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As we are constantly reminded here, Apple takes 80% of the phone industry profits and thus deserve proportionate blame for working conditions. They make $575 i

As we are constantly reminded here, Apple takes 80% of the phone industry profits and thus deserve proportionate blame for working conditions. They make $575 in profit from an iPhone but pay the Foxconn workers $7 to assemble it. They could double the pay and still make a very huge profit. On the other hand, many other companies like Amazon and Microsoft sell the hardware for a loss, hoping to make it up on software and media purchases. Meanwhile, the other companies are not doing very well, and labor cost increases for them might put them out of business entirely and then the workers won't even have a job. HTC doesn't have $100 billion in the bank and recently reported a bad quarter. This is why Apple is criticized more since it has most leeway of all the companies mentioned in the article to increase wages.

xenophanes 15y ago
$575 profit per iPhone? I think you mixed up profit with something else, maybe average sale price. In a free market, profit isn't determined by cost or your intuition about "fairness". Price is determined by supply and demand, and profit is price minus cost. Foxxconn already pays well above average wages while providing a safer workplace than the average US manufacturer, and a lower suicide rate than the Chinese average. And this is still going up even as working hours decrease. Whether all these criticisms are completely legitimate or not (for example I think workers should be allowed to work more overtime if they voluntarily choose to, to get more money, instead of being capped at 49hours/week), Apple is responding to them as well as anyone could ask for. Apple's competitors are not getting the same scrutiny. Since Apple is handling the issue great, isn't there room for some of that attention to land on others with much worse practices? Further, Apple has nowhere near 80% of the production or employees or anything like that. There are other big players as far as how many Chinese workers they are involved with, which I think is the relevant metric for how important reform is.
- recoiledsnake 15y ago
  >$575 profit per iPhone? I think you mixed up profit with something else, maybe average sale price. The number is from the usual suspect Asymco. http://www.asymco.com/2012/04/02/android-economics/ http://www.asymco.com/2012/04/02/android-economics/ >Whereas Android generates $1.70/device/year and thus an Android device with a two year life generates about $3.5 to Google over its life, Apple obtained $576.3 for each iOS device it sold in 2011[4]. The economics of Android are nothing like the economics of iOS.
  - xenophanes 15y ago
    That's revenue (gross income) not profit (net income). Look at the charts on that article, they say all "revenue", the article is about revenue. Apple has an ASP on iphones on the order of 650 and a profit margin on the order of 40%. They can't be making 575 profit per phone.
    - recoiledsnake 15y ago
      If that is correct, I stand corrected. I was taken in by the summary on Slashdot which stated that the profit was $575 and quoted Asymco. http://mobile.slashdot.org/story/12/04/08/0546247/google-earns-2-per-handset-apple-575 http://mobile.slashdot.org/story/12/04/08/0546247/google-ear...
      - glhaynes 15y ago
        Slashdot has always reminded me of that clueless friend that always remembers the numbers from a news story but doesn't remember the units or have any sense of them in a meaningful context.
  - nextparadigms 15y ago
    I don't know why people even read Asymco. His data why seemingly true, because he shows you charts and whatnot, it's usually very misleading. Apple doesn't make $575 in profit per iPhone. The components alone cost around $300, and they only get like $650 from the carrier, but you also have to take into account all the extra costs, marketing, shipping, salaries, R&D, and so on. At most they probably make around $200-$300 in profit for iPhone, depending on the version. The Android data is also misleading. He's taking it from what Google said in the trial. You don't think Google would try to downplay the revenues they get from Android in the trial through some smart accounting?
