Foxconn Causes Another PR Problem for Apple in China

Apple (AAPL) has a brand image that marketing managers around the world can only dream about. In the eyes of its incredibly loyal consumer base, Apple represents the pinnacle of innovation and coolness. Like many Western brands, Apple depends on suppliers in Asia to manufacture its popular products, such as the iPhone and the iPod.

Led by the legendary Steve Jobs, the California-based company is widely-admired for its user-friendly products and design capabilities. Sometimes this outsourcing of manufacturing strategy can lead to serious legal and public image problems.

On July 16, a young employee of Chinese contract manufacturer Foxconn (also known in China as Hon Hai) committed suicide after being accused over a missing iPhone prototype, reported Businessweek citing mainland press reports. The staff member, Sun Danyong, 25, threw himself off the 12th floor of the building in southern China.

Concerned about the safety of Apple's intellectual property, Foxconn took the issue a missing prototype very seriously. The missing phone was one of 16 prototypes held by the Taiwanese-owned company. Sun was reportedly responsible for shipping the prototypes back to Apple, which had received just 15 devices.

This tragedy sparked outrage online across the country. Sina.com website said Sun's suicide had spawned speculation online that Sun had been beaten or detained by Foxconn staff. Foxconn said in a statement that it "would not allow any person or department to take matters beyond the limit of the law."

In a statement Foxconn's Li Jinming apologized to Sun's family and said the incident reflected "the inadequacies of Foxconn internal management."

This is not the first time Foxconn has faced controversy over the treatment of its employees. A few years ago, London's The Mail on Sunday reported workers at Foxconn's Shenzhen factory toil for 15 hours a day, with a salary of only 27 pounds a month, living in dormitories housing 100 people.

In response to the British report, Apple initiated an investigation, interviewed over 100 employees, and eventually concluded in a report released that the working hours exceeded its standard 60 hour-per week work time and that workers often had to work six-day weeks. Apple admitted the hours were “excessive.”

Jill Tan, communication manager of Apple Asia, said at that time: “Our investigation found that our top IPod manufacturing partner, Foxconn, complies with our Supplier Code of Conduct in most areas and is taking steps to correct the violations we found.”

Foxconn spokesman Edmund Ding was quoted as saying: “Those having some fundamental professionalism would know it is impossible for this kind of thing to happen at Foxconn. The Mail on Sunday is a tabloid in Britain. Key foreign media who follows the code of professionalism didn’t publish this.”

From its Taiwanese base, Foxconn has expanded rapidly in China in recent years. Along with its Hong Kong-listed subsidiary the company employs 200,000 workers and even has its own police force. In 2007, it employed a total of 360,000 people in scores of factories worldwide, from Malaysia to Mexico.

Apple has a history of keeping new product information in the hands of very few people. According to recent report in the New York Times, few companies are more secretive than Apple, or as punitive to those who dare violate the company’s rules on keeping tight control over information.

Employees have been fired for leaking news tidbits to outsiders, and the company has been known to spread disinformation about product plans to its own workers, claimed the US newspaper. “They make everyone super, super paranoid about security,” Mark Hamblin, who worked on the iPhone. “I have never seen anything else like it at another company.”

Disclosure: No positions

Comments

[FreeRange:]

This is not a PR problem for Apple. It is a PR problem for Foxconn.

Jul 23 01:58 PM

[NDinMSP:]

Don't fault Apple for their extreme secrecy. They need it to stay ahead of the copycats. And Foxconn - the largest company of its kind in the world - builds products for many famous US companies. Some reports make it sound like an Apple subsidiary.

Jul 23 03:20 PM

[brewer:]

Everyone copies Apple relentlessly, and poorly at the same time. This is well known, but you can hardly use that to blame them for what happened or didn't happen at Foxconn.

Jul 23 03:26 PM

[Spook:]

Actually, this is a PR problem for both Apple and Foxconn. Why?

Take the case of Ever Ready case in India, the plant disaster happen long after Ever Ready cease their production in India, yet the disaster was tied to Ever Ready.

In this case, multinational companies like Apple, Microsoft, Cisco have limited choice but to continue working with Foxconn. Foxconn had grown from a small connect manufacturer in early 90's to a huge conglomerate by late 90's.

This goes back to the discussion of what the western company were preaching about CSR (Corporate Social Responsibility), did the excessive overtime improve from the initial report in 2007 until today?

So for Apple, this is PR problem like Nike, sweatshop for a higher profit product. But for Foxconn, no difference as people who really had worked for Foxconn Shenzen know the work condition they are in.

Jul 23 09:40 PM

[Gregman2:]

Apple should be using local: www.rapidsmtassembly.com

Jul 24 03:56 PM

[njineer:]

Typical example of companies outsourcing their responsibilities along with non-core areas of their business. If a company wishes to save money by hiring a sub-contractor, and they expect that sub-contractor to live up to certain expectations / requirements, they must invest in doing random, unannounced audits. If they don't, they are just as guilty as the subcontractor.

Jul 27 04:02 PM