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Apple Foxconn Fallout: "The goal should not be raising the standards of Foxconn"

Posted by Abe Sauer on April 3, 2012 10:01 AM

A little anecdote from the booming Chinese port city of Dalian will tell you two different (but equally important) things about Apple's popularity in mainland China and what the brand is going through there.

It seems that the security detail from Mall 1 showed up at Mall 2 to "send a message." That message was communicated when Mall 1's security guards arrived at Mall 2 and knocked down billboards advertising the soon-to-open Apple store. That Apple store, set to the world's largest, will soon open at Parkland Mall. The mall is high-end and home to numerous foreign luxury brands. In fact, a close look at the video of the brouhaha, above, reveals it was shot from a Starbucks patio. (Starbucks, by the way, is plowing its way through China lately, too.)

And all this during a week when Apple CEO Tim Cook visited China, from the Foxconn factory floor to the vice premier, and the March 29th report on Foxconn seemed to make all Apple's Foxconn woes disappear.

China tech blog MIC Gadget has an impressive roundup of Cook's Big Deal visit last week to the Mainland, from standing in line at immigration, to his tour of a Foxconn factory to his snap-happy visit to Beijing's Apple Store.

Cook's visit came the same week the much-anticipated report from the US-based Fair Labor Association (FLA) about Apple's embattled China supplier. The report's landing was padded by recent revelations that much of famous Apple critic Mike Daisey's criticism of Foxconn was made up. A fascinating read on Daisey's downfall is a Time Out Shanghai piece by Adam Minter, an American journalist in China who called B.S. on Daisey's tale from the beginning.

The FLA's summary of its own report:

"On February 13, FLA launched an independent investigation into labor rights allegations at Foxconn, an Apple supplier in China. FLA assessors logged more than 3,000 staff hours inside the factories. They evaluated conditions based on visual observation and review of policies, procedures and documentation (payroll and time records, production schedules, employee records); interviewed hundreds of Foxconn workers and managers both on- and off-site; and conducted an anonymous worker perception survey of 35,500 randomly-selected Foxconn workers – providing an in-depth understanding of working conditions, particularly during peak production of Apple products. FLA found excessive overtime and problems with overtime compensation; several health and safety risks; and crucial communication gaps that have led to a widespread sense of unsafe working conditions among workers."

The report contained no truly shocking details, but it did take Foxconn to task for providing less than ideal working conditions. The FLA claims it already has received Foxconn's promise to make improvements and, for its part, Apple "fully" accepts the FLA's recommendations. Indeed, Apple had already committed to as much and, honestly, the brand would only have stirred up a bigger PR mess had it pushed back at all. The full report is available for download.

A number of unforeseen—and oddball—stories have developed from the immediate steps taken to improve Foxconn. The first is that some workers are expressing concern that cuts in overtime will lead to pay cuts. One told Reuters, "We have just been told that we can only work a maximum of 36 hours a month of overtime. I tell you, a lot of us are unhappy with this. We think that 60 hours of overtime a month would be reasonable and that 36 hours would be too little."

The other nugget is, as Forbes points out, is how ironic the FLA's criticism of underpaid Foxconn internships can sound considering how many internships in the US are unpaid.

But the fundamental question is whether this means Apple is in the clear. Has the brand weathered a storm that just a few months ago, after several New York Times exposes, had this writer wondering if Apple was flirting with becoming the next Hummer. While some say this is nothing more than a dog and pony show in the hopes that "things will die down," it is certainly a win for Apple, especially when combined with the Daisey disaster.

Another way Apple wins? As the Mercury News pointed out: "If Foxconn and other, similar Chinese factories increase their payrolls, it may hurt other tech companies more than Apple, however. Apple charges a large premium for its products: IHS iSuppli estimated that Apple pays less than $200 for the components and work on each iPhone, which it sells for up to $600. Companies such as Hewlett-Packard, which depend more on low margins, would be hurt more by an increase in manufacturing costs in China." Zing!

Finally, as a branding case study, the Apple-Foxconn story is a fascinating tale that's as much about what's ignored as what's included. Apple is slammed for its Foxconn connection even though, as many have pointed out, Foxconn does similar work for numerous tech giants. Consumers, with Apple's help, really do "think different" when it comes to Apple and expect more out of the brand. But that says a lot more about Western consumers than it does about Apple or Foxconn. As Minter put it so succinctly in his Time Out interview that should give everyone pause:

"I can tell you that companies engaged in raw materials are far more dangerous, unhealthy, and unpleasant places to work than somewhere like Foxconn. Indeed, I can think of a range of industries that are more dangerous than Foxconn: textile dying, batttery manufacture, paper making, the list is endless.
The goal should not be raising the standards of Foxconn, but rather the much more difficult task of raising up China's other industries to the level of a Foxconn."

Food for thought.

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