- theoj 15y ago
  >> [Foxconn provides] a safer workplace than the average US manufacturer Would really love to see some data that backs up that assertion.
  - xenophanes 15y ago
    I got it from https://twitter.com/#!/nicepaul/status/163797296306331648/photo/1/large https://twitter.com/#!/nicepaul/status/163797296306331648/ph... which gives a data source and is linked from http://go.bloomberg.com/tech-blog/2012-03-20-now-can-we-start-talking-about-the-real-foxconn/ http://go.bloomberg.com/tech-blog/2012-03-20-now-can-we-star...
    - theoj 15y ago
      Careful with your data sources and assertions. Some of this "data" needs a serious dose of fact checking. The data for: https://twitter.com/#!/nicepaul/status/163797296306331648/photo/1/large https://twitter.com/#!/nicepaul/status/163797296306331648/ph... as indicated at the bottom, comes from: http://onforb.es/wj2Lt6 http://onforb.es/wj2Lt6 which maps to: http://www.forbes.com/sites/timworstall/2012/01/29/the-apple-boycott-people-are-spouting-nonsense-about-chinese-manufacturing/2/ http://www.forbes.com/sites/timworstall/2012/01/29/the-apple... If you look at Tim Worstall's (kinda op-ed) article on the second page, you can see that the author says that if the fatalities rate in Foxconn was the same as that in the US, we would expect to have 35 fatalities / year. Then he says that we only heard about 3-4 workers hurt at Foxconn, hence the rate is lower. That argument is flawed because what we hear on the news cannot be construed to represent all fatalities at Foxconn. I suspect that the fatalities rate at Foxconn is not publicized (because it doesn't have to be). Another issue is that to determine the relative safety of the workplaces, the author is only looking at workplace fatalities. What about looking at accidents that leave the workers unable to work or maimed? Bottom line, I don't think the incomplete data that we have supports the assertion that Foxconn is a safer workplace.
      - xenophanes 15y ago
        OK, thanks.
Xuzz 15y ago
That $575 number is nonsensical; the iPhone 4S (the most expensive model) costs $599 off-contract. These phones do not cost $25 to make. The real number is somewhere around $300, most of which paid by the carrier: http://www.asymco.com/2012/02/26/iphone-sine-qua-non/ http://www.asymco.com/2012/02/26/iphone-sine-qua-non/. Regardless, doubling the pay for workers does not solve the real issue here. Their wages are already above average for Chinese factory workers in that area. If you want these workers to be paid a first-world wage, that's a much larger issue than how much Apple pays their final assembly workers. Also, Foxconn does not build just phones. It's used by most desktop and laptop manufacturers, where Apple is certainly not in the lead, and to assemble all game consoles, where Apple doesn't even have products. Microsoft, for example, is responsible for the workers in the incident mentioned here: http://kotaku.com/5874706/report-mass-suicide-threats-at-xbox-360-plant http://kotaku.com/5874706/report-mass-suicide-threats-at-xbo... (I don't think Microsoft would have an issue paying more, for example.) Now this is not to underplay the problems in Chinese manufacturing, of which there are many. But Apple is certainly not singularly able to make any changes here.
- masklinn 15y ago
  No disagreement that $575 in profits per phone is nonsensical, but > the iPhone 4S (the most expensive model) costs $599 off-contract 649 according to the store, and that's for the 16GB version, the 64GB one is 849. According to http://store.apple.com/us/browse/home/shop_iphone/family/iphone/iphone4s http://store.apple.com/us/browse/home/shop_iphone/family/iph... anyway.
- cooldeal 15y ago
