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Apple believed to be subsidizing wage increases at Foxconn

post #1 of 37
Thread Starter 
After gross margins rebounded at Foxconn parent company Hon Hai Precision, one analyst has said he believes Apple "stepped up" and helped to pay for wage increases at its manufacturing partner.

While Hon Hai's gross margins went up, Apple saw its own gross margins drop from 47 percent last quarter to 42.8 percent this quarter. Its conservative guidance for the current September quarter goes even lower to 38.5 percent.

Analyst Adnaan Ahmad with Berenberg Bank said in a note to investors provided to AppleInsider on Monday that he believes the changes in gross margins at both companies signal that Apple probably played a major part in wage increases at Foxconn.

Ahmad noted that Hon Hai indicated this quarter that it was trying to get better terms from some of its customers, after labor costs increased by as much as 100 percent.

Apple's capital expenditures ballooned from $440 million in the December 2011 quarter to $2.1 billion in the June quarter. But those expenses were not related to Apple's plans to expand its corporate campus, Ahmad said, as the company recognized those costs in 2010.

While Ahmad believes Apple likely subsidized some of the wage costs at Hon Hai, the analyst is "fairly sure" that two other large Foxconn customers —?HP and Sony — didn't contribute, given the current "precarious situation" both technology companies find themselves in.

Tim Cook at Foxconn
Apple CEO Tim Cook touring an iPhone production line at a Foxconn plant in Zhengzhou, China.


Foxconn Chief Executive Terry Gou revealed earlier this year that his company and Apple would be sharing the costs to improve labor conditions at the Chinese factories were devices like the iPhone and iPad are assembled. But the executive did not detail how much Foxconn or Apple would be spending to improve working conditions, or how those costs would be split.

Foxconn has been facing criticism for years as some have referred to the electronics maker as a "sweatshop" where employees work long hours for little pay. The company has worked to improve its image, and Apple has encouraged those changes with a series of audits, including new independent reviews from the Fair Labor Association.

In March the FLA announced it had found a number of violations at Foxconn, after auditing its facilities at the request of Apple. Foxconn responded by reducing employee working times and addressing various code violations.

And last month, a new report from the FLA suggested labor conditions at Foxconn have improved since the audits conducted earlier this year.. The association announced that Foxconn had corrected some 284 infractions, including steps taken to create a safer workplace.
post #2 of 37

This is actually a pretty cool story.  I'm sure Chinese factory worker wages are horrible compared to US wages, but their cost of living is less.  Apple is fighting a good fight.

 

It's going to be an interesting century as Chinese and Indian labor comes online, which will create a labor glut and makes it uneconomical for expensive labor countries to make anything.   I can't wait for the day when all labor costs and wages around the world are comparable -- I probably won't be alive to see it, but it'll be painful until it happens.

post #3 of 37

Nope. Apple is a slavedriver and sweatshop owner. Apple workers in China commit suicide by the millions. They get beaten to a pulp by the Apple guards. This entire story is a lie.

😩

Originally posted by Relic

...those little naked weirdos are going to get me investigated.
Reply

Originally posted by Relic

...those little naked weirdos are going to get me investigated.
Reply
post #4 of 37

Correct me if I'm wrong but wasn't it already speculated that the sudden increase in capital expenditure was due to increased component buying prior to the upcoming largest release in iPhone history and components for the new, so called, iPad Mini?

 

 

Not only that but since these Foxconn assembly workers get paid so little would a 25% wage increase amount to that much of an increase in capital expenditure? 

Why does Apple bashing and trolling make people feel so good?

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Why does Apple bashing and trolling make people feel so good?

Reply
post #5 of 37

I also think the story is false. Because if Apple does at one place, they will have to do it some other place. Apple is not a government, who is going to go around subsidizing workers wages, and that also in foreign country. Also not, while there is story being floated about them continue to layoff retail workers on account of earnings!

post #6 of 37
Quote:
Originally Posted by Tallest Skil View Post

Nope. Apple is a slavedriver and sweatshop owner. Apple workers in China commit suicide by the millions. They get beaten to a pulp by the Apple guards. This entire story is a lie.

😩

 

Meanwhile another story regarding Samsung suppliers using child labor under appalling conditions, made by the same watchdog group that went after Apple, was barely mentioned on sites like C|net. No attention was given to it and it disappeared over night like it never happened. And people still claim there is no anti-Apple bias in the tech media.

post #7 of 37
Quote:
Originally Posted by lkrupp View Post

 

Meanwhile another story regarding Samsung suppliers using child labor under appalling conditions, made by the same watchdog group that went after Apple, was barely mentioned on sites like C|net. No attention was given to it and it disappeared over night like it never happened. And people still claim there is no anti-Apple bias in the tech media.

