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Apple Inc. and Wall Street Journal Essay

Apple has set the standard and has built a reputation around the world for creative, consumer-friendly, simple devices that are used around the world. They are marketed in such ways that demand for these gadgets are always in high demand. Apple’s innovations and marketing techniques have changed not only the phones and computers we use but their innovation has challenged people to do business outside of the box. For Apple not only have they gone outside the box, but literally outside of the country for the manufacturing of their products. 10 percent of the Apple IPhone is manufactured in the United States, the other 90 percent of the Apple IPhone is manufactured abroad. (Duhigg & Bradsher, 2012). To make an IPhone requires hundreds of different parts and not all of these parts can be found all in one place. The advanced semiconductors of the phone are made in Germany and Taiwan, the memory pieces, display panels and circuitry are all from Korea and Taiwan, chipsets are from Europe and the rare metals are found from Africa and Asia. After the materials have been acquired they are sent to China mainly Foxconn City where they are manufactured. (Duhigg & Bradsher, 2012).

The unscratchable glass screen was perfected by Apple engineers in Kentucky and sent to Foxconn City where they are assembled.(Duhigg & Bradsher, 2012). While 90 percent of the parts needed are found elsewhere the software and the marketing of that software in the phone is all American. (Duhigg & Bradsher, 2012). Apple employs 43,000 people in the United States and 20,000 overseas, whereas they contract an additional 700,000 people from everywhere but the United States to engineer, build and assemble their gadgets. (Duhigg & Bradsher, 2012). As Apple grew around the world the demand for their products simultaneously increased. Apple realized that their production was also going to have to grow and grow out of the United States to meet their expanded quota. The solution was outsourcing. Outsourcing has become the frequent thing to do in hundreds of industries including electronics. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas. (Duhigg & Bradsher, 2012).

When companies decide to outsource Asia always looks to be the best choice among the rest. The workers who are just barely trained are much cheaper, which keeps profits high when labor the main cost of production is kept to a minimum. In Apple’s case this was not their concern, what made Asia the place where Apple contracted Foxconn is because of the speed of production and the magnitude of people that are trained and hired to work are unthinkable here in the United States. For the needed 208,700 people to work in assembly lines and over see production it has been estimated to take nine months to find that many qualified engineers in United States to work. In China, it took 15 days. (Duhigg & Bradsher, 2012). Apple’s worldwide supply demand manager spoke on the subject and commented “What U.S. plant can find 3,000 people overnight and convince them to live in dorms?” For Apple to make the switch to Chinese workers from American workers was a critical advantage in their company. (Duhigg & Bradsher, 2012).

Foxconn City was informally named a city because of the amount of people that works are equivalent to city. This facility employs 230,000 most of the workers spend six days a week working, and up to 12 hours of their day at that same plant. Many of the workers there are forced to live in company dorms where they make less than $17 day. (Duhigg & Bradsher, 2012). However, Foxconn can provide companies, like Apple with the scale of people that are needed for efficient production of their gadgets. Since Foxconn has been successful they have opened dozens more of facilities that assemble an estimated 40 percent of the world’s consumer electronics. (Duhigg & Bradsher, 2012). With production exceeding everywhere else in the world the consequence of having unseen high production output is also to have harsh and demanding working conditions for employees. Employees at Foxconn work extreme overtime hours, and live in crowded dorms. The owners of Foxconn and Apple have been criticized for these conditions and that underage workers have helped build these products.(Duhigg & Barboza, 2012).

They are also criticized for safety concerns of hazardous materials that are not disposed properly that eventually harm uneducated workers. The China Labor Watch (CLW) found “a variety of dangerous working conditions, as well as unfair calculations of work time, low basic wages that compel acceptance of large amounts of overtime in order to have adequate income on which to live, very high work intensity, and failure to pay for social insurance, work-related injury insurance and other insurance required by law.” (Lubman, 2012). Codes of conduct were set by Apple and the CLW in place to help balance working conditions and employees rights.

