Tech subcontracting and working conditions in China

Some really interesting comments from Chinese readers on the New York Times’ article about working conditions in Apple’s subcontractors:

If not to buy Apple, what’s the substitute – Samsung? Don’t you know that Samsung’s products are from its OEM factory in Tianjin? Samsung workers’ income and benefits are even worse than those at Foxconn. If not to buy iPad – (do you think) I will buy Android Pad? Have you ever been to the OEM factories for Lenovo and ASUS? Quanta,
Compaq … factories of other companies are all worse than those for Apple. Not to buy iPod – (do you think) I will buy Aigo, Meizu? Do you know that Aigo’s Shenzhen factory will not pay their workers until the 19th of the second month? If you were to quit, fine, I’m sorry, your salary will be withdrawn. Foxconn never dares to do such things. First, their profit margin is higher than peers as they manufacture for Apple. Second, at least those foreign devils will regularly audit factories. Domestic brands will never care if workers live or die. I am not speaking for Foxconn. I am just speaking as an insider of this industry, and telling you some disturbing truth.

Is this really how we want our tech toys to be made?

20 thoughts on “Tech subcontracting and working conditions in China

  1. Hunnymonster says:

    No I don’t particularly – but it also seems that the EU (thanks to WTO agreements) also gives every manufacturer outside the EU a tax break…

    If you were to import the components to make a tech widget into the EU, it’s dutiable and VATable.

    If you import the same components, but assembled – then it’s only VATable.

    So even if it costs the same to run the manufacturing operation (obviously it doesn’t – it’s lower in Asia) then the Asian-made one will be cheaper.

    Talk about shooting yourself in the foot (at an EU level)

  2. Gary says:

    Yeah, that’s crazy.

    Some reporting of Foxconn has strongly implied that the problem is with feather-bedded westerners: unlike the Chinese, we in the west won’t work in awful conditions for 2p a year, living permanently on-site and trying to steal food from rats the size of alsatians. Lazy westerners!

    I know there are union issues, pensions, healthcare etc in the west, but surely there’s a happy medium between 1970s-era British Leyland and 2010s-era Foxconn?

  3. Hunnymonster says:

    But “everybody” wants cheap tech… out of preference I’ll buy eurotech, but you try and find some…

    All the funnier when I had a Chinese visitor at work and planned to take him to see stuff like Hadrian’s Wall, Edinburgh Castle etc… the full tourist BS at the weekend.

    Where did he want to go at the weekend? B&Q! To buy a shower (yes an electric shower – available in China but only poor quality and in anticipation he’d had the supply to his house specially augmented to cope with the new shower unit he planned to buy) some copper pipework (again available in China, poor quality), some plumbing tools (available but…). Actually we ended up at Toolstation & Screwfix and placed a couple of huge orders for delivery to his hotel… but he still blew in a monster wedge of dosh on it.

  4. Squander Two says:

    Saw an interesting article t’other day (sorry, can’t remember where) about Foxconn and Apple’s reason for choosing them. The reason isn’t the cost of labour — which is quite a small fraction of the cost of these gadgets anyway, and it’s not as if Apple are aiming to be the cheapest. The reasons are (a) the adaptability of the factories and (b) the lack of availability of engineers in the US.

    Apple used to be proud of manufacturing everything in the US; it went into their advertising. They say they literally can’t do it any more. The American education system has stopped creating mid-level engineers, and the prevailing culture has turned against factory-line jobs as somehow demeaning. James Dyson has said similar things.

    We can’t have schools full of teachers who tell kids that using your brains is worthy and using your hands is for losers, and then complain when we have to get foreigners to do all our skilled manual labour for us.

    Jobs switched the original Iphone from a plastic to a glass screen about six weeks prior to launch, apparently. After figuring out which glass to use and how to machine it, that left less than a month to refit the factories. There is simply no factory in America or Europe that can do that. Foxconn can. The launch date was not changed.

  5. Tony Kiernan says:

    TBH, I don’t think those are different/separate reasons. If a production line can was retooled and still hit the original deadline, you can guarantee that the workforce just worked longer days

    The idea that there are factories closing all over the US because you ‘just can’t get the staff’ is rubbish. It was not a shortage of engineers that did for the Detroit motor industry. And, it does not follow that when you remove the opportunities therein you end up with a surplus of engineers. No jobs here, no training for those jobs here. The reason there are the engineers in China, is that is where the engineering work is.