 

Please provide a link so everyone here can spam the story.  I certainly will.
 
post #8 of 37
Quote:
Please provide a link so everyone here can spam the story.  I certainly will.

Samsung's Supplier Factory Exploiting Child Labor

http://www.chinalaborwatch.org/pro/proshow-175.html

post #9 of 37
Quote:
Originally Posted by lkrupp View Post

 

Meanwhile another story regarding Samsung suppliers using child labor under appalling conditions, made by the same watchdog group that went after Apple, was barely mentioned on sites like C|net. No attention was given to it and it disappeared over night like it never happened. And people still claim there is no anti-Apple bias in the tech media.

 

 

Apple gets all the glory in consumer tech - having revolutionized the entire segment several times over. Unfortunately (and naturally), they'll get not just the positive but also the negative coverage. 

 

The only way Samsung (and a lot of others) can make any real headlines is if their story is somehow tied to Apple, often as a trailer to the main Apple story. 

post #10 of 37
Quote:
Originally Posted by sessamoid View Post

Samsung's Supplier Factory Exploiting Child Labor

http://www.chinalaborwatch.org/pro/proshow-175.html

 

 

WHEN WILL APPLE DO SOMETHING ABOUT IT!?

 

Won't Apple PLEASE think of the children??

 

 

 

That's how these things go these days . . .

post #11 of 37
Quote:
Originally Posted by lkrupp View Post

Meanwhile another story regarding Samsung suppliers using child labor under appalling conditions, made by the same watchdog group that went after Apple, was barely mentioned on sites like C|net. No attention was given to it and it disappeared over night like it never happened. And people still claim there is no anti-Apple bias in the tech media.

Tech media is like many sites. Only interested in the hits. Apple gets hits way above everyone else.

People might be shocked to learn that Samsung, Microsoft etc also sue folks.

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

Reply

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

Reply
post #12 of 37

1. Apple finds problems, caused not by Apple but realities in China. Reports them to the public with specific plans to improve, not just vague promises.

 

2. People forget the info came from Apple and claim Apple tried a cover-up.

 

3. Apple requests public and independent reviews, with results Apple knows they don’t control. No other company does this. Nobody cares.

 

4. Media invents or repeats additional lies to exaggerate the situation.

 

5. The cover-up hysteria grows into boycotts, and people switch to Samsung and other companies with the same or worse problems—and no plan to fix them.

 

6. The lies are disproven. But nobody remembers that. 

 

7. Apple’s plans to improve are successful, by independent review. New plans are added. They don’t make a big thing about it. Nobody notices.

 

8. During all this time, Samsung and others have worse problems, cover everything up, and solve nothing. Nobody cares.

post #13 of 37
Originally Posted by charlituna View Post
Tech media is like many sites. Only interested in the hits. Apple gets hits way above everyone else.

 

They could at least not lie about it, then.

 

Originally Posted by nagromme View Post
8. During all this time, Samsung and others have worse problems, think Apple actually has these problems, create real, identical problems in their own plants to copy Apple. No one cares.

 

Fixed. lol.gif

Originally posted by Relic

...those little naked weirdos are going to get me investigated.
Reply

Originally posted by Relic

...those little naked weirdos are going to get me investigated.
Reply
post #14 of 37

To keep some perspective here... suicide remains a problem in everywhere in China, not just at Foxxcon. I don't believe that China's suicide rate PER CAPITA is much worse than many countries.

 

The problems lie more at the governmental level anyway. They do not have the labor laws that other countries have. They do not have the pollution controls that other countries have to abide by. Not to mention that Chinese officials are well known for looking the other way.

 

At least Apple is trying, and it appears as though those efforts are making somewhat of a difference and I hope that Apple continues. It's important. Samsung has now "appeared" to have finally stepped up in this regard too.

 
post #15 of 37
Quote:
Originally Posted by AppleInsider View Post

After gross margins rebounded at Foxconn parent company Hon Hai Precision, one analyst has said he believes Apple "stepped up" and helped to pay for wage increases at its manufacturing partner.
While Hon Hai's gross margins went up, Apple saw its own gross margins drop from 47 percent last quarter to 42.8 percent this quarter. Its conservative guidance for the current September quarter goes even lower to 38.5 percent.

 

Accounting FAIL.  Gross margin includes the increased worker's wages in the production costs.

   Apple develops an improved programming language.  Google copied Java.  Everything you need to know, right there.

