System Failure

Apple is front and center today saying the death of a 15-year-old worker at one of its subcontractors was not the result of conditions at the Pegatron factory in Shanghai.

The teenager died of pneumonia, according to news reports. He was employed after using someone else’s ID to get the job.

It’s very sad that this happened. But the truly uncomfortable fact is that the worker was 15.

Apple’s response, as usual, was stiff and unconvincing: “Apple has a long-standing commitment to providing a safe and healthy workplace for every worker in our supply chain, and we have a team working with Pegatron at their facility to ensure that conditions meet our high standards.”

Underage workers continue to gain employment in Chinese factories. Why does this continue to happen there? Is it a failure of management? Is it cultural? And how many others will die before the system is fixed?



Poison Apple?

Move over, Foxconn. First Pegatron and now Jabil have joined you on the Apple-watcher hit list.

In June, the New York-based employee rights group known as China Labor Watch singled out three Pegatron sites for worker abuse. The alleged violations are now like a refrain: excessive overtime, harsh working conditions and employment of underage workers.

Today it was Jabil’s turn, as its Green Point unit in Wuxi drew CLW’s ire. Perhaps most concerning is the accusation that Jabil workers must agree to a “list of punishments.” That sounds sickening and demeaning.

The common thread, of course, is Apple, whose corporate standards are apparently more for show than practice.

Chinese law prohibits more than 49 hours of work per week. Yet the CLW report shows 80% of the 80 Jabil workers interviewed put in more than that. While both Apple and many workers claim they want the overtime, the sad truth is they need to work the extra hours in order to make sufficient wages. Yet with Apple sitting on more than $100 billion in cash, it’s illogical to argue that company needs to suppress wages in order to make its iPhones and related products affordable to Western consumers.

Just 18 months ago, then Jabil CEO (and now chairman) Tim Main excoriated Foxconn for its “very abusive policies, employment policies.”

“I think their business will begin to suffer because of the way they treated their employees,” Main told Jabil shareholders. “And you can all be quite comfortable and proud that, you know, that’s not your company. We treat people like human beings like we want to … treat our own kids. So you don’t have to worry about that with us.”

Sadly, CLW’s report says something very different.

At the time of Main’s comments, Apple had just become a 10% customer of Jabil. Now, Apple is estimated to make up 13%, or $2.23 billion, of Jabil’s annual revenue. So like Foxconn and Pegatron, does serving Apple necessarily cost a company its soul?

Correlation is not causation, but the circumstantial evidence is getting mighty difficult to ignore. Will any EMS company be able to resist the temptation of Apple’s poisonous riches?


3 Thoughts on Foxconn

A few thoughts on Foxconn in the wake of last night’s Fair Labor Association report:

1. Not that Mike Daisey feels much better today, but the excessive overtime was clearly way out of whack with Chinese law.

2. The FLA head was very clear in stating that Foxconn’s assembly lines are on par with any in the world. We knew that. There’s only so many placement machines and screen printers out there. Don’t let that obscure the larger picture, which was the dehumanization of employees. One quote that jumps out: “We’ve got to make sure people can opt out and if they do feel that they’ve suffered any kind of incriminations as a result, that they can complain, and that complaint will be handled fairly.”

3. The Electronic Industry Citizenship Coalition, which supposedly sets standards on how electronics OEMs should behave, has been fully exposed as being nothing more than a PR front.

Finally, you should read this piece from the Silicon Valley Mercury News that explains what the FLA is — including the main source of its funding.


Can Cook Take the Heat?

CEO Tim Cook has taken to the Apple airwaves, rebutting claims made by The New York Times and others that company indirectly contributes to worker abuse but not rejecting Foxconn as a supplier.

In a letter, published yesterday by 9to5mac, Cook wrote, “Every year we inspect more factories, raising the bar for our partners and going deeper into the supply chain. As we reported earlier this month, we’ve made a great deal of progress and improved conditions for hundreds of thousands of workers. We know of no one in our industry doing as much as we are, in as many places, touching as many people.”

I’ll address the second point first. It’s true Apple has been singled out for bad corporate behavior toward Third World workers, while companies such as Dell and H-P are equally reliant on their supply chains (often the same suppliers), yet receive far less flak. It says here Apple is getting the brunt of bad publicity for good reason. The company has struck a wholly sanctimonious tone toward those who dared criticize its leadership. It has been strident in its support of Foxconn, the biggest (in size and in number of incidents) purveyor of recorded worker abuses. Apple on any given day is the largest (by market capitalization) company in the world. If a critic wants to make a point at a company’s expense, who better than Apple? Frankly, HP and Dell have been so beset by internal management problems, attacking them for supply-chain problems seems somewhat quaint by comparison.

As for the first point (“Every year we inspect more factories, raising the bar for our partners and going deeper into the supply chain.”), the truth is Apple does not visit every one of its suppliers every year. In 2011, Apple conducted 229 audits, 100 of which were first-time audits. According to the company, 97% of Apple’s procurement expenses are from 156 vendors. Incredibly, by Apple’s own admission, the logic says it audited many of its suppliers for the first time in 2011. (Either that, or the math isn’t working out, unless Apple is churning its supply base — composed primarily of well-known companies in their respective fields — with great rapidity, or that supply base is adding new plants with even greater rapidity, because the number of first-time audits has been at or over 100 three years running.)

I commend Apple for bringing some degree of transparency to the issue. But the numbers don’t quite add up. Nor does the nagging feeling that Apple, which perhaps has no parallel when it comes to leveraging a supply chain for competitive advantage, could effect positive change at places like Foxconn and Pegatron, if only it were willing to shoulder the financial risk.

When you have $100 billion* in the bank, you can afford to stop by each of your suppliers at least once a year. And when you’re the biggest company in the world, and apparently comfortable lecturing anyone else on what they should think, then you’d better be able to handle the blowback. If Cook can’t handle the heat, he should get out of the kitchen.

*Actually $97 billion.