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Apple (AAPL -1.6%) is underperforming today on above-average volume. The Fair Labor...

Apple (AAPL -1.6%) is underperforming today on above-average volume. The Fair Labor Association's discovery of "non-compliances" at Foxconn's Chinese facilities, together with Apple and Foxconn's agreement to address the issues via new hiring and other measures, could have investors worried Apple will see higher manufacturing costs and lower margins.
Comments (42)
  • Jason F
    , contributor
    Comments (217) | Send Message
     
    If that is WHY AAPL is down, why barely a dent on Amazon, since they use the same factories, and as we all know...amazon's margins are thin already.
    30 Mar 2012, 02:44 PM Reply Like
  • HarryWanger
    , contributor
    Comments (184) | Send Message
     
    Strange that it's not pulling the market with it. Usually SPX gets dragged along with AAPL. Odd.
    30 Mar 2012, 02:46 PM Reply Like
  • emburns
    , contributor
    Comments (218) | Send Message
     
    Of course the FLA fails to admit how much safer and modern Foxconn's facilities are compared to the vast majority of factories in China.
    30 Mar 2012, 02:48 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5315) | Send Message
     
    Exactly, they have the most up to date suicide nets.
    30 Mar 2012, 02:50 PM Reply Like
  • gensearch2
    , contributor
    Comments (1462) | Send Message
     
    Don't blame the FLA ...

     

    FLA: iPad plant conditions ‘way, way above average’
    Author's pic
    By Charles Starrett

     

    Senior Editor, iLounge
    Published: Wednesday, February 15, 2012
    News Category: Apple

     

    Working conditions at Foxconn are far better than those in other factories elsewhere in China, according to the initial findings of the Fair Labor Association. Reuters reports that the group is beginning its study—announced Monday—of Apple’s top eight suppliers in China, following several recent reports which painted the conditions at the plants in a negative light, as well as a number of documented worker suicides. Auret van Heerden, president of the FLA, spent the past several days visiting Foxconn plants in preparation for the study.

     

    “The facilities are first-class; the physical conditions are way, way above average of the norm”, said van Heerden. “I was very surprised when I walked onto the floor at Foxconn, how tranquil it is compared with a garment factory. So the problems are not the intensity and burnout and pressure-cooker environment you have in a garment factory. . It’s more a function of monotony, of boredom, of alienation perhaps.” He went on to say that suicides have been a problem at Chinese factories since the 1990s. “You have lot of young people, coming from rural areas, away from families for the first time”, he said. “They’re taken from a rural into an industrial lifestyle, often quite an intense one, and that’s quite a shock to these young workers. And we find that they often need some kind of emotional support, and they can’t get it. Factories initially didn’t realize those workers needed emotional support.”
    http://bit.ly/HqDsQb

     

    Apple leading the way in having the best factories in China and leading the way in making them better doesn't make good copy for the media.
    30 Mar 2012, 03:06 PM Reply Like
  • vphibbs
    , contributor
    Comments (140) | Send Message
     
    Love this comment but I really think the window dressing is over.
    30 Mar 2012, 03:11 PM Reply Like
  • gensearch2
    , contributor
    Comments (1462) | Send Message
     
    ummary: Journalists reporting an epedemic of suicides at the electronics manufacturer Foxconn have badly misrepresented the facts…

     

    Patrick Mattimore, a fellow at the Institute for Analytic Journalism, recently published the following article on China’s People’s Daily Online, headlined: Media badly misplaying Foxconn suicides.

     

    Taiwanese-owned Foxconn has had seven suicides this year. That sounds like a lot, but the firm has an estimated 800,000 workers, more than 300,000 of them at a single plant in Shenzhen.

     

    Although exact figures are hard to come by, even the most conservative estimate for China’s suicide rate is 14 per 100,000 per year (World Health Organization). In other words, Foxconn’s suicide epidemic is actually lower than China’s national average of suicides.

