Bad Apple in China?

Apple Inc. currently enjoys one of the most positive consumer perceptions of any company in America. A New York Times poll last November revealed that more than half of those surveyed couldn’t think of anything negative about the firm, and when pressed, the worst thing they could say was that their products cost too much. So when the same paper came out with a long, carefully researched story about hazardous and onerous working conditions in China where Apple products are made, it was a little bit like reading that Santa Claus was hauled in for heroin possession.

Full disclosure: My wife and I have been Macintosh fans since the early 1980s, and I bought her an iPad this last Christmas. But when I told her about some of the things I read about how they were made, she may never view her iPad in the same light again.

First, the salient facts. Most consumer electronics products are made in China in factories that are Chinese-owned and operated. But the ties between Chinese manufacturers and U. S.-based firms like Apple are very close. When Apple chooses a new supplier, they ask all kinds of nosy questions about costs, facilities, numbers of workers, and so on, and allow only a small profit margin. Since 2005, they also inform the supplier about Apple’s “Supplier Code of Conduct” which reportedly requires adherence to basic standards of safety, worker rights, and other good things. And commendably, Apple actually conducts audits of its suppliers and has found and publicly reported many violations of the Code—so many, in fact, that some former Apple executives say it is largely window-dressing, and Apple may not be that serious about enforcement. Apple says it will drop a supplier if too many violations are found, but in the case of a firm such as Foxconn, which makes about 40% of all the consumer electronics manufactured in China, alternative suppliers simply may not be there. So in some cases it’s a matter of either Foxconn or no (or fewer) iPads. And in the highly competitive and fast-paced world of consumer electronics, an entire generation of products can come and go in a few months. Supply delays can mean not just reduced profits, but complete failure.

How bad are conditions for workers in Chinese consumer-electronics factories? It depends. If you picked up a well-paid auto worker from his production line making Toyota pickups in San Antonio, say, and plopped him down so he was making less than $7,000 a year working ten- to twelve-hour days, five or six days a week, and living in a dorm with nine other guys in a three-room apartment, and nothing to eat but Chinese food—well, he’d scream bloody murder. On the other hand, if you were like Times-profiled worker Lai Xiaodong, taking the same job would seem at first glance to be a stroke of good fortune, because you likely grew up in a small farming community where city life in Chengdu looked like Heaven, even with the long hours and crowded living conditions (Xiaodong could afford a single apartment, tiny as it was). Unfortunately, Mr. Lai was one of two workers killed in an apparent aluminum-dust explosion last May at a plant that makes iPad cases. That beautiful smooth-grained aluminum finish is not easy to make, and the plants where the cases are finished are potential firetraps. The firm where the explosions happened has since made safety improvements, but there are millions of other Chinese workers at hundreds of other plants where similar accidents may be just waiting to happen.

Back when most products sold in America were also made in America, you could sometimes buy an item that was made by someone you knew personally. But even by the 1800s, this was increasingly not the case: first raw materials, then later low-tech manufactured goods such as toys and clothing began to be imported from abroad in large volumes. Geography textbooks from the 1930s showed photographs of supposedly happy natives carrying bushels of raw rubber so that Mr. Ford could sell more cars with rubber tires. The happiness of the natives was assumed, not verified, and in fact, exploitation of workers of all kinds has been a chronic problem ever since exchange economies came into being.

Apple may have to join the ranks of Nike and other firms who have squirmed in the spotlight of exposure when maltreatment of workers making their products became public knowledge. A new and positive trend in the retail economy is the practice of buying according to conscience rather than just price or performance. With commodities such as clothing or coffee, sometimes the fact that one supplier can guarantee his product was made by genuinely contented workers in safe, comfortable factories gives him the only edge he needs over a similar product with no guarantee. However, Apple is not anywhere close to that situation. There is literally nothing like an iPod, or an iPad, at least for many consumers, and Apple wants to keep it that way. But part of the way they keep it that way is by squeezing the last drop of fast, agile production out of their (largely Chinese) suppliers, and so you get clouds of aluminum dust and an explosion here and there.

We may be seeing part of what can be regarded as a normal maturing process for Apple Inc. They began as the small, impudent upstart against IBM, and played the underdog role for years. Underdogs don’t have time to get all self-conscious and introspective—they’re too busy fighting. But the underdog label no longer fits Apple, and these latest revelations are a kind of loss of innocence. We will still probably buy Apple products as long as they are good ones, but I sure hope Apple slows down enough to do the right thing by its suppliers. It would be a shame if they don’t.

Sources: The New York Times article “In China, Human Costs are Built Into an iPad” appeared on Jan. 25, 2012 at http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costs-for-workers-in-china.html.