America, and probably much of the world, loves Apple. The company’s stock price recently has exceeded $600 per share and its market capitalization is around 1/2 of a trillion dollars. We buy millions of iPhones and iPads, and i-This’s and i-That’s. But there is another side to Apple and probably many of the brands that we buy in the U.S.: China. Oh, how conflicted we are about our life’s love!
Mike Daisey has been making the rounds telling of woes he claims to have personally observed in the manufacturing center of China for Apple products. The only problem is that Mike’s story involves a little dramatic license because he has a larger agenda which, by the way, is not journalism. On the other hand, factories in China that make Apple products, such as Foxconn‘s, actually have blown up here and there, killing workers and causing injury to others. Apple has hit back in recent months with assertions that it has created jobs in the U.S. directly and indirectly through supporting industries. But there is a simple equation in all the noise: Apple makes its products outside of the U.S. because this makes commercial sense. Part of its ability to trounce the tablet market is that Apple has negotiated larger volume, longer term, and lower-cost component parts contracts with particular suppliers because of its overall market volume. And, of course, Apple is cool (or a cult, depending on who you ask).
As a result, Apple products remain priced so that we can buy them and Apple continues to make a healthy profit margin, in part fueling an increase in the share price of Apple from its 2002 price of under $60/share (though it probably helps that Apple is also planning to offer a dividend with all the billions in cash it has on hand, and that Apple is also planning some kind of share buy back). Factory conditions in other countries are a problem, just as they have been in the United States. Safety, wage and hour rules, and employee benefits do increase the cost to manufacture goods. The question for us, though, is should we support subcontractors that avoid these costs so we can buy cheaper products at home? Is such a business model sustainable? What do you think?