     

    I checked his figures. World Health Organization suicide figures for China (1999) are 13 males and 14.8 females per 100,000 people.

     

    Elderly (65+ years) suicide rates can be as much as 50% higher than youth (18 to 24 years), which means Foxconn’s suicide rate, with its younger workforce, should be significantly below the national average.

     

    Let’s estimate an average of 10 suicides per 100,000 at Foxconn. Just the Shenzhen Foxconn plant alone, with its 330,000 employees, would be expected to have about 33 suicides this year, or 14 so far.

     

    Foxconn has had just 10 suicides this year, and that’s across its entire workforce.

     

    http://zd.net/wSp5AQ

     

    Once again, it just isn't good copy to say the suicide rate at Foxconn is significantly lower than the overall rate of suicide in China.
    30 Mar 2012, 03:12 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2888) | Send Message
     
    That's true, but Foxconn is a glowing symbol.
    30 Mar 2012, 10:34 PM Reply Like
  • VictorHAustin
    , contributor
    Comments (827) | Send Message
     
    It's a chuckle, but we really should be concerned that our college suicide rate is higher than the Asian factories'.

     

    What makes a good story has little to do with what actually needs attention.
    31 Mar 2012, 10:32 AM Reply Like
  • jimmy46
    , contributor
    Comments (1804) | Send Message
     
    Suicides per 100,000 population: 12.0 in the USA

     

    Fox has 1.2 million workers, would be 144 a year at the US rate.
    31 Mar 2012, 09:45 PM Reply Like
  • thotdoc
    , contributor
    Comments (1650) | Send Message
     
    OMG another case of I must say there is a reason. How about Apple can't go straight up?

     

    And looked at another way, more people will be proud to own aapl because it's a good citizen.
    30 Mar 2012, 02:51 PM Reply Like
  • Stan Low
    , contributor
    Comments (39) | Send Message
     
    What about the impact on other tech companies? Would they be able to continue to use "non-compliance" labor? Wouldn't they be forced to also comply and pay more? Wouldn't their margins be affected? Not to give Cook more credit than due, but what if this was a play by Apple to squeeze other companies? Who is in a better cash position to deal with reduced margins?
    30 Mar 2012, 02:54 PM Reply Like
  • Doug45
    , contributor
    Comments (35) | Send Message
     
    Somebody in Bloomberg did the numbers. Even a 20% increase in labor costs affects Apple margins in not more than 1%. So it does not seem to be a big deal. They could also recuperate that 1% in several other ways.
    30 Mar 2012, 02:54 PM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    Apple does not have to worry here. All other US manufacturing companies have to worry. Apple has big margin on their products but other companies have very little.
    30 Mar 2012, 02:56 PM Reply Like
  • vphibbs
    , contributor
    Comments (140) | Send Message
     
    Options expiration for the big boys.
    30 Mar 2012, 03:08 PM Reply Like
  • Snowden
    , contributor
    Comments (31) | Send Message
     
    It is just a matter of time before China is Apple's biggest market. My gut reaction is that China's rapidly growing middle class will remember Apple's action in a positive way further building brand loyalty. The $5-$10 in additional cost per unit (yes, I have no data to back up this number--it is just a WAG) is nothing compared to the revenue increase from meeting Chinese demand, or the value of really good Chinese siri talk.
    30 Mar 2012, 03:11 PM Reply Like
  • muoio
    , contributor
    Comments (2957) | Send Message
     
    We should and I emphasize the word should be elated that AAPL has moved ever so slightly away from slave labor.

     

    And my friends if you have a major problem with that I would only suggest you look a little deeper inside your 'soul" and contemplate your morality.
    Good trading
    30 Mar 2012, 03:15 PM Reply Like
  • VictorHAustin
    , contributor
    Comments (827) | Send Message
     
    This "slave labor" term is pure slander, in my opinion. Slaves have not choice. There are long lines of people applying to get into FoxConn.

