Inside Business

February 15, 2012 9:27 pm

Apple has incentive to worry about workers’ rights

Its scale and conspicuous brand have brought it unwelcome attention

Imagine a company generating an extra $1.5bn in sales every week compared to what it earned only a year ago – and nearly all of that coming from products that it had dreamt up from scratch within the last half decade. These were things the world didn’t know until recently that it needed.

That would be like General Motors conjuring up its entire North American sales – all the Chevrolets, Cadillacs, Buicks and GMC trucks – from nothing, in the space of just a year.

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That gives some idea of the enormity of Apple’s recent success on the back of the iPhone and iPad. Without those inventions, it would be a struggling computer maker trying to fill the gap left by shrinking iPod sales. Instead, it is a world-beater with a share price that surged past $500 this week and didn’t stop to catch breath. It was only with the launch of the iPad that Apple’s stock market value topped that of Microsoft, a company that once seemed unassailable: it is now worth nearly twice as much.

But this latest surge has consequences. When Microsoft’s sales jump on the back of new software releases, it only needs to ship more bits. Apple has an altogether different problem. In late 2010, it was shipping 1.8m shiny new iPhones and iPads a week. A year later, it had upped that weekly quota by nearly 1.5m – and still couldn’t satisfy demand.

This has created one of the great historic challenges of manufacturing. The supply chain of the electronics industry, with its hub in south China, was already one of the most impressive manifestations of the forces that have brought a new, globally distributed workforce into play. But this system is now being tested in the extreme.

This is not just about iPads and iPhones: with the advent of true mobile computing, an industry that once counted its sales in the hundreds of millions will soon be counting it in the billions.

That makes Apple’s handling of the supply chain labour issues that continue to dog it a central concern not just for its own future but for the industry at large. Its scale and conspicuous brand have brought it unwelcome attention. But it is already ahead of its main rivals in trying to grapple with the underage labour, excessive forced overtime and inadequate safety standards that continue to be alleged against it, and the new standards it is helping to set will be felt across the industry.

One implication is that costs will rise. According to one tech industry veteran who has been closely involved with supply chain labour issues in the past, Foxconn, the immense Chinese manufacturer that supplies much of Apple’s output, “clearly has optimised around cost and speed rather than worker rights”.

Changing that will take money. For a company that can charge premium prices, like Apple, that may not present a problem. It is also unlikely to hurt the lowest-cost makers of consumer electronics based in the emerging world, many of which will feel no obligation to meet the new, higher, voluntary standards that are likely to emerge. But the same will not be true for consumer electronics brands based in the US or Europe: without Apple’s premium brand, they will have little price protection, but they will still need to conform to raised expectations.

All of this presumes, of course, that Apple actually has the power to influence how its suppliers treat their own workers. Transparency appears to be one problem. Apple executives argue strenuously that they audit suppliers thoroughly and have identified any problems. Tim Cook, chief executive, says that he gets weekly data on the working hours put in by 500,000 workers around the world – surely giving him a far better understanding than his counterparts in the automobile industry had nearly a century ago when they first introduced mass manufacturing.

Yet independent investigations – most recently one by the New York Times – continue to point to significant shortcomings.

Apple’s leaders certainly have plenty of incentive to get to the root of this problem. The consequences of failing to deal with it would be significant. It is not just a question of appeasing the NGOs that make themselves a nuisance about such issues. As Nike and Reebok found a decade ago, customers can rebel against brands associated with sweatshop practices. Steve Jobs, for whom the Apple brand experience was a big part of delighting his customers, would have understood what is at stake.

Of course, this could also have consequences that reach far beyond the Apple brand. Unlike the recent stream of young internet idealists who have made a show of their desire to make the world a better place – most recently Mark Zuckerberg of Facebook – Mr Jobs never set his sights beyond pleasing his customers as he sought to “put a dent in the universe”.

But for Apple’s brand to thrive as it moves into its new phase of global manufacturing superpower, his heirs will have to show that their company is dedicated to the betterment of a large slice of the world’s working population.

Richard Waters is the FT’s West Coast Managing Editor

richard.waters@ft.com

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