Foxconn is on an iPhone 6-related hiring spree, but the giant Apple supplier isn’t only looking for human workforce. IT Home reports that Foxconn may rely on some 10,000 robots to make Apple’s 2014 iPhone models, in addition to humans, with each machine capable of building up to 30,000 units per year, for a theoretical total of 300 million iPhones per year.
The innovation trap: How the iphone isn’t saving America.
By Martin Hart-Landsberg, PhD
The US economy faces a number of challenges—among them a lack of job creation and an ever-growing trade deficit. Many policy-makers believe that encouraging business innovation is the best response to these particular challenges. Sounds plausible but experience suggests otherwise.
The best example of why simply encouraging business innovation is not the answer for our employment and trade problems is Apple and its iPhone.
The iPhone was introduced in 2007 and has been incredible successful. U.S. sales soared from 3 million units in 2007 to over 11 million in 2009. Global sales topped 25 million in 2009.
While the iPhone is designed and marketed by Apple, almost all the phone’s components are produced by foreign companies operating outside the United States. These components are then shipped to China where Foxconn, a Taiwanese company, oversees their assembly and their export to the United States and other countries. As a result, the iPhone generates few jobs in the United States.
Two economists, in an Asian Development Bank working paper, examined the iPhone 3G production process in some detail. The table below, taken from their study, highlights the main suppliers and the costs of the components they produce for a single phone. Most of the components are supplied by Japanese, South Korean and German firms, although there are also some U.S. suppliers (although who knows where they actually produce their compnents).
The total component cost of an iPhone in 2009 was $172.46. Workers in China assemble the iPhone, but because their wages are low the assembly cost per phone (labeled manufacturing costs in the table below) is quite small, only $6.50 a phone. The total production cost per phone is $178.96.
Because the iPhone is assembled in China all sales in the U.S. mean an increase in Chinese exports (even though the phone is largely composed of inputs produced outside of China) and an increase in U.S. imports. In 2009, China exported more than $2 billion worth of iPhones to the United States. Thus, the iPhone, because of the Apple’s production strategy, also adds to the U.S. trade deficit.
Apple is not alone in embracing China as its production base. China is now the world’s largest exporter of manufactured goods. And, as the chart below shows, the share of Chinese exports that are labled high technology is growing. This trend has encouraged many analysts to claim that the U.S. is now locked in fierce economic competition with China.
However, as we see next, more than 80% of China’s high technology exports are actually produced by foreign companies operating in China. Moreover, these foreign companies have significantly increased their control over this production. In 2002 foreign owned firms that were 100% foreign owned (which means that they had no Chinese partner) accounted for only 55% of Chinese high technology exports. In 2009 they accounted for 68%.
Why do so many transnational corporations choose to locate production in China? The answer is obvious: profits. Apple again serves as a good example. The table below, taken from the Asian Development Bank working paper cited above, shows Apple’s profit-margin on the iPhone. In 2009 it was a whopping big 64%.
Struck by the size of Apple’s profit-margin, the authors of the Asian Development working paper considered whether the iPhone could reasonably be made in the United States. As they note:
The role of the PRC in the production chain of iPhones is primarily the assembly of all parts and components into the final product for re-shipment abroad. The skills and equipment required for the assembly are very basic and there is no doubt that American workers and firms are capable of assembling iPhones in the US. If all iPhones were assembled in the US, the US$1.9 billion trade deficit in iPhone trade with PRC would not exist. Moreover, 11.4 million units of iPhone sold in the non-US market in 2009 would add US$5.7 billion to US exports.
For the sake of discussion, they assumed that assembly line wages in the U.S. are ten times higher than in China. Given that Chinese production workers earn roughly $1 an hour, that is not an unreasonable assumption. The higher wages would mean that the total assembly cost per phone would rsie to $65 and the total manufacturing cost would approach $238. If Apple continued to sell the iPhone for $500, the company would still earn a very respectable 50% profit margin.
Moreover, as the authors point out:
In this hypothetical scenario, iPhones, the high-tech product invented by the U.S. company, would contribute to U.S. exports and the reduction of the U.S. trade deficit, not only with the PRC, but also with the rest of world. More importantly, Apple created jobs for U.S. low skilled workers; those who could not be the software engineers needed by Apple. Giving up a small portion of profits and sharing them with low skilled U.S. workers by Apple would be a more effective way [than depreciation of the exchange rate] to reduce the U.S. trade deficit and create jobs in the United States.
Of course, shifting production to the United States would mean that Apple would earn less money and there is little reason to believe that the company is prepared to sacrifice its profits for the good of the country. If we want to tackle our employment and trade problems were are going to have to do more than promote more attractive conditions for business.
We ran along the railway,
arriving in some place called ‘the City’
where we trade in our youth, and our muscle.
Finally we have nothing to trade, only a cough
and a skeleton nobody cares about.
Midnight. Everyone is sleeping soundly,
We keep our pair of young wounds open.
These black eyes, can you really lead us to the light?
I swallowed a moon made of iron
They refer to it as a nail
I swallowed this industrial sewage, these unemployment documents
Youth stooped at machines die before their time
I swallowed the hustle and the destitution
Swallowed pedestrian bridges, life covered in rust
I can’t swallow any more
All that I’ve swallowed is now gushing out of my throat
Unfurling on the land of my ancestors
Into a disgraceful poem.