     

    And nobody seems to mention the labor used to make products sold by Amazon, RIMM, HTC, Samsung, Sony, Microsoft, or any other major player, that I can see.

     

    Just sour grapes or envy, as far as I can tell.
    31 Mar 2012, 10:37 AM Reply Like
  • gensearch2
    , contributor
    Comments (1462) | Send Message
     
    70% of the trades are driven by software. Software "investors" don't care about possible higher costs in Jul 2013.

     

    It's a group of robotic technicians.
    30 Mar 2012, 03:16 PM Reply Like
  • muoio
    , contributor
    Comments (2957) | Send Message
     
    I am not talking about the bloody computers.

     

    I am talking about people.

     

    Good trading
    30 Mar 2012, 03:22 PM Reply Like
  • gensearch2
    , contributor
    Comments (1462) | Send Message
     
    So you think that people on 3/30/2012 are worried about higher costs in July 2013?

     

    How about on Monday? Do you expect that people on 2 May 2012 are going to be more or less worried about rising costs in July of 2013?
    30 Mar 2012, 03:42 PM Reply Like
  • gensearch2
    , contributor
    Comments (1462) | Send Message
     
    I'll do you a favor and write up your bullet for Monday ...

     

    Another down day for Apple [-x%]. Apparently, Apple investors are still concerned about increased labor costs by Foxconn labor restructuring.

     

    or

     

    Apple rebounds on Monday [+y%]. Upon further analysis over the weekend, investors concluded that possible increased labor costs could be offset by increased automated assembly and lower parts costs achieved by higher volumes.

     

    or

     

    Apple is fundamentally unchanged on Monday, reflecting investor uncertainty about any impact resulting from Foxconn labor restructuring.

     

    Up, down or unchanged you have your bullet for Monday after the close. You could be on CNBC after the close on Monday. The professional "analysts" don't do anything different.
    30 Mar 2012, 04:02 PM Reply Like
  • bobbobwhite
    , contributor
    Comments (1971) | Send Message
     
    As all Chinese factories treat their workers more or less the same, so what is different about Foxconn other than Apple?

     

    Nothing, it's all in what's trending now that gets the most readers that then may buy more advertiser's soap. As always, follow the money, as this sure is not news.
    30 Mar 2012, 03:24 PM Reply Like
  • darekz
    , contributor
    Comments (64) | Send Message
     
    One of the factories I visited in China, was using glue to assemble their products. This assembly was performed in a huge hall that was neither airconditioned in summer or heated in winter (even though the equipment existed and was operational i was told). The suction fans drawing glue vapors out of the building were turned off to save the energy. In winter time, the workers were wearing thick gloves to keep hands warm... I am not sure how they were able to work there 8 or sometimes even 12 hours a day, when I was getting a headache after only 20 minutes at the production line... This factory was european owned.... This makes the chinese (Taiwanese) Foxconn factory look like a resort...
    30 Mar 2012, 04:02 PM Reply Like
  • milehr
    , contributor
    Comments (493) | Send Message
     
    Fair labor is when nobody forces you to work.
    30 Mar 2012, 03:28 PM Reply Like
  • darekz
    , contributor
    Comments (64) | Send Message
     
    I was just wondering if anybody thought of asking the Chinese workers at Foxconn about reduction in overtime? Reuters article here partially refers to it in http://reut.rs/HztIks. There they cite a worker saying that they came to Foxconn to work, not to play... They are not there to strike right "work/life balance" another words.

     

    I worked in China for nearly 9 years, I can almost guarantee that the workers will be unhappy about this change... Less O/T = less pay, no matter what the company says. These workers came from deep countryside with one and only one goal in mind - make as much money as possible in as short time as possible. O/T is a very profitable way to make money for them and they do want that. By law in China they can earn between 150% to 300% of their hourly rate for OT. They have no life after work and don't want life after work, they just want to make money and send it back to their families to build house, buy land, etc.. This ill conceived western worry about Chinese worker life-work balance, without deeper understanding of this issue, will backfire in employee dissatisfaction and lowered productivity.

