Does Your IPhone Exploit Chinese Workers?
The Chinese workers who assemble Apple Inc. (AAPL)'s ubiquitous iPhones aren’t committing suicide as often as they used to. Still, according to a report by the Fair Labor Association, they work in what would be considered sweatshop conditions by developed-world standards.
Last year, Apple became the first technology company to be admitted to the FLA -- part of the iPhone maker's response to the public-relations disaster known as the Foxconn suicides. From January to November 2010, 18 employees of Apple supplier Hon Hai Precision Industry Co. Ltd., also known as Foxconn, attempted to take their lives, and 14 succeeded. Reports of inhumane working conditions proliferated, and though the company's suicide rate was lower than China's national average, Apple had to respond.
The FLA did a thorough investigation of three Foxconn factories in early 2012. It conducted hundreds of interviews with workers and managers on site and off site, and it hired an independent polling service to run an extensive job-satisfaction survey. In a detailed action plan, the FLA recommended that Foxconn reform its hiring practices, properly explain the wage structure to workers, count training time toward working hours and -- perhaps most important -- stop working people like slaves. During peak production periods, workers were clocking more than 60 hours a week. Many did not get a single day off.
Foxconn's response was no less thorough. The FLA's final report says the company addressed 98.9 percent of 360 action points. Separately, the suicide rate fell, with only three people at Foxconn reported to have died by their own hand this year.
Unfortunately, the remaining 1.1 percent represented one of the biggest problems: working hours. According to the FLA, most workers exceeded China's legal limit of 36 hours of overtime per month over the eight months through October 2013. During the latter four months, when Apple was rushing to get the iPhone 5s and 5c to market, 4 in 5 workers at a factory in Chengdu put in more overtime than allowed by Chinese law. Workers at another factory frequently went without days off.
It's easy to see why Foxconn might be reluctant to cut hours: The workers need the overtime to earn a decent income. In 2012, the starting monthly salary at Foxconn was 1,800 yuan, or about $300. Two-thirds of the workers told the FLA that it was not enough to meet their basic needs. Salaries average about $400 per month. If anything, the FLA's insistence on cutting working hours is hurting the workers' chances of making enough to send money home.
Apple reportedly pays about $8 to assemble an iPhone 5s, out of a total production cost of $199 to $218. The company sells the device in the U.S. for $649 to $849. For the iPhone 5c, the numbers are $7 for assembly, $173 to $183 for total production, and a sale price of $549 to $649. The profit margins would still be huge if the assembly cost doubled or even tripled, theoretically allowing Foxconn to give its workers a decent wage and the weekend off.
The FLA's efforts are laudable, but the ultimate responsibility for working conditions still lies with Apple. There is no good reason why the Chinese workers who make the company's flagship products have to lead miserable lives on monthly wages that are lower than the price of the cheapest new iPhone.
(Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor. Follow him on Twitter.)