  >That $575 number is nonsensical; Well, then maybe Slashdot is wrong too: http://mobile.slashdot.org/story/12/04/08/0546247/google-earns-2-per-handset-apple-575 http://mobile.slashdot.org/story/12/04/08/0546247/google-ear... >"While Apple generates more than $575 in profit for every iOS device, and according to estimates in 2007 Apple earned more than $800 on every iPhone sold through ATT, Horace Dediu reports that Android generated less than $550m in revenues for Google between 2008 and the end of 2011, earning only $1.70 per year, per Android device — explaining how Apple is sucking up two thirds of the profit in the mobile phone business.
sjwright 15y ago
Should Microsoft be excluded from criticism if they make their buttloads of money from game sales and not the console itself? Should Samsung be excluded from criticism because they discount their prices? Even though they make more phones than Apple? If Apple decided to lower their prices to compete more aggressively with Android, would that absolve Apple of majority responsibility in your eyes?
- recoiledsnake 15y ago
  I did not say Microsoft and Samsung should be excluded from criticism, I said Apple deserves proportionally more blame because they can easily afford to pay more wages unlike other OEMs some of who are struggling to stay afloat.
  - bonch 15y ago
    What do you mean by pay more wages? Apple doesn't own Foxconn or hire its employees.
jdq 15y ago
"As we are constantly reminded here, Apple takes 80% of the phone industry profits and thus deserve proportionate blame for working conditions." Blame needs to be proportional to amount produced, not amount profited. If I have one phone manufactured and I charge $11 million for it (and actually find a buyer), but you produce a million $10 phones, your impact on the workers is far greater. "On the other hand, many other companies like Amazon and Microsoft sell the hardware for a loss, hoping to make it up on software and media purchases." So if tomorrow Apple decided to sell their phones at half price, thereby eliminating all profits, then suddenly no one will be able to say anything to Apple about their manufacturing and worker treatment? "Meanwhile, the other companies are not doing very well, and labor cost increases for them might put them out of business entirely and then the workers won't even have a job. ... This is why Apple is criticized more since it has most leeway of all the companies mentioned in the article to increase wages." So it all amounts to how much you charge the end user. If a company charges more for their product they must ensure the workers of the companies they contract with are paid/treated fairly, but if a company chooses to sell devices at little to not profit, they can treat the workers however they want. It sounds to me more like if a company makes a device and provides it to you cheaply, you'll look the other way on how they handle manufacturing.
- jkn 15y ago
  Blame needs to be proportional to amount produced, not amount profited. But the profit margin is an important factor in your ability to make things better.
nextparadigms 15y ago
$575 in profit? No they aren't making that much. How could you even believe that?
jstevens85 15y ago
>They make $575 in profit from an iPhone but pay the Foxconn workers $7 to assemble it. They could double the pay and still make a very huge profit. Assembling the iPhone is a small and very insignificant part of the manufacturing process. What about the manufacturing of the steel, glass, LCD panels, logic boards, processors and IC chips, antennas, speakers, microphones, screws, cameras, batteries, and cables? Obviously if it's unethical for Apple to contract the assembling of the iPhones to a manufacturer that pays high wages relative to the average Chinese job, then it must also be unethical to buy components from suppliers that also pay their factory workers a similar wage. Clearly, doubling the wage for all factory workers who work on any component of the iPhone will have a huge impact on the manufacturing cost far beyond the extra $7 you suggest it to be.