 

  MA497LL/A FB463LL/A MC572LL/A FC060LL/A MD481LL/A MD388LL/A ME344LL/A

Reply

   Apple develops an improved programming language.  Google copied Java.  Everything you need to know, right there.

 

  MA497LL/A FB463LL/A MC572LL/A FC060LL/A MD481LL/A MD388LL/A ME344LL/A

Reply
post #16 of 37

I don't understand the use of the word "subsidizing" here.

 

What is Apple subsidizing? All I can see is Apple paying more to a vendor who needs to raise prices in order to meet Apple's new requirements. That's not a subsidy, it's a cost increase.

 

I think this is a good thing, by the way. I'm just puzzled at the language.
 

post #17 of 37
Quote:
Originally Posted by Alonso Perez View Post

I don't understand the use of the word "subsidizing" here.

 

What is Apple subsidizing? All I can see is Apple paying more to a vendor who needs to raise prices in order to meet Apple's new requirements. That's not a subsidy, it's a cost increase.

 

I think this is a good thing, by the way. I'm just puzzled at the language.
 

If the story is to believed, Apple is paying a percentage of Foxconn's worker wage increases out of it's own pocket. Whether this is actually true or not is another matter. 

post #18 of 37
Quote:
Originally Posted by nagromme View Post

1. Apple finds problems, caused not by Apple but realities in China. Reports them to the public with specific plans to improve, not just vague promises.

2. People forget the info came from Apple and claim Apple tried a cover-up.

3. Apple requests public and independent reviews, with results Apple knows they don’t control. No other company does this. Nobody cares.

4. Media invents or repeats additional lies to exaggerate the situation.

5. The cover-up hysteria grows into boycotts, and people switch to Samsung and other companies with the same or worse problems—and no plan to fix them.

6. The lies are disproven. But nobody remembers that. 

7. Apple’s plans to improve are successful, by independent review. New plans are added. They don’t make a big thing about it. Nobody notices.

8. During all this time, Samsung and others have worse problems, cover everything up, and solve nothing. Nobody cares.

This is because Android-based smartphone proponents aren't very intelligent or they are dishonest. While that may seem a harsh statement it is reality. They are blinded by their hatred of Apple.

I have never understood Apple-hatred from anyone other than an information technology professional although even then the hatred isn't justified. Some information technology professionals believe Apple computers will make their function nearly obsolete if everyone has a computer that "just works." This is not true, they simply need a different skill set but they can't imagine proactive service and support instead of responding to every "fire." Alternatively, the "fires" make them seem like heroes which likely means to receive more funding.
Edited by MacBook Pro - 9/3/12 at 4:54pm
post #19 of 37
Quote:
Originally Posted by Dickprinter 
Not only that but since these Foxconn assembly workers get paid so little would a 25% wage increase amount to that much of an increase in capital expenditure? 

Nope, the wage increase wouldn't impact their margins nearly as much as noted, I'd estimate a couple of hundred million at most. Whether the figures corroborate a contribution is unclear but I think they will have done the right thing by taking a minimal hit to help those workers out.
post #20 of 37
Quote:
Originally Posted by MacBook Pro View Post


They are blinded by their hatred of Apple.

 

 

*jealousy* of Apple.

 

 

Because Apple's continued success, their cockiness, their daring, their belief in their own strategy in the face of opposition, their foresight, the way they humiliate their competitors and then teabag them in Consumer Satisfaction, their devotion to a closed ecosystem (!), their shrewdness, their obsession with detail and control, their devotion to making tech easy, usable, and less complex for Joe Average (read: can't tinker, sorry IT crowd), and their insistence on protecting what's rightfully theirs . . . drives them absolutely batshit crazy. 
 
And it warms my heart to see that. 
post #21 of 37

I just don't get this story at so many different levels. Sounds like pure nonsense.

 

How can Apple send a check for some other company's wages? Send it to whom, with what instructions? How does it show up (or not) as a difference in Apple's gross margins? Apart from component costs, GM should include only direct labor costs, but in order to record it as 'direct', wouldn't Apple have to employ them?

 

Moreover, attributing a decline in Apple's margin by 3.2% of sales from doing this would imply that Apple sent Foxconn a check of (something in the region of) $5B during the forthcoming year. Assuming one-quarter of Foxconn's 1 million employees work full-time-equivalent on Apple products, that would be sending a check of ~$20,000 per worker.

 

Is my arithmetic wrong?

post #22 of 37
Quote:
Originally Posted by Dickprinter View Post

Not only that but since these Foxconn assembly workers get paid so little would a 25% wage increase amount to that much of an increase in capital expenditure? 

