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Apple to Contribute Toward Costs of Improving Working Conditions at Foxconn Facilities

Reuters reports on comments from Foxconn chief Terry Gou, who claims that Apple and Foxconn will be splitting the initial costs to improve working conditions at Foxconn's facilities in China.
"We've discovered that this (improving factory conditions) is not a cost. It is a competitive strength," Gou told reporters on Thursday after the ground-breaking ceremony for a new China headquarters in Shanghai.

"I believe Apple sees this as a competitive strength along with us, and so we will split the initial costs."

It was unclear if the split would be 50/50 or in some other ratio.

Foxconn workers assembling iPads (Source: Rob Schmitz/Marketplace)

Foxconn has raised wages several times over the past couple of years as it has faced scrutiny over the treatment of its employees. And following a series of audits, Foxconn and the Fair Labor Association reached an agreement in late March to reduce overtime while boosting compensation packages to compensate for the reduction in hours.

It is unclear how much the actions are costing Apple and Foxconn and how the costs are being split, but with Foxconn operating on a very slim profit margin it has limited ability to finance such improvements without raising costs for its customers or receiving direct support from Apple to assist with the changes.

Top Rated Comments

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30 months ago
I still don't understand why people are spitting venom at Apple in regards to their factories when there are other factories far far worse.
Rating: 22 Votes
30 months ago

Non-rhetorical question: Why does Apple not just buy Foxconn? Apple could buy Foxconn, strengthen its supply chain, stop paying the Foxconn profit margin, and prevent Foxconn from being a manufacturer for rivals. Maybe I'm overlooking something obvious.

Foxconn is huge and has many other clients.

It would be like someone buying the entire McDonalds corporation just to make and sell the french fries.
Rating: 21 Votes
30 months ago

I still don't understand why people are spitting venom at Apple in regards to their factories when there are other factories far far worse.

people are jealous of their record profit.
Rating: 9 Votes
30 months ago
Apple seems to have grown more of a "heart".

Whether or not this is at least appears that way.
Rating: 8 Votes
30 months ago
I wonder how the media and the public would respond to a $50 price increase on iPads and iPhones to cover higher commodity, labor, and labor workplace safety costs?

This, given China labor rates are increasing at 15% per year and commodities (in Dollar terms) are increasing in cost at 7% per year, and Apple is co-investing in factory capital costs to improve workplace safety and reduce overtime.

It would be interesting to see of those constituencies, media and public who so often ask companies to do exactly these things, will also be willing to take on, and publicly support, the actual costs of those endeavors.


Q: Why doesn't Apple just buy Foxconn?
A: China does not allow foreign companies to own more than 33% of companies. That is increasing to 49% this year.
A: Apple share holders require a certain operating margin. Foxconn has a much lower operating margin than Apple and its acquisition would tank Apple stock.

Q: Why venom at Apple when so many other factories are far, far worse.
A: By proactively working to improve worker conditions in a country where that is a cultural abnormality, it gets the attention of the media. Once focused on, the media being simple folk, compare the conditions against some local observations they have at their workplace, or some fictional hopeful future workplace, rather than the alternative real people have in their real lives, because it is very disturbing to see. The media generally does a poor job of reporting business stories in the language and standards of business itself. Simply compare MSNBC and CNBC for hard evidence. One might think reporters and especially commentators have no business training or experience. :)
Rating: 8 Votes
30 months ago
Nice touch, considering Apple didn't HAVE to do this.

Seems like Apple's influence (even if it is being 'forced' by negative press) is having a positive effect on the local workforce & working conditions. I guess that shows the real benefit of being there; rather than avoiding countries with - to Western viewers - negative, oppressive work practices.
Rating: 6 Votes
30 months ago
Not to blindly defend Apple, or to over-simplify the situation, but I'm trying to wrap my head around the problem itself. Let me pose this hypothetical situation:

Let's say, for instance, you're a little local construction company. You build sheds that sell rather well. You buy your supplies at Home Depot or Lowes. When you're getting your supplies, you notice that the store seems sorta run down and the people seem upset and make a really low wage.

Now is it your responsibility to go out of your way and spend your money to improve their wages or conditions? You're already a customer and pay your invoices on time. Doesn't it behoove the company to use their income to improve their workforce's conditions/wages?

Personally, regardless of how much cash Apple has on hand, I don't see why it's Apple's responsibility to improve Foxconn conditions. At the end of the day, they're just another Foxconn customer. No more, no less. If Apple owned a substanital financial stake in the company, that might be different, though I doubt that's the case. Sure, there might be a moral obligation, but no more so than any of Foxconn's other customers. But you don't hear about them being at fault or contributing.

That being said, it really does appear to me that Apple's being raked over to coals simply because they have more money and they're a higher profile customer.
Rating: 5 Votes
30 months ago

Working for foxconn is not so bad. The thing is that they choose to work overtime.

A lot of workers are complaining about less working hours. Many want the overtime, means more money for them.
Rating: 4 Votes
30 months ago

When you make 35% + margin and have billions in cash and aren't doing anything with it, especially when your home country is experiencing terrible unemployment, why wouldn't Apple decide to produce these products here in the USA? People already pay way to much for Apple products and Apples margins are already padded enough to where they could cover it with little increase in price. I mean a 25% margin is still way above everyone else at that point.

Try telling that to an investor. Apple has a responsibility to maximise shareholder value above almost everything else. Also wiser men than me have said even if Apple did want to move manufacturing back to the US it wouldn't be able to. The manufacturing expertise just doesn't exist here to get the job done, because all of these jobs have been sent overseas for so long now.
Rating: 4 Votes
30 months ago

Labor costs are the least of it. There is a huge money laundering racket going on that keeps Apple (and others) from paying US and state taxes. In addition, huge amounts of money is stashed in off-shore banks waiting for a president who will give them a "tax holiday".

This is much more a factor than the few minutes (if that) of labor needed to assemble some robot-made components at Foxcon.

Also, the real abuses take place in the companies that supply Foxcon with components. From mining to making little parts, those companies are hardly regulated at all.

A company has no obligation to pay higher taxes, just as you don't. I take every tax break the US tax code allows me to take. Why should a company not do the exact same thing?
Rating: 4 Votes

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