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Monday, 23 May 2011

Explosion at Foxconn another nail in Apple’s coffin? Well, should it not be?

In the recent past, I have already written a few articles on the extremely bad working conditions at the factories where the Apple iPads, iPod’s and iPhones are created: the Foxconn factories in Chengdu and Shenzen. Read for more info: Foxconn finds ideal solution… and Shepherd, take care of your sheep….

Although these stories should be worrisome for the enormously succesful inventor of the tablet computer and the iPhone, based in Cupertino (Ca), the customers were uptil now not very much impressed.

This might change, as the following story unrolls. The Financial Times wrote last Friday, May 20th and today on a deadly explosion that occurred at the Foxconn factory in Chengdu, China. Here are the pertinent snips of these articles:
Explosion at Apple supplier Hon Hai 
An explosion ripped through a large manufacturing facility owned by key Apple supplier Hon Hai, better known as Foxconn, killing two and injuring 16, Chinese state media reported. 
The cause of the blast was still under investigation on Saturday morning local time and Apple had no immediate comment.
Local media said that production had been halted at the facility, which was said to be used for making the iPad 2 tablet. 
Depending on the cause, the accident could also bring more attention to working conditions at Hon Hai, which has been faulted for a rash of suicides and other problems.
So far, though, none of the finger-pointing at Apple’s suppliers has done anything to damage the company’s brand appeal.

Dust build-up blamed for Foxconn plant blast
An explosion at one of Apple’s main supplier’s factories that killed three workers and injured 15 last week could have started with a build-up of dust that combusted, according to an investigation by local authorities.
Foxconn, a subsidiary of Taiwan-based Hon Hai Precision, said dust had gathered in a section of a manufacturing facility, based in Chengdu, in southwestern China, that was used for polishing technology products such as the iPad 2.
The plant, which opened last October, was to produce most of Apple’s second-generation iPad 2 tablet computers. Apple has enjoyed the lion’s share of the tablet market it pioneered, but its sales have been limited by inadequate supply in the past, especially after the iPad 2 launch. Apple last month said it was working through “the mother of all backlogs” for the devices.
In a worst-case scenario, with production halted through June and Chengdu being the main supply point, revenue could fall by as much as $1.7bn, said Mike Abramsky, an analyst at RBC.
The explosion could highlight workplace safety issues at the Foxconn factory. Apple has come under fire previously for the conditions at Hon Hai and other suppliers. If the blast was caused by dust that inspections should have rooted out, that could become a focus of new criticism on Apple policies and Chinese government practices.
I don’t want to be more moralistic towards Apple, than towards other world-leading brands. Too many companies are using the cheap labor in former third world countries, like China, Indonesia, Vietnam or The Phillippines, without asking any questions about safety, health and just payment for the people working there. Apple is in good company as far as this concerns.

What does become clear, however, is that the very bad working conditions in the low-wage factories can pose a severe threat for the continuity of the production and thus the brand itself.

Apple already stated that “it was working through the mother of all backlogs” for the iPad 2 and now it might be that the production is even halted through June. 

This is not so much a threat for the iPad2’s that have been ordered and (partially) paid for already.The real threat is when the customer in the shop, loaded with money, must decide between:
  • An Apple iPad2 that will cost him at least two months of impatient waiting, or
  • A tablet computer from “the competitors” that is almost as good and that he can buy-to-go.
As I don’t have religious feelings towards Apple, for me it would be a very easy choice.

And I hope once again that stories like these might cause people to think about the brands they buy. Because it is about time that the labor circumstances in the low-wage countries change for the better.

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