this country’s younger voters.

I’ve cut and pasted something taken from various blogs across the intertubes that I think frames my inquiry, and juxtaposed it against an excerpt from your own developer guidelines in a way that I think makes it look like something important. The following is a list of questions, most of which overlap each other, that I will have a young person on my staff, Felipe Mendoza, to translate the answers to in “elected official speak” for me. I’ve added a respond-by date, because I want it to look like I mean business.


Some generic politician

Some trumped-up title

Some subcommittee that does nothing

Apple: iOS update to require user permission for apps to access contacts – Macworld

Last call for all editorializing about Apple’s contacts permission policy, 7 day extension granted to all blogs who want to bitch about how it should have been done sooner.

To Read, Or Not To Read – parislemon


Feb 082012

The reason I object to causes that aim to improve working conditions in Chinese tech mills by protesting and/or boycotting Apple isn’t because I don’t think people deserve a humane employment environment. It’s because the rationale that makes up this pressure is half-assed, if it exists at all. Because Apple makes the biggest margins on its smartphones and tablets, Apple should empty its pockets into some kind of the rainbow puppy fund which magically improves the lives of workers. How that transaction gets created, funded and administered is usually met with some kind of dismissive hand motion on the part of the people who already signed up at SumOfUs.org, and have therefore fully registered their indignation.

I hate to break it to all the armchair philanthropists out there, but the reason Apple makes upward of a 45% margin on their products is because what people are willing to pay – and in some cases how much wireless carriers subsidize – is far in excess of what these products cost now. The reason the iPhone can leverage large subsidies out of carriers started because Apple spent an enormous amount of effort and several years to build a non-shit mobile phone. Once it was designed, they shopped their product around confidently, and got Heismanned by Verizon before falling into the arms of AT&T, who signed them into an exclusive agreement. This exclusivity came at the expense of Apple’s ability to market its device to other carriers, something that led directly to the army of shitpile Android knock-offs busting down Verizon’s and other carriers’ doors. If you recall, the first iPhone wasn’t even subsidized by AT&T. Enough people paid full price for it that Apple was able to parley its success into a subsidy. Apple commands its margins because it built a superior, minimalist piece of consumer electronics kit vacuum-packed into Apple incredible App Store ecosystem, sold in the most pristine retail environments and supported in a way that earns the company best-in-class customer satisfaction awards every year. In other words, they didn’t trip and fall into their current success – they earned it.

Part of the reason – a minor part, mind you – that Apple is able to offer its unicorn tears at a reasonable price is because Apple, like every consumer electronics maker on the planet, assembles their products in other countries, China chief among them. The part of the January 21 New York Times article that wasn’t unsubstantiated former Apple employee heresy highlights why: it’s less about the economics and more about the logistics. Apple makes wildly successful products that requires wildly massive outlays of human capital on demand. I have no doubt that some variation of the overtime abuse claimed in these pieces happens when Apple shifts into balls-out production mode. The speed at which the products are assembled is actually the biggest bottleneck Apple currently faces, something that’s been mentioned by Tim Cook on more than one occasion. That’s why Apple’s building factories in other countries – to address the throughput issue in a way that’s less taxing on existing resources. But that’s in the future, and it may not be a complete solution. So how does Apple, who has been causing some stress to the channel used by others to assemble its wares, improve the conditions of workers fairly? Of course I have some ideas, the listing of which represents more effort than I’ve seen applied to the issue to date.

  • Contact all the manufacturers of devices that use foreign labor to assemble their wares. Here’s a partial list, from our friends at Wikipedia:

Acer Inc.
Barnes & Noble
EVGA Corporation
Sony Ericsson

  • Announce that you’re spearheading an initiative to improve working conditions in factories that their products are assembled and invite them to contribute. The fairest contribution methodology I can come up with is that it be a “tax” derived as percentage of the value of the components making up the device multiplied by the number of devices. Apple doesn’t pay more per device because it makes more money, but it does pay more into the kitty because of its insane volume. Proceeds from Galaxy Tab assembly can be used for a “coffee of the month” subscription. Don’t want to be a part of the Apple solution to the industry’s problem? No sweat. Apple will make sure a list of contributors and non-contributors is publicly available so every crackpot .org can scream about boycotting your ass.
  • Have Mike Daisey contribute $5/ticket from net proceeds of “The Agony and Ecstasy of Steve Jobs” to the same fund. As long as we’re punishing Apple for making money off of its name, we may as well be thorough. I’m sure he’d agree. I’m kidding. Sort of.
  • Have one of these watchdog groups administer the fund with input from representatives of the workforce. If it were me, I’d throw down a raise across the board and some extra incentive for overtime, but I don’t know what floats the average factory laborer’s boat. The point is that the spending decisions gets made based on worker input.
  • Have the watchdog group also monitor the factories so they don’t pull any bullshit like yanking down worker’s salaries to account for the extra money they get from the Collective. They would also keep an eye on all the usual stuff like consecutive hours worked, total hours worked and appropriately-aged laborers. I assume that’s the kind of stuff you pay these people for.

If the people caterwauling about Apple are interested in bettering the conditions of the people that assemble their consumer electronics, something like this represents a rational starting point. Singling out Apple, while probably more cathartic than indicting all manufacturers, is disingenuous and lazy. Real world problems spawned by globalization require solutions that go beyond shaking your fist and blindly boycotting. Real solutions don’t penalize some companies more than others because some of them worked harder to enjoy their current level of success. They distribute the responsibility to all the parties involved. I hope Apple’s response to its critics resembles a real, sustainable solution.

Feb 082012

Change.org and SumOfUs.org are combining their angst to deliver petitions to Apple Stores across the world. According to the site, 250,000 people have registered their concerns about the conditions under which their iPhones are being made. Because nothing communicates extreme discontent like scrawling your name on a piece of paper. From SumOfUs.org’s press release:

“Apple’s attention to detail is famous, and the only way they could fail to be aware of dozens of worker deaths, of child labor, of exposure to neurotoxins is through willful ignorance.”

Dozens eh? I recall seeing that four people died making iPads in the Times article, but I guess if you want to pin every Foxconn suicide on Apple, by all means do so. You’re not going to make a difference in the world without a little hyperbole. What exactly should Apple do?

…sign the petition to Apple telling them to make the iPhone 5 ethically.

Ethically. Pay workers more? I kinda think Apple would be all for it. How about the rest of the dozens of manufacturers that use facilities like Foxconn? Should they kick in too?

Apple is the richest company in the world, posting a profit margin for the last quarter of 42.4% yesterday.

So Apple should pay…wait – how does that translate into what Apple should do on behalf of the entire consumer electronics industry?

They’re sitting on $100 billion in the bank.

Upon reflection, this cause is beyond petty details like “fairness in implementation” or “shared responsibility”. That’s why Philip McCracken has just joined the rest of his fellow citizens in answering SumOfUs’s call to arms against teh ebil Apple.

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