If it costs them $100 million per quarter in additional manufacturing costs that is $100 million taken directly from profits per quarter. If they have an executive that wanted to fire retail store employees to save a dime it's hard to see how Apple wouldn't want this amount of savings.

There are also other costs associated with Foxconn and their employees now that they have reduced the workable hours. From the employee's PoV they get less OT hours which means less money. They also have more free time to spend money. I doubt it's possible for them to work a 2nd job while at Foxconn. They might make more money per week with the raise but I doubt it's much.

Then you have Foxconn's PoV. All these people are working less hours so to keep the factories running at full tilt you need more people which means more housing and more of everything, including additional security et al. to keep the extra influx in check.

Apple may even benefit from this as a worker might not be as tired and therefore make less mistakes. Even a 0.01% reduction in errors is a lot of product. It could also be more employees that will have to for Foxconn for a longer duration to save up enough money when you consider that they'll have more idle time which could mean Apple benefits from more skilled workers thus reducing errors even more.

On the surface it looks like Foxconn workers are making out the best here but that's only if you look at percentage of the wage increase. If you look at everything that's changed I wonder if Apple is the one who is making out the best here.

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #23 of 37
Quote:
Originally Posted by anantksundaram View Post

I just don't get this story at so many different levels. Sounds like pure nonsense.

How can Apple send a check for some other company's wages? Send it to whom, with what instructions? How does it show up (or not) as a difference in Apple's gross margins? Apart from component costs, GM should include only direct labor costs, but in order to record it as 'direct', wouldn't Apple have to employ them?

Moreover, attributing a decline in Apple's margin by 3.2% of sales from doing this would imply that Apple sent Foxconn a check of (something in the region of) $5B during the forthcoming year. Assuming one-quarter of Foxconn's 1 million employees work full-time-equivalent on Apple products, that would be sending a check of ~$20,000 per worker.

Is my arithmetic wrong?

I assumed the way the wage increase was happening when this first happened was that Apple agreed to pay Foxconn more per unit if Foxconn agreed to pay employees working on Apple's products an increase in their wage. I'm sure it's more complex as that as the change in employee hours means Foxconn needs to invest in a lot more things to get more employees just to produce the same amount, but it's certain that Apple isn't paying Foxconn employees directly.

I think the story has been twisted a bit to make it seem like Apple is paying Foxconn's employees when it's Foxconn that is paying their employees more if they work on Apple's products per an agreement they've setup with Apple.

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply
post #24 of 37
Quote:
Originally Posted by AppleInsider View Post

Apple's capital expenditures ballooned from $440 million in the December 2011 quarter to $2.1 billion in the June quarter. But those expenses were not related to Apple's plans to expand its corporate campus, Ahmad said, as the company recognized those costs in 2010.

 

Wages are not capital expenses.

post #25 of 37
Quote:
Originally Posted by SolipsismX View Post


I assumed the way the wage increase was happening when this first happened was that Apple agreed to pay Foxconn more per unit if Foxconn agreed to pay employees working on Apple's products an increase in their wage. I'm sure it's more complex as that as the change in employee hours means Foxconn needs to invest in a lot more things to get more employees just to produce the same amount, but it's certain that Apple isn't paying Foxconn employees directly.
I think the story has been twisted a bit to make it seem like Apple is paying Foxconn's employees when it's Foxconn that is paying their employees more if they work on Apple's products per an agreement they've setup with Apple.

Even if that is true, the amount attributable per worker -- see the calculations above -- makes no sense at all relative to their average wage.

post #26 of 37
Quote:
Originally Posted by Slurpy View Post

If the story is to believed, Apple is paying a percentage of Foxconn's worker wage increases out of it's own pocket. Whether this is actually true or not is another matter. 

 

Maybe, but that doesn't make it a subsidy. More like a worker happiness surcharge or something. A subsidy is when you get nothing in return.

post #27 of 37
Quote:
Originally Posted by anantksundaram View Post

Even if that is true, the amount attributable per worker -- see the calculations above -- makes no sense at all relative to their average wage.

I've completely ignored the values in the article. I find that to be a good rule or thumb. The only thing I feel I know for certain is that a Foxconn employee who has their pay increased by 25% but their weekly hours reduced will be making less than 25% more per week.

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply
post #28 of 37

Apple squeezes its retail employees, while giving handouts to its supplier's workers?

 

If this were true then Cook would be sitting on a PR powder keg.