xenophanes 15y ago

$575 profit per iPhone? I think you mixed up profit with something else, maybe average sale price. In a free market, profit isn't determined by cost or your intuition about "fairness". Price is determined by supply and demand, and profit is price minus cost. Foxxconn already pays well above average wages while providing a safer workplace than the average US manufacturer, and a lower suicide rate than the Chinese average. And this is still going up even as working hours decrease. Whether all these criticisms are completely legitimate or not (for example I think workers should be allowed to work more overtime if they voluntarily choose to, to get more money, instead of being capped at 49hours/week), Apple is responding to them as well as anyone could ask for. Apple's competitors are not getting the same scrutiny. Since Apple is handling the issue great, isn't there room for some of that attention to land on others with much worse practices? Further, Apple has nowhere near 80% of the production or employees or anything like that. There are other big players as far as how many Chinese workers they are involved with, which I think is the relevant metric for how important reform is.

recoiledsnake 15y ago
>$575 profit per iPhone? I think you mixed up profit with something else, maybe average sale price. The number is from the usual suspect Asymco. http://www.asymco.com/2012/04/02/android-economics/ http://www.asymco.com/2012/04/02/android-economics/ >Whereas Android generates $1.70/device/year and thus an Android device with a two year life generates about $3.5 to Google over its life, Apple obtained $576.3 for each iOS device it sold in 2011[4]. The economics of Android are nothing like the economics of iOS.
- xenophanes 15y ago
  That's revenue (gross income) not profit (net income). Look at the charts on that article, they say all "revenue", the article is about revenue. Apple has an ASP on iphones on the order of 650 and a profit margin on the order of 40%. They can't be making 575 profit per phone.
  - recoiledsnake 15y ago
    If that is correct, I stand corrected. I was taken in by the summary on Slashdot which stated that the profit was $575 and quoted Asymco. http://mobile.slashdot.org/story/12/04/08/0546247/google-earns-2-per-handset-apple-575 http://mobile.slashdot.org/story/12/04/08/0546247/google-ear...
    - glhaynes 15y ago
      Slashdot has always reminded me of that clueless friend that always remembers the numbers from a news story but doesn't remember the units or have any sense of them in a meaningful context.
- nextparadigms 15y ago
  I don't know why people even read Asymco. His data why seemingly true, because he shows you charts and whatnot, it's usually very misleading. Apple doesn't make $575 in profit per iPhone. The components alone cost around $300, and they only get like $650 from the carrier, but you also have to take into account all the extra costs, marketing, shipping, salaries, R&D, and so on. At most they probably make around $200-$300 in profit for iPhone, depending on the version. The Android data is also misleading. He's taking it from what Google said in the trial. You don't think Google would try to downplay the revenues they get from Android in the trial through some smart accounting?
theoj 15y ago
>> [Foxconn provides] a safer workplace than the average US manufacturer Would really love to see some data that backs up that assertion.
- xenophanes 15y ago
  I got it from https://twitter.com/#!/nicepaul/status/163797296306331648/photo/1/large https://twitter.com/#!/nicepaul/status/163797296306331648/ph... which gives a data source and is linked from http://go.bloomberg.com/tech-blog/2012-03-20-now-can-we-start-talking-about-the-real-foxconn/ http://go.bloomberg.com/tech-blog/2012-03-20-now-can-we-star...
  - theoj 15y ago
    Careful with your data sources and assertions. Some of this "data" needs a serious dose of fact checking. The data for: https://twitter.com/#!/nicepaul/status/163797296306331648/photo/1/large https://twitter.com/#!/nicepaul/status/163797296306331648/ph... as indicated at the bottom, comes from: http://onforb.es/wj2Lt6 http://onforb.es/wj2Lt6 which maps to: http://www.forbes.com/sites/timworstall/2012/01/29/the-apple-boycott-people-are-spouting-nonsense-about-chinese-manufacturing/2/ http://www.forbes.com/sites/timworstall/2012/01/29/the-apple... If you look at Tim Worstall's (kinda op-ed) article on the second page, you can see that the author says that if the fatalities rate in Foxconn was the same as that in the US, we would expect to have 35 fatalities / year. Then he says that we only heard about 3-4 workers hurt at Foxconn, hence the rate is lower. That argument is flawed because what we hear on the news cannot be construed to represent all fatalities at Foxconn. I suspect that the fatalities rate at Foxconn is not publicized (because it doesn't have to be). Another issue is that to determine the relative safety of the workplaces, the author is only looking at workplace fatalities. What about looking at accidents that leave the workers unable to work or maimed? Bottom line, I don't think the incomplete data that we have supports the assertion that Foxconn is a safer workplace.
    - xenophanes 15y ago
      OK, thanks.

Xuzz 15y ago

That $575 number is nonsensical; the iPhone 4S (the most expensive model) costs $599 off-contract. These phones do not cost $25 to make. The real number is somewhere around $300, most of which paid by the carrier: http://www.asymco.com/2012/02/26/iphone-sine-qua-non/ http://www.asymco.com/2012/02/26/iphone-sine-qua-non/. Regardless, doubling the pay for workers does not solve the real issue here. Their wages are already above average for Chinese factory workers in that area. If you want these workers to be paid a first-world wage, that's a much larger issue than how much Apple pays their final assembly workers. Also, Foxconn does not build just phones. It's used by most desktop and laptop manufacturers, where Apple is certainly not in the lead, and to assemble all game consoles, where Apple doesn't even have products. Microsoft, for example, is responsible for the workers in the incident mentioned here: http://kotaku.com/5874706/report-mass-suicide-threats-at-xbox-360-plant http://kotaku.com/5874706/report-mass-suicide-threats-at-xbo... (I don't think Microsoft would have an issue paying more, for example.) Now this is not to underplay the problems in Chinese manufacturing, of which there are many. But Apple is certainly not singularly able to make any changes here.

