Pursuant to a discussion that has been going on in the comments of one of my posts of yesterday, I decided to research the costs of manufacture and labor as a proportion of costs of an iPhone 4. As it turns out that’s fairly easy to come by.
I presume you’re aware that the iPhone 4 is manufactured in China by Foxconn, a Taiwanese company with manufacturing facilities on the mainland. Foxconn, like many Taiwanese companies, is a a private label manufacturer. It makes products that are sold by Apple, Dell, and HP. The iPod, iPhone, and iPad are all made by Foxconn in their Shenzhen facility. I’ve heard estimates of everything from 300,000 to 1 million workers at that facility alone.
The labor cost is for a single iPhone is estimated to be $6.54.
So, in total, what Apple pays for an iPhone is about $200, a third of its retail cost. Pretty good.
A number of things struck me about those figures. First, labor costs can’t be chaffered down much. Even if Hon Hai moves out to the provinces where labor costs are purportedly 20 to 30% lower (!) the effect on Apple’s margins will be minimal.
Second, I wonder what the labor costs of manufacturing them here would be? Ten times more? Twenty times more? I honestly have no idea. Even at twenty times more (which seems incredible to me given the experience in other industries) that still shouldn’t make the difference between a product that’s profitable and one that isn’t. It might make a difference between a product that’s profitable and one that’s obscenely profitable.
And obscene is precisely the right word. China doesn’t have social insurance, modern healthcare is only available in the big cities, it’s polluting its air, water, and soil at a ferocious rate, and the working conditions in that Shenzhen plant are wretched—the suicide rate there made worldwide news only recently. Business as usual with China really should not continue.
China is sitting on well over a trillion in foreign reserves. It should be spending some of that on its people and IMO it’s worth rocking the boat over. The status quo means that a relative handful in China become fabulously wealthy while conditions for the poor continue to deteriorate.
We really need to get on the backs not just of the Wal-Marts but on the Apples, Dells, and HPs as well. If U. S. companies are going to sell products in the U. S. that are made in China, shouldn’t we be insisting that those products be made under humane conditions and that the workers who make them be paid a decent wage?