     

    Somehow reading these articles about Foxconn one can get an impression that this bad, bad Foxconn (or for many it is that really awful Apple) enslaves Chinese workers to work OT to satisfy gadget cravings of western customers... You couldn't be more wrong. At the place I worked, if I did not specifically banned OT that day, the employees would work OT undeterred. They would pocket the lunch allowances for OT or taxis and provide phony receipts, all with one and only one goal in mind to pocket as much cash as possible. And now comes that "carrying" western customer and deprives them of this extra income... Let's see how this will play out...
    30 Mar 2012, 03:34 PM Reply Like
  • gensearch2
    , contributor
    Comments (1462) | Send Message
     
    And in fact the large majority of workers at Foxconn said the number of hours they worked were either fair, or it wasn't enough.

     

    So if your typical airline pilot wants to fly for 40 hours straight to make a little extra Christmas cash, do you let him/her. Sure.

     

    BTW. The objective for Foxconn is by Jul 2013 to reduce worker hours and maintain worker pay. Which means that your assumption of less hours, less pay is dead wrong.
    30 Mar 2012, 03:54 PM Reply Like
  • darekz
    , contributor
    Comments (64) | Send Message
     
    I would like to encourage you to revisit this factory a year from now and verify if this was the case (keeping the pay)... I am almost certain that what Foxconn was referring to was RMB/hr and not total pay to the employee (their wording might have been purposely vague). I hope I am wrong and you are right for the workers sake....

     

    And just out of curiosity I was wondering how would you technically do it (keep the same pay and reduce OT), when the OT varies from employee to employee and from month to month for the same employee... No matter what you do, some workers will feel that they are loosing on that new deal.

     

    In addition, even if Foxconn increases hourly pay, the workers will only want the OT even more. I am not taking sides here, just stating my observations based on my experience in China.

     

    BTW, I also feel it is likely that potentially sloppy assembled iPhone by an overworked Foxconn worker, may endanger far fewer lifes (if any) than a tired airline pilot (hance the pay differential as well). But what you or I think may not be so relevant, again I am not advocating excessive OT. I was only trying to shed some light on mentality of Chinese worker in these factories and potential repercussions steming from half-informed media requested changes.

     

    From management point of view it actually might be cheaper to hire more workers if the OT seems to be an ongoing affair at Foxconn rather than pay 150-300% rates for the same assembly work with overworked workers being more prone to errors.
    30 Mar 2012, 04:28 PM Reply Like
  • SoCal.Sooner
    , contributor
    Comments (91) | Send Message
     
    I think it is strange that the media complains that the Foxconn employee's are paid so low and AAPL profits are so high, then they complain that the pay raise will make AAPL have lower profits.

     

    I thought that a 10% increase of a low salary would still be low.
    30 Mar 2012, 04:07 PM Reply Like
  • remurraymd
    , contributor
    Comments (2287) | Send Message
     
    It is simply end of the quarter profit taking and rebalancing by the hedge funds happens at the end of every quarter great buying op for us .We sold to open the May 550 Puts @ $1200 per contract and sold to open June 550 Puts @ $1675 per contract.In 2-3 months 90% chance we keep all the cash 10% chance we get long in the $530s. So win win really. http://bit.ly/GHhica
    30 Mar 2012, 04:17 PM Reply Like
  • MoeGiguere
    , contributor
    Comments (35) | Send Message
     
    Great web site and agree with your philosophy. I have to learn more about selling options...your win-win sounds like a win.
    30 Mar 2012, 04:37 PM Reply Like
  • Tusc
    , contributor
    Comments (277) | Send Message
     