masklinn 15y ago
No disagreement that $575 in profits per phone is nonsensical, but > the iPhone 4S (the most expensive model) costs $599 off-contract 649 according to the store, and that's for the 16GB version, the 64GB one is 849. According to http://store.apple.com/us/browse/home/shop_iphone/family/iphone/iphone4s http://store.apple.com/us/browse/home/shop_iphone/family/iph... anyway.
cooldeal 15y ago
>That $575 number is nonsensical; Well, then maybe Slashdot is wrong too: http://mobile.slashdot.org/story/12/04/08/0546247/google-earns-2-per-handset-apple-575 http://mobile.slashdot.org/story/12/04/08/0546247/google-ear... >"While Apple generates more than $575 in profit for every iOS device, and according to estimates in 2007 Apple earned more than $800 on every iPhone sold through ATT, Horace Dediu reports that Android generated less than $550m in revenues for Google between 2008 and the end of 2011, earning only $1.70 per year, per Android device — explaining how Apple is sucking up two thirds of the profit in the mobile phone business.

sjwright 15y ago

Should Microsoft be excluded from criticism if they make their buttloads of money from game sales and not the console itself? Should Samsung be excluded from criticism because they discount their prices? Even though they make more phones than Apple? If Apple decided to lower their prices to compete more aggressively with Android, would that absolve Apple of majority responsibility in your eyes?

recoiledsnake 15y ago
I did not say Microsoft and Samsung should be excluded from criticism, I said Apple deserves proportionally more blame because they can easily afford to pay more wages unlike other OEMs some of who are struggling to stay afloat.
- bonch 15y ago
  What do you mean by pay more wages? Apple doesn't own Foxconn or hire its employees.

jdq 15y ago

"As we are constantly reminded here, Apple takes 80% of the phone industry profits and thus deserve proportionate blame for working conditions." Blame needs to be proportional to amount produced, not amount profited. If I have one phone manufactured and I charge $11 million for it (and actually find a buyer), but you produce a million $10 phones, your impact on the workers is far greater. "On the other hand, many other companies like Amazon and Microsoft sell the hardware for a loss, hoping to make it up on software and media purchases." So if tomorrow Apple decided to sell their phones at half price, thereby eliminating all profits, then suddenly no one will be able to say anything to Apple about their manufacturing and worker treatment? "Meanwhile, the other companies are not doing very well, and labor cost increases for them might put them out of business entirely and then the workers won't even have a job. ... This is why Apple is criticized more since it has most leeway of all the companies mentioned in the article to increase wages." So it all amounts to how much you charge the end user. If a company charges more for their product they must ensure the workers of the companies they contract with are paid/treated fairly, but if a company chooses to sell devices at little to not profit, they can treat the workers however they want. It sounds to me more like if a company makes a device and provides it to you cheaply, you'll look the other way on how they handle manufacturing.

jkn 15y ago
Blame needs to be proportional to amount produced, not amount profited. But the profit margin is an important factor in your ability to make things better.

nextparadigms 15y ago

$575 in profit? No they aren't making that much. How could you even believe that?

jstevens85 15y ago

>They make $575 in profit from an iPhone but pay the Foxconn workers $7 to assemble it. They could double the pay and still make a very huge profit. Assembling the iPhone is a small and very insignificant part of the manufacturing process. What about the manufacturing of the steel, glass, LCD panels, logic boards, processors and IC chips, antennas, speakers, microphones, screws, cameras, batteries, and cables? Obviously if it's unethical for Apple to contract the assembling of the iPhones to a manufacturer that pays high wages relative to the average Chinese job, then it must also be unethical to buy components from suppliers that also pay their factory workers a similar wage. Clearly, doubling the wage for all factory workers who work on any component of the iPhone will have a huge impact on the manufacturing cost far beyond the extra $7 you suggest it to be.