Happy Chinese workers spell the end of affordable tech

Summary:Human and worker rights reforms in China would have serious negative consequences for the efficiency and cost of the gadget supply chain.

Recent coverage in the media over worker conditions in the Chinese factories which manufacture Apple's products have "exposed" much of what all of us in the technology industry already knew but were unwilling to accept -- that China is the most powerful engine of production for the technology industry, and that the blood, sweat and tears of Chinese workers is what fuels that hungry engine, at a tremendous cost to human rights.

Also See: The dark side of shiny Apple products (CBS News)

I really don't want to focus on the Apple side of this problem because the concern is an industry-wide problem. Apple was targeted because they are the largest and most powerful consumer electronics company in the world, but their situation is not unique.

The outsourced manufacturing subcontractors that Apple uses such as Hon Hai Precision Industry (Foxconn) are used industry-wide, by some of the largest players in technology.

Foxconn's client list reads like a celebrity tech roster that includes Hewlett-Packard, Dell, Intel, Lenovo, IBM, Cisco/Linksys, Netgear, Microsoft, Sharp, Sony, Motorola, Asus, Acer and Vizio.

And to Foxconn's celebrity clientele list I will also include the second and third place tablet runners and e-reader champions Amazon and Barnes & Noble. Yes, your Kindles and Nooks are also made by the very same companies with the same awful working conditions that make products for Apple.

As much as I think the Android crowd would love to claim moral superiority to Apple as it relates to the production of their toys, it can't.

So we should cut to the chase that Apple is absolutely not unique in having products made by workers which are paid far below that of Americans, that work unbelievably long hours in sweatshops using child labor under conditions that rival that of the worst factories during the industrial revolution in America and Europe of the late nineteenth century.

The reason why Apple is being singled out is that they are the poster child for this problem. Apple's current CEO, Tim Cook, was entirely responsible for shifting the company's production to China during his tenure under Steve Jobs as Chief Operating Officer, and is credited as the genius behind the company's manipulation of the Asian supply chain.

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The bottom line why all of these manufacturers, Apple included, outsource much of their manufacturing to China is that the labor is cheap, in addition to escaping American taxes and regulatory issues which lower the costs of production.

It would be nearly impossible for these companies to stay competitive if they produced electronics in the United States because you would have to pay these workers decent salaries and decent benefits, you would have to conform to American labor laws which significantly reduce the number of hours these people could work, and you could never legally employ child workers.

So the sad truth is that in order to feed the world's thirst for the latest and greatest in inexpensive smartphones, tablets, computers and other consumer electronics, a vast number of human beings in China need to suffer.

One has to wonder how long China as one of the world's most quickly developing economies is truly going to be able to sustain this model.

As Chinese citizens accumulate wealth, and as China as a country becomes more of a participant on the world economic stage and as a member of the larger community of nations, and as its citizens gain more and more access to information about the world around them, its people will inevitably demand better working conditions, increased wages and increased rights overall.

None of these things are going to happen necessarily within five years or perhaps even ten. But it would be naive to say that China can sustain the quid pro quo of having the trappings of a despotic neo-communist nation and all of the worst aspects of modern capitalism indefinitely.

Companies like Foxconn or even the Chinese government may not bring about change on their own. It's possible that as a result of this public outcry over mistreated Chinese workers, the foreign technology companies investing in China themselves may start having to build their own factories in that country and control their own means of production to ensure their own labor compliance directives.

This is already happening. In eWeek, writer Wayne Rash recently wrote a piece entitled "Making Smartphones Without Condoning Poor Work Conditions." In it he writes about how Motorola Mobility, which has a firm commitment to corporate responsibility has invested a tremendous amount of money building its own factories in China and conducts and discloses regular audits of working conditions.

And Motorola's workers in China are in fact their own employees.

Obviously, the cost to Motorola Mobility in order to have a corporate conscience is high. It is reflected in lower profit margins for their products which obviously hampers its ability to compete.

Motorola's competitors which do not display an equally strong corporate conscience (such as Apple) need not concern themselves with these moral ambiguities. And they can use this lack of corporate conscience to their advantage with increased profit margins.

Profit margins that ultimately please Wall Street in terms of their yearly earnings statements.

But one day in the future for the nations which consume Chinese manufactured technology, and for all of the companies that have to do business in China like Apple, the party will be over. Any incremental cost of improving the lives of the Chinese workers will inevitably result in in increased costs in components and manufacturing outsourcing, which will be passed down to you, the consumer.

How much more expensive is anyone's guess. It could be as low as 20 percent or as high as double the cost.

I had a conversation about this with my ZDNet colleague Ed Bott, and the expression he used was that America and other Chinese consuming technology nations would turn into "techno-Cubas".
The reference he was making was that Americans and other nations might end up trying to keep their technology running much longer than they were designed for, in the same way Cubans have kept 1950's and 1960's automobiles running for decades due to the trade embargoes against their nation.

That is obviously a nightmare scenario, and as an industry we cannot allow that to happen because the consequences would be disastrous for driving technology consumption.

It's certainly possible that Apple, with its growing war chest of over $90B, facing international pressure to improve the conditions of its workers, may eventually have to use that money to build its own factories in China or in other countries such as South Korea, which have an ample supply of skilled workers and also have far better working conditions as well as a superior reputation for upholding human rights.

In fact, such a transition for technology manufacturing to Korea may actually accelerate the need for a re-unification of that nation. With a combined population of over 73 million people, a unified North and South Korea could create an economic and manufacturing powerhouse not unlike what happened during the German reunification of the 1990's.

Will international concerns over working conditions in China's technology industry eventually result in increased costs for manufacturing and ultimately, the prices of consumer electronics and other technology products? Talk Back and Let Me Know.

Topics: CXO, IT Employment

About

Jason Perlow, Sr. Technology Editor at ZDNet is a technologist with over two decades of experience with integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer... Full Bio

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