A kinder, gentler Apple? Don't bet on it.
A New York Times article depicting the high human costs built into the making of Apple products has provoked a strong reaction from readers and consumers. How will Apple respond?
You may have heard by now that the New York Times wrote an article called "In China, human costs are built into the iPad" that takes a look at the dark side of producing Apple's products in China.
It's not the first time the Times and other publications have written about the "punishing" work conditions at Foxconn, the contract manufacturing behemoth that also makes products for loads of other companies, not just Apple.
Foxconn--headquarted in Taiwan, but (according to Reuters) the largest private employer in mainland China--has been frequently in the news for fires and explosions at its factories along with a spate of worker suicides. But coming on the heels of and news that it had $98 billion squirreled away in cash, the article seems to have really touched a nerve, the "Occupy Apple" kind.
I don't think anybody's faulting Apple for wanting to make a good profit on its products or trying to keep up with demand. But what seems to be the big friction point is how much profit Apple is making and how it continues to squeeze its suppliers and manufacturing partners to the Nth degree.
The Times article depicts Apple as creating a vicious circle where suppliers and manufacturers desperately long for Apple's business ("Getting a contract from Apple can lift a company's value by millions because of the implied endorsement of manufacturing quality," the article states). But then it puts the big squeeze on everybody, making it exceedingly difficult for anybody but Apple to turn a profit.
The reporters, Charles Duhigg and David Barboza, serve up several damaging quotes but here are a few that seem to really hit home for a lot of readers:
"The only way you make money working for Apple is figuring out how to do things more efficiently or cheaper. And then they'll come back the next year, and force a 10 percent price cut."
That's from an executive at one company that helped bring the iPad to market.
Then, there's this from a former Apple exec "with firsthand knowledge of the supplier responsibility group":
"You can set all the rules you want, but they're meaningless if you don't give suppliers enough profit to treat workers well. If you squeeze margins, you're forcing them to cut safety."
It doesn't stop there. Li Mingqi, a former Foxconn manager:
"Apple never cared about anything other than increasing product quality and decreasing production cost."
Will Apple do anything about it? Well, if the past is any indication, Applethat it has and will continue to do something about it.
The article has plenty of quotes attesting to Apple taking "significant strides in improving factories in recent years." Not only has it "mounted a vigorous auditing campaign" but it has a supplier code of conduct that "details standards on labor issues, safety protections, and other topics." That's a better track record than a lot of consumer electronics companies, which wish their products were as successful and had the same margins as Apple's.
But it's still not good enough. Alas, for a lot of folks it goes back to Apple's corporate ethos. You don't make $46.3 billion in a quarter by being terribly nice. Apple and Apple CEO Tim Cook, who was the guy behind setting up Apple's vaunted manufacturing and supply chain (and all that stuff written about in the article), have shown themselves to be incredibly disciplined, secretive, and, yes, ruthless over the years.
As you can see from the Times article, no one who currently works at Apple is quoted, which is par for the course when writing an article about Apple. They simply don't say anything, which is why I don't bother to call Apple PR people anymore--because they rarely, if ever, have anything to say.
Apple has adroitly fended off its PR snafus in the past and come through unscathed not because it changed and became a kinder, gentler company. No, it stayed the course. It stuck to its guns. And look at the results: $16 billion in profits, which could have been even more if those factories had been able to produce more products faster.
Meanwhile, the burgeoning Chinese consumer class just can't get enough of them iPhones and their thirst for them should remain unquenched for years to come. Apple shareholders are happy, consumers are happy, so who cares what anybody says, particularly putzes like Carnoy at CNET who doesn't know anything? Hey, he owns an iPhone 4S, MacBook Air, MacBook Pro, iMac, an iPod Touch or two, and an Apple TV, and never complained how they got made (I didn't).
Alas, the problem for Apple this time is timing. You can't sit on $98 billion in cash and $16 billion in profits for a quarter and not expect people to think that you're heartless and have no soul when a negative article comes out about the human capital that goes into making your products.
Yes, Apple holds grudges, and I'm sure I'm not winning any fans in Cupertino, Calif., with this. I haven't been invited to an Apple event in years, and I don't really care if I get invited in the future. They're getting boring anyway--it's as if they've lost their creative spirit.
You can guess why.