Apple and Foxconn to share improvement costs
Foxconn International Holdings Ltd, complex in Shenzhen, China.
Kai Ryssdal: We've talked a lot on the program about the workers who assemble your iPhones and your iPads and what working conditions are like in Apple's Chinese factories. 'Rough' is one word you might use. Really long hours, not always fairly paid.
Today, Apple's contract manufacturer in China -- an entirely separate company -- announced it's gonna improve those conditions. And that its customer Apple would split the costs.
Marketplace's Scott Tong has more.
Scott Tong: Your iPhone and mine get snapped together by a company Apple hires – Foxconn runs the factories. Foxconn’s CEO today said he’d cap worker overtime, improve labor conditions, and buy robots for the dreariest work. He says Apple his customer will “split the initial costs,” but it’s unclear if that means 50-50.
Either way, IT professor Jason Dedrick at Syracuse figures good PR move.
Jason Dedrick: The public relations impact of these problems with the Foxconn factory on Apple has been, I think, significant enough that Apple feels that something needs to be done.
Normally, a brand name customer like Apple can squeeze its Chinese supplier dry. But with iPhones and iPads, Foxconn’s one of the only outfits that can crank them out in a jiffy. So it may have some leverage to have Apple pony up for more cafeterias, dorms, and karaoke parlors on factory campuses.
Dedrick: Apple couldn’t ditch Foxconn altogether by any means. And it’s not just the scale that Foxconn has, but its capability it has for rapid ramp-up in production.
Apple may incur higher costs, but this is a company that can handle it. It’s coming off a record quarter, largely because it sells gadgets at whopping profit margins.
Analyst Jeffrey Wu is with IHS isuppli.
Jeffrey Wu: Apple does charge a price premium. And consumers are willing to pay. It’s really not something Apple’s competition can easily achieve.
And Apple’s factory partner could use some financial help: Foxconn’s operating profit margin last quarter fell to under 1 percent; Apple’s dropped in at 39 percent.
In Washington, I’m Scott Tong for Marketplace.