    And, to stick with the example, the Detroit motor industry did not collapse due to teachers telling kids to reach for the stars.

  6. Squander Two says:

    > If a production line can was retooled and still hit the original deadline, you can guarantee that the workforce just worked longer days

    Oh, I’m sure they did. But I think the point being made was that they had three or four weeks to retool AND to manufacture, and a US factory wouldn’t even have finished retooling inside that time.

  7. Squander Two says:

    Found it:
    http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?_r=1&pagewanted=all

    For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.

    All the lean manufacturing advocates will tell you that supply chain efficiency has a far bigger effect on costs than labour does.

  8. Gary says:

    But how much of the efficiency is because you’re treating your workers badly? For example, today’s Observer says that according to Apple’s own stats, 62% of its Asian suppliers haven’t been keeping to maximum working hours agreements.

  9. Squander Two says:

    > But how much of the efficiency is because you’re treating your workers badly?

    None, because I was referring to supply chain efficiency. That’s how much inventory you keep in stock, where your warehouses are, how long your transport chains are, lead times, likelihood of supply delays, etc. I’m not saying Foxconn are Lean manufacturers — they certainly aren’t — but they’ll reap some Lean benefits merely by being in Asia.

    Interestingly, it’s lean advocates who’ve been able to make a success of manufacturing in the US without paying shite wages or otherwise treating their staff like crap, by concentrating on supply chains and inventory.

    Good piece here.

  10. Squander Two says:

    Superb quote here:

    The latest popular excuse from far too many manufacturers is a shortage of skilled workers (Never mind that many of those doing the complaining laid off machinists, welders, pipefitters and electricians by the busload over the last few years, and dismantled their apprentice programs). They might want to give some thought to how the United States almost instantly turned some 1.6 million housewives into the machinists, welders, pipefitters and electricians who cranked out ships, planes, tanks and weapons in quantities staggering enough to overwhelm Nazi Germany and Imperial Japan.

  11. Gary says:

    > “The latest popular excuse from far too many manufacturers”

    Yes, that’s a really good quote. I do wonder if there’s an element of self-fulfilling prophecy going on here, with firms outsourcing everything to cut costs and then saying “it’s not about costs, we can’t come back because there’s no infrastructure there”.

  12. Squander Two says:

    Not so much self-fulfilling prophecy as vicious circle, I’d say — especially regarding the supply chains. Remember that costs aren’t just down to labour; a lot of it’s about red tape.

  13. Squander Two says:

    OK, last time I link to Evolving Excellence, but they’ve just put up another post relevant to this, and rather brilliant.

    So …. Golden Bear Ltd gets the contract to produce the official mascot for the 2012 British Olymic Team, and decides labor costs – excuse me, labour costs – are way too high in England to make them there. So they make them in China and, as a result of 26p per hour Chinese labor is able to sell this thing for $20 (12.99 pounds).

    Meanwhile, West Paw Design in Montana makes something called a Spring Chicken – 2″ bigger and filled with recycled material (instead of God knows what Golden Bear’s Chinese friends put in the Lion), pays something like $15 an hour and sells it for $14. West Paw is a profitable, rapidly growing, enterprise.

  14. Gary says:

    That’s really interesting. Do you think the commenters are right, and licensing fees / safety tests etc account for a big chunk of the difference?

  15. Squander Two says:

    Well, the commenters are clearly experts, not bullshitters. But so’s Waddell.

    Safety tests are per product range, not per individual product, so economies of scale minimise their cost.

    I’m not convinced by the idea that the mane requires careful manual alignment. Surely it requires careful manual alignment in a Chinese factory because the labour’s so dirt-cheap it’s not worth investing in a machine. In a British factory, it would be, which means a bit of initial investment which would again be minimised by economies of scale, and then faster production.

    The blog’s one of the most interesting on the Web.

  16. Gary says:

    I like his suggestion that Apple could use its money to find a better way of manufacturing in the US rather than just outsource.

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