Apple CEO Tim Cook has responded to a New York Times report about the working conditions at its Foxconn contract manufacturer as false and offensive.
In a long letter to employees published by 9to5Mac, Cook outlined how Apple cares about workers in its supply chain and takes steps to audit how they are treated. The response comes after a New York Times went into detail about how Apple's China manufacturing efforts are a) necessary due to U.S. inability to be nimble and b) the cost advantages of making your electronics abroad.
Credit: Associated Press
Apple was the main target of the story, but the Times made a passing mention that there was a tech industry problem. It didn't go much deeper on the subject. Apple is a much better storyline. I've been relatively silent on this Apple supply chain argument because I think the company is being targeted because it's the big dog on the tech block. In fact, the Apple-Foxconn tale isn't really just a tech problem. It's a U.S. problem and it's a consumer problem that goes well beyond tech.
In other words, Cook has every right to be miffed about the Times report. His company is being singled out.
A few thoughts at a high level:
Apple may be the poster child for manufacturing abroad, but HP also uses Foxconn heavily. Analysts estimate that Apple will be roughly 40 percent of Foxconn's revenue in 2012. HP is about 25 percent, according to Fubon Research. No one is writing about HP though even though its supply chain report reads just like Apple's. Every electronic you have on you right now goes through China. The data center that powers the cloud behind those devices were also made by folks stacked in tech dorms in China. The minerals in the battery were mined somewhere. Deep down do you really give a rat's ass about the working conditions that created those relatively inexpensive devices? Of course not, you're from a Western economy. And from what I can tell you're still buying as much tech gear as you can.
This chart from Fubon Research gives you a rough sketch of Hon Hai's revenue breakdown. Hon Hai is the parent of Foxconn.
It's not just tech. Tech is being thrown under the bus with this debate because it's sexier. Ever notice how everything you wear comes from somewhere else too. We go to Wal-Mart, Target or wherever and demand cheap chic. You don't get cheap without inexpensive labor. In the fashion industry the race is on to find more sourcing outside of China. Why? Labor costs are going up. Africa is looking good at the moment. Rest assured that shirt on your back has some exploited labor behind it. In fact, everything you own comes from a supply chain that probably has multiple things you just don't want to know about. You could swap out Apple in that New York Times story and replace it with almost any American corporate giant.
The U.S. wants inexpensive. Theoretically, there should be some buy American movement that would make companies manufacture here and then charge prices that make them whole. First, the buy American movement never quite worked. Every institution we have depends on prices being kept in check. To do that you need the cheapest labor you can find. Take the U.S. government. These guys print money better than any counterfeiter on the planet. The whole house of cards depends on the U.S. being a reserve currency. Inflation would go through the roof if we all suddenly manufactured everything here. The pols talk about U.S. manufacturing being built up, but their grand plan to print money depends on cheap goods or we'll look like Germany after World War I with buckets of worthless currency.
And then there's the reality that all of these takes on the abused supply chain are all viewed through the Western lens. To that person working in the Foxconn plant he's providing for his family and future generations. To him, the pay is probably pretty good. Maybe the second and third generations wind up running Foxconn. Ditto for the guy in the textile worker in Africa and every other person in an emerging market.
The bottom line here is we enable a supply chain that has a lot of warts. We want to examine those warts, but not really. This flap about worker safety isn't about Apple, the tech industry or any other vertical. It's about us.