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the foxconn con

if you're an apple products user, you were probably as disappointed as i was to hear the horror stories about conditions in their chinese factories run by foxconn. tales of work days lasting twelve hours or more, exposure to poisonous chemicals and shockingly high suicide rates among employees [including, most recently a large group who threatened to commit suicide en masse if working conditions were not improved].

i'm somewhat mollified to hear that apple, a company known for its high standards, has initiated a review by the fair labour association and that, going forward, it will make its reports public. as a longtime customer, i'm disappointed that it took a public embarrassment to set this chain of events in motion. as a human being, i'm uncomfortable because i know that i've [unwittingly] enabled this sort of travesty as a consumer. as a person who has worked on many occasions with suppliers from china, i'm cynical, because i know that all the public reform in the world is unlikely to make a big difference in manufacturing practices. here's why:

one bad apple is still just one apple

if you think that this is something driven by apple's corporate greed and uncaring attitude towards its suppliers, you need to take a deeper look. foxconn is the largest electronic components manufacturer in the world. aside from the now-tainted iphone and ipad products, it also produces kindle, xbox 360, playstation 3 and wii. it's also the company that will be producing the much-touted amazon smart phone, due out later this year. virtually every major electronics company you can name- dell, sony, intel, microsoft, cisco, motorola- use foxconn as a supplier. it is the largest private employer in china and has factories in eastern europe and south america as well. about 40% of consumer electronics products come from foxconn.

that means that there are a lot of companies implicated in this scandal and apple, as big as it is, is only one of them. because apple's effect on north american markets is so profound, it's easy to lose sight of its size relative to other manufacturers. [it represents 3.8% of the s & p index on its own and its share of the nasdaq was so high that it forced changes to reduce its impact and therefore the risk to the nasdaw as a whole. canadians may remember that their stock markets plummeted when telecommunications giant nortel, with a hugely overgrown share of the market, fell apart.] in the last quarter of 2011, apple represented 19% of all consumer electronics spending. so even if apple represents a large portion of foxconn's china business, there is still a huge portion- at least half and probably a lot more- done by other manufacturers.




the reason that we're hearing about apple is because they're a suitably big fish. in the same way, protests about sweat shop labour were leveled against nike years ago and they too were forced by public humiliation to clean up their act, when it became clear that they had at best been negligent in the monitoring of their overseas suppliers. companies with a large presence are easy targets because everyone recognises them. they're also more likely to care about the image of their brand, which means that rather than debate and hope the problem goes away, they'll trip over themselves to put a visible solution in place. and that's a good thing, as far as it goes.

the other reason you're hearing about apple in this story, of course, is because, in an election year with unemployment still riding above 8% in the united states and with both parties trying to assure the public that they will fight to bring manufacturing back to the united states either by reducing domestic costs and penalizing china for unfair trade practices [republicans] or offering incentives to companies who move their manufacturing back to america [democrats], the late steve jobs' assertion that high tech manufacturing was never returning to american shores still rankles. politicians would have the public believe that the reason those jobs are not coming back is that companies like apple- and apple is by far the largest example- have moved manufacturing offshore because it's so much cheaper. it's certainly true that manufacturing in china costs a lot less than it does in america, but if cost were the only issue, then apple would have moved its production to vietnam or indonesia, as china is now comparatively expensive.

in truth, electronics manufacturers stick with china because their facilities are state-of-the-art and their factories are able to instigate changes faster and more efficiently. the big reason, however, is america's dirty little secret: apple's home base is not producing enough skilled workers to occupy the middle-to-upper management positions necessary to manage the manufacturing process. apple could undoubtedly get unskilled labour cheaper, but china is way ahead of anyone else in the crucial category of educated high-tech workers. 

the pressure on america's political leaders [and would-be leaders] to find a way to return stable, well-paying manufacturing jobs to home shores is enormous and at a time when access to higher education is dwindling, it's a lot easier to go along with the outdated trope that the big issue is cheap labour and corporations valuing profits over loyalty to the country that allowed them to flourish. so it makes a great story when a politician can hold up a big, well-known example like apple and cry "sure, they can get labour cheaper over there, but at what moral cost?"

and now the bad news

reading through the litany of charges against foxconn is a pretty depressing literary experience, but part of me wonders if the average person can put the charges in their proper context. for instance, foxconn is alleged to have imposed a prison-like control of their workers, refusing to allow them to leave the factory premises and subjecting them to surveillance while there. i found this surprising not because such practices are disturbing- which they are- but because the implication was that they were abnormal. i assure you, they absolutely are not. even respected factories make a practice of requiring employees to surrender their official identification- which they need to travel anywhere outside the factory- when they are employed. the rationale behind that is that the employees, especially those from rural areas, would stay only a short time and then return home when agrarian work was more plentiful and more lucrative. even with relatively unskilled jobs, the training curve is such that high rates of turnover would damage tremendously the vaunted efficiency of chinese factories. so factory owners protect themselves by confining their workers to the premises. in the case of foxconn, that means a virtual city. in others, it means much less. but a prison is a prison.