I want to touch the sky, feel that blueness so light
But I can’t do any of this, so I’m leaving this world
Everyone who’s heard of me
Shouldn’t be surprised at my leaving
Even less should you sigh or grieve
I was fine when I came, and fine when I left.
On the last day of September, a 24-year-old migrant worker in the southern Chinese city of Shenzhen killed himself. Xu Lizhi jumped out of a window of a residential dormitory run by his employer, Foxconn, the huge electronics manufacturing company with a million-strong workforce that makes the majority of the world’s Apple iPhones.
According to accounts from his friends, Xu tried multiple times to leave his job at Foxconn. Applications for positions in libraries and book stores in Shenzhen proved unsuccessful. He also was turned down for a job at an internal library within Foxconn’s compound. Xu moved away for a spell to be with his girlfriend in the city of Suzhou, but that relationship fell through, and he eventually made his way back to Shenzhen and Foxconn.
Xu is not the only Foxconn employee to commit suicide: in 2010, a spate of suicides put the international spotlight on the Taiwanese-run company, which is China’s biggest private employer. Foxconn has since taken effortsto improve working conditions and dormitories. There have been 18 attempted suicides of Foxconn employees in the past five years.
Taiwan’s Foxconn has admitted employing children as young as 14 on assembly lines at a plant in China, a fresh blow to the tech giant that has been attacked over its treatment of staff after several suicides.
The company, which makes products for Apple and Sony, admitted it hired the underage workers as part of an internship programme, reflecting a practice rights groups said is widespread among enterprises in China.
“This is not only a violation of China’s labour law, it is also a violation of Foxconn policy,” the company said in a statement late Tuesday, referring to Chinese rules that set the legal minimum age for workers at 16.
“Immediate steps have been taken to return the interns in question to their educational institutions,” it added.
Foxconn, the world’s biggest contract manufacturer, said it had carried out a probe at the plant in eastern Shandong province, which showed the interns in question, aged from 14 to 16, had worked in there for about three weeks.
A spokesman told AFP the interns had been mainly working on assembly lines at the plant.
No more Made in China iPhones? Japan wants to take over iPhone Manufacturing
According to a report from Digitimes, Japanese manufacturers are currently working on making a concerted effort to secure more orders from Apple, which currently deals mainly with companies based in Taiwan and China.
Foxconn to speed up 'robot army' deployment; 20,000 robots already in its factories
June 26, 2013, 10:20 AM — Manufacturing giant Foxconn Technology Group is on track with its goal to a create a “million robot army”, and already has 20,000 robotic machines in its factories, said the company’s CEO Terry Gou on Wednesday.
Workers’ wages in China are rising, and so the company’s research in robots and automation has to catch up, Gou said, while speaking at the company’s annual shareholder’s meeting in Taipei. “We have over 1 million workers. In the future we will add 1 million robotic workers,” he said. “Our [human] workers will then become technicians and engineers.”
For decades, every trend in manufacturing favored the developing world and worked against the United States. But new tools that greatly speed up development from idea to finished product encourage start-up companies to locate here, not in Asia. Could global trade winds finally be blowing toward America again?
Farm workers in South Africa set fire to vineyards in protest of what they call “hunger wages”. They use the term “hunger wages” to describe the conditions they are forced to endure; they cannot afford to feed themselves and are expected to accept a low standard of living while spending most of their productive energy as manual workers. The workers have indicated that they will continue to struggle against their oppression until a better standard of living becomes available.
There are many reasons the zombie, sprung from the colonial slave economy, is returning now to haunt us. Of course, the zombie is scary in a primordial way, but in a modern way, too. He’s the living dead, but he’s also the inanimate animated, the robot of industrial dystopias. He’s great for fascism: one recent zombie movie (and there have been many) was called “The Fourth Reich.” The zombie is devoid of consciousness and therefore unable to critique the system that has entrapped him. He’s labor without grievance. He works free and never goes on strike. You don’t have to feed him much. He’s a Foxconn worker in China; a maquiladora seamstress in Guatemala; a citizen of North Korea; he’s the man, surely in the throes of psychosis and under the thrall of extreme poverty, who, years ago, during an interview, told me he believed he had once been a zombie himself.
Eva Dou on the news that Apple is shifting more of its manufacturing business to Foxconn rival Pegatron:
Executive changes at Apple have also made a difference. Mr. Jobs had been easier at forgiving his favorite manufacturing partner, according to several people familiar with the relationship. Now, instead of relying on the uniquely close partnership between “two leaders with a hero complex"—as one of the people said—Mr. Cook is putting a greater premium on risk diversification, they said.
How many times have you heard that Steve Jobs was more "forgiving” than Tim Cook? Not a lot.
Pegatron Corp., named after the flying horse Pegasus, will be the primary assembler of a low-cost iPhone expected to be offered later this year.
Why am I way more excited about the Pegasus name-drop than the low-cost iPhone name-drop?
Apple is without question Foxconn’s largest and most important client. The China-based electronics manufacturing giant has seen its revenue skyrocket since it began building iPhones and iPads for Apple, and 2014 will seemingly be the biggest year yet for the iPhone, with two new models set to debut and as many as 80 million units on order.
More pics featuring Li Liao’s performance / installation work “Consumption” - on exhibit at The Ullens Center for Contemporary Art in Beijing. Here’s our interview with him: The Artist and the Factory.