    Most noteworthy are comments from people who have worked in these factories.It was kind of an eye opener for me that the standards of the Chinese factory are probably higher than the USA, at the same stage of economic development, back in the day. Workers toiling long hours to make as much as they can sounds very familiar to what was in place here 100 years ago. To find fault ,may be understandable,but we are in a much different place than most of the Chinese workers, and we need to keep perspective on the evolution of where the Chinese economy is versus where it will go.
    30 Mar 2012, 04:36 PM Reply Like
  • talltannedcc
    , contributor
    Comments (33) | Send Message
     
    Mike abramsky RBC capitol. Suggests that Rimm could partner with Facebook...one is biz orientated. And Facebook consumer. Orientated. Doesn't. Make sense??
    30 Mar 2012, 04:40 PM Reply Like
  • GANALAKS
    , contributor
    Comments (8) | Send Message
     
    Every one who is bragging about taking care of Chinese workers,. should look at the dress/garments they wear or bought in the past. How many of us bought cheap Chinese made dresses, underwear, and toys. Do we worry the workinig condition of such labourers while enjoy buying cheap chinese goods. Why all on a sudden a love for such workers.
    Some here could not admire the success of Apple, or digest their money power.
    The media makes money by bashing popular icons, be persons for products..
    30 Mar 2012, 04:51 PM Reply Like
  • jmsommertx
    , contributor
    Comments (3) | Send Message
     
    I think hedge fund managers are selling to show a profit at the end of the quarter. Watch what happens on Monday.
    30 Mar 2012, 05:20 PM Reply Like
  • pocohonta
    , contributor
    Comments (573) | Send Message
     
    If labor cost at Foxconn goes up, it will be passed on to not just Apple, but to competitors who uses Foxconn. The domino effect of shrinking an already razor thin margin among Chinese factories will cause more factories to close. So this is actually good for Apple because it is now seen as socially responsible, yet it contributed to its competitors' rising cost of goods sold.

     

    Also, isn't the enforcement of labor law the something that Chinese government is responsible for? Why are foreign companies imposing its Western standards onto a non-Western country? Before you know it, we'll be lobbying to give six-figure salary to those smart engineers at India because so many US firms outsources to India.
    30 Mar 2012, 05:28 PM Reply Like
  • ItsAllGreek
    , contributor
    Comments (547) | Send Message
     
    The reason Apple is down today is Wall Street locking down gains for the quarter. Attempting to link it to the FLA report is ... disingenuous.
    30 Mar 2012, 05:40 PM Reply Like
  • PSUPete
    , contributor
    Comments (17) | Send Message
     
    Please look up the definition of "capitalism" and then leave APPL alone. Remember that China is still a communist empire!
    30 Mar 2012, 05:47 PM Reply Like
  • bailinnumberguy
    , contributor
    Comments (1090) | Send Message
     
    Options expiration day and profit taking at the end of a dazzling quarter for Apple shareholders. The sell-off was very modest considering the gains on the quarter and the put hedge was most timely. The buying party begins again on Monday as the dividend funds start loading up on Apple to ride the gravy train....
    30 Mar 2012, 06:15 PM Reply Like
  • John N. Heil
    , contributor
    Comments (96) | Send Message
     
    The whole Foxconn issue is a red herring considering the age-old problem of exploiting Chinese labor, and the primitive working conditions in a country transitioning from rigid authoritarian controls. Actually Foxconn is somewhat of an ideal employer and would have to be with such size and general accountability to a vast number of workers and their families. Now it is they who will be responsible for any shortcomings in the work place, not Apple. Indeed, Apple will benefit if they eliminate overtime work at the higher rate per hour Fosconn pays for it. Some of those savings will come back to Apple, you can count on it.

     

    Big J in L.A., retired security analyst
    30 Mar 2012, 06:36 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2888) | Send Message
     
    This is a great victory for the working class people. The global rat race to bottom may have finally stopped.
    30 Mar 2012, 10:36 PM Reply Like
  • milehr
    , contributor
    Comments (493) | Send Message
     
    An even greater victory than Mao taking over the country? That can't be...
    31 Mar 2012, 09:03 AM Reply Like
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