likewise, overtime in factories is commonplace and expected. that's not just true of the fast-paced electronics industry, either. the incredible flexibility that makes china such a desirable manufacturing hub, demands an inordinate number of hours from workers at all levels. 60 hour work weeks at foxconn are unreasonable, but not unheard of by any means. there is an essential disconnect between north american manufacturers and chinese suppliers in terms of expectations. with time differences of twelve to sixteen hours, the working day is not ever going to line up between the two unless someone is working overtime. when the north american parent company or client calls at noon their time, it's expected that someone is going to answer the phone at anywhere from midnight to four in china. because no one wants to lose a day waiting for responses.

even the ugly issue of child labour is not particularly uncommon. as a rule, workers are required to have identification stating that they are eighteen [the same identification which is confiscated by the employer], but fake i.d.'s are easy enough to get and a lot of factories, through a combination of negligence and tacit agreement, don't bother to verify authenticity.

in fact, the factories least likely to be engaged in unsavoury business practices are those affiliated with companies like nike, who have been subjected to intense scrutiny in the past. nike realised that their brand was worth more than a few percentage points in profit margin and these days, the words "nike factory" are code for a top of the line facility in china. more questionable by far are the facilities that make goods for brands you see all the time in stores, but probably don't recognise.

to be fair, giant retailers like wal-mart and costco conduct inspections of their supplier companies' factories as a matter of course. but those inspections are scheduled in advance more often than not, which means that shady factory owners can take steps to avoid detection. plus, many factories sub-contract parts of the manufacturing process, although they're really not supposed to, and even the best inspections don't address conditions at factories down the chain- those who supply the suppliers. at the same time, those retailers pit suppliers against one another to drive prices down as far as they can possibly go- which means less money for everyone along the supply chain. for smaller retailers, goods that are purchased domestically are often subject to no research whatsoever, because they are standard company product shipped from a warehouse in the united states or canada.

revelations about the tiny percentage of profit returned to workers should not be a revelation at all. i'd be surprised if it was any worse than any other manufacturers as a percentage of the total. if you want to look at where money goes in the supply chain, look at logistics- many products, particularly larger or heavier ones- cost more to ship than they do to make and if a company needs to employ a warehouse stateside [and more and more retailers are offloading warehousing and shipping costs to their suppliers] to accommodate the flow of product, those rates are often enormously high compared to the price of the product itself.

none of this excuses foxconn from their culpability. none of it makes conditions there any better and the fact that apple were called out means that at least conditions are likely to improve at the facilities that directly [and possibly indirectly] supply apple products. but to leave the fight there is a serious mistake, allowing a hierarchy of factories to develop, with those affiliated with large name brands serving as cover for those who do everything else. if we really want to improve conditions in china and assuage our materialist guilt, we need to find ways to re-evaluate our relationship with overseas manufacturers.

a good start to that would be by spreading the awareness of what factory conditions are generally like, rather than holding up specific and unsettling examples with the implication that they are much worse because they make product for brands that are well known and in high demand. apple has agreed to publicise its labour reports, so that its shareholders and its consumers know the conditions in which apple products are made. that's great. isn't that something that every company should do?

what about inspections? most companies doing significant business in china have an office there, or at least work through a third party who acts as a go-between. shouldn't those offices be checking in to make sure that goods are being made under the conditions agreed to? and shouldn't those inspections be taking place both with and without notice at different times during the manufacturing process?

things like stiffer fines and penalties for those who violate the law- child labour, enforced overtime, etc.- those need to be addressed by the government [chinese and provincial], but certainly companies buying from factories who bend the law need to stand up for what's right if the government won't. but that doesn't just mean apple, it means everyone.

ideally, the revelations about foxconn would bring a greater public scrutiny of manufacturing in china and in other developing countries in general. greater attention would be paid to what conditions are across the board, including in those places that manufacture the lowest cost goods, where the incentive to cheat and save money is greatest. ideally, this sort of reality check would set in motion a process of demystification, which would allow the world's largest consumer market to better understand how products come into their hands- because the fact that the foxconn story has angered people and shaken their faith in apple can only indicate that the majority are in a state of blissful ignorance on that score.

unfortunately, looking back on what has happened when other top-tier brands have been the focus of public outcry, i have a feeling that this is a passing thing. apple will likely get its house in order and people will, if not entirely forget, move on, assuming that apple solving their problems is tantamount to all the problems being fixed. but that isn't the case. and if we allow ourselves to be lulled into a sense of security that things are right with the world just because a big name like apple has been brought to heel, then we're allowing the sorts of injustices that appalled us at foxconn to go right on in less visible places. we are, in short, conning ourselves.

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