 

 

 
 
post #29 of 37
This "story" is a total fabrication, in my opinion, by an analyst attempting to create downward pressure on AAPL stock.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

Reply
post #30 of 37
Quote:
Originally Posted by Rayz View Post

Apple squeezes its retail employees, while giving handouts to its supplier's workers?

 

If this were true then Cook would be sitting on a PR powder keg.

 

 

 
 

 

This is exactly the kind of false reporting that Apple should sue over.

Proud AAPL stock owner.

 

GOA

Reply

Proud AAPL stock owner.

 

GOA

Reply
post #31 of 37
Originally Posted by SpamSandwich View Post
…an analyst attempting to create downward pressure on AAPL stock.

 

He should try harder (read: not at all).

 


Originally Posted by SpamSandwich View Post
This is exactly the kind of false reporting that Apple should sue over.

 

Should sue over ALL of it… Or at least one big, painful suit for each type of falseness. That would put a serious damper on any future attempts to do a wide range of… what's it called, predatory reporting?

Originally posted by Relic

...those little naked weirdos are going to get me investigated.
Reply

Originally posted by Relic

...those little naked weirdos are going to get me investigated.
Reply
post #32 of 37
Quote:
Originally Posted by Tallest Skil View Post

Nope. Apple is a slavedriver and sweatshop owner. Apple workers in China commit suicide by the millions. They get beaten to a pulp by the Apple guards. This entire story is a lie.

😩

I like sarcasm as much as the next person,

but, this post (like so many others), is a perfect example of why you really should

use one screen name as a moderator, and a different one as a commentator/contributor.

post #33 of 37
Quote:
Originally Posted by boredumb View Post

I like sarcasm as much as the next person,
but, this post (like so many others), is a perfect example of why you really should
use one screen name as a moderator, and a different one as a commentator/contributor.

What different would it make? You know he's a mod even if he creates a new account just for modding and it's not like you know it's him when he deleted spam or bans a troll. I think it's ridiculous that someone who has agreed to keep the forum civil for free should get any grief when he posts in a way that you don't agree with. If he' breaking the forum rules then report that but if he's not then don't worry about his opinions. He's just a forum member who was given additional rights, not rights if he agreed to stop being a forum member.

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply
post #34 of 37

As Apple increases its already exceptional chinese factory wages for the "adult" work force that they employ, Samsung shrugs as their child labor makes Apple clones daily. But its ok, from what i hear apple is evil.

post #35 of 37

"This is because Android-based smartphone proponents aren't very intelligent or they are dishonest. While that may seem a harsh statement it is reality. They are blinded by their hatred of Apple.

I have never understand Apple-hatred from anyone other than an information technology professional although even then the hatred isn't justified. Some information technology professionals believe Apple computers will make their function nearly obsolete if everyone has a computer that "just works." This is not true, they simply need a different skill set but they can't imagine proactive service and support instead of responding to every "fire." Alternatively, the "fires" make them seem like heroes which likely means to receive more funding."

 

LOL.  Funniest post ever.  Thanks!

post #36 of 37

Activists on the warpath aren't they?

 

Aple and Samsung already reimburse their suppliers over this. Now who else going to the the target?

post #37 of 37
Quote:
Originally Posted by Srice View Post

This is actually a pretty cool story.  I'm sure Chinese factory worker wages are horrible compared to US wages, but their cost of living is less.  Apple is fighting a good fight.

 

It's going to be an interesting century as Chinese and Indian labor comes online, which will create a labor glut and makes it uneconomical for expensive labor countries to make anything.   I can't wait for the day when all labor costs and wages around the world are comparable -- I probably won't be alive to see it, but it'll be painful until it happens.

 

Actually the average American wage is horrible, straight up slave wage pay check to pay check. People keep factoring in the exchange rate so of course it sounds like they're making a slave wage, but people forget that China and the Chinese do not run on USD, their cost of living is not in USD.

 

Did you know Chinese workers pay no income tax if they make under $4000RMB? They have no sales tax, they do not have to tip when they go out to eat (as a matter of fact it is not customary to tip in East Asian countries).

 

Making $4000RMB in China is the same as a US worker making $4000USD, imagine if you paid ZERO tax if you made less than $4000USD?

 

The Chinese worker does not have to pay rent as most of them live on site, they do not need to pay for food as the company provides that for them. When you factor in no income tax for <$4000RMB earners, no sales tax, no tipping, no rent, food and transportation expenses you start to wonder who is the real slave in this picture.

 

It's also not surprising that the Chinese were the biggest spenders in this years London Olympics. Their middle class makes our middle class look like poverty.

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