These policies are frequently inspected but are found to be seriously violated on a daily basis.(Duhigg & Barboza, 2012). The criticism and investigations of Foxconn have led them to improve conditions; they plan on improving conditions by hiring more new workers, eliminating unpaid overtime, improving safety, and to upgrade housing and other amenities. (Gupta & Chan, 2012). Foxconn said it was “going to raise salaries by 16 to 25 percent, and was advertising a basic monthly wage, not including overtime, of 1,800 yuan ($290) in the southern city of Shenzhen, Guangdong province – where the monthly minimum wage is 1,500 yuan.” (Duhigg & Barboza, 2012).

Foxconn also alleged to building new housing where multiple workers do not have to cram into a room, and help their workers enroll in union type of structures. As these promises seem hopeful they have not been yet effective. Chen Yamei, 25, who has works at a Foxconn factory, complained that her salary will drop to just over 2,000 yuan a month ($317) from over 4,000 yuan. (Duhigg & Barboza, 2012).Which is the complete opposite of what was promised, and shows that the investigations just highlighted the problems of oversea manufacturing companies that without fixing them. Urbanization normally generates more economically productive work, compared to rural areas. The skills needed to survive in an urban area are different, also getting paid for these skills are an increase to rural pay. ( Areddy, Davis, & Page 2012). With more people living in an urban center this naturally causes a demand for new housing and buildings. Therefore, an increase in the urban cities would create more jobs and better pay for people and this could lead to people less likely to work at companies like Foxconn, and utilize their skills somewhere else with a more competitive pay.

The urbanization of China not only will open up more cities and jobs and such, but it will change the way that this generation thinks and works. The new generation of workers is less tolerant of the rigid military management style that was used on their parents and grandparents. ( Mozur, 2012). As jobs grow in China, young workers will pick and choose their jobs. This complicates the situation at Foxconn because the newer generation will challenge the manufacturing company and the government to meet the large expectations that will only continue to grow. The younger workers want to work more independently, employees 24 and under desire jobs where they don’t live paycheck to paycheck and can afford to save money for the future. ( Mozur, 2012). Being independent or an entrepreneur, living in a big city where there are more opportunities, not depending on working at a company like Foxconn where you are told what to do and where to sleep every day. No I do not think it is probable to manufacture IPhones and IPods in the United States. Figuring out space, resources, and labor would cost a fortune even before production.

While in China they have warehouses already built to accommodate production, with free samples of products, employees available 24 hours a day and free engineering offered. (Duhigg & Bradsher, 2012). As a business executive the smart choice for your company would be to move your supply chain to the most efficient place possible. “The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.” (Duhigg & Bradsher, 2012). The production that can be done overseas could not be matched here in the United States in the same amount of time, this is why manufacturing in the United States would not benefit Apple as much as it does in China.

I don’t believe that companies have an obligation to support American workers. CEOs want to maximize profits, and continue to be competitive around the world, so the most logical thing to maximize profits is lower costs. Labor is a huge cost. The U.S. is a world leader not because Americans are more intelligent than everyone else on earth, but because we have a free market and a free market inspires people to innovate which help American companies to stay a competitive power around the world. It hurts some people’s jobs but for a short term. Globalization needs to happen to thrive, limiting outsourcing inhibits growth, and jobs cannot be made without growth. Acquire new and better skills or perish. Competition needs to continue for growth in jobs, not an entitlement to a job just because you’re American.

“How the U.S. Lost Out on iPhone Work” by Charles Duhigg and Keith Bradsher from The New York Times, January 22, 2012, pp. A1 and A22-A23 ( ONLINE version dated January 21, 2012) “In China, Human Costs are Built Into an iPad” by Charles Duhigg and David Barboza, The New York Times, January 25, 2012 “Apple Contractor Ho Hai Says it Hired Underage Workers” by Paul Mozur, The Wall Street Journal, October 16, 2012 (also see version printed on October 17, 2012 “Foxconn Factory in China Used 14-Year-Old Workers”)
“Working Conditions: The Persistence of Problems in China’s Factories” by Stanley Lubman, The Wall Street Journal, September 25, 2012 “Apple, Foxconn set new standard for Chinese workers” by Poorima Gupta and Edwin Chan Reuters, March 30, 2012 “China Population Balance Tilts Urban” by Jeremy Page and Bob Davis, The Wall Street Journal, January 18, 2012, p A10 “New Labor Attitudes Fed Into China Riot” by Paul Mazor, The Wall Street Journal, September 26 (or 27), 2012

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