What Hath Apple Wrought?

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I just had a morbid thought: I wondered how many Chinese workers committed suicide in the making of my iPhone.

This is not the kind of thing I would normally dwell on, but after listening to the podcast of last weekend's "This American Life" episode, I can't stop thinking about it. That program featured the first part of Mike Daisey's monologue "The Agony and the Ecstasy of Steve Jobs."

Daisey is a self-professed techno geek, a lover of everything Apple (Nasdaq: AAPL  ) , one who has knelt, as he says, before Steve Jobs' throne. But Daisey began questioning his near-religious Apple fervor after seeing photos (test images taken with a just-assembled iPhone) of Chinese workers on an iPhone production line. The picture he had in his mind of his techno toys being assembled by a bunch of robots was replaced pictures of real people, frantically hand assembling thousands of devices every day, barely keeping up with the world's growing appetite for technical gadgetry.

So Daisey did what very few people would do.  He travelled to Shenzhen, the third largest city in China, and an area designated a special economic zone by the Chinese government. Shenzhen is, Daisey tells us, the place where much of our electronic "crap" comes from. It doesn't just pop out of an abstract place called "China"; it is made by hand, by actual people.

After trying without success to get access to Shenzhen's factories through the normal channels of inquiry, Daisey ends up, unauthorized, outside the gates of a Foxconn factory on the outskirts of Shenzhen. Foxconn is the largest exporter in greater China. It employs more than 400,000 people in its Shenzhen plant alone, where it assembles products for Apple, Dell (Nasdaq: DELL  ) , and Hewlett-Packard (NYSE: HPQ  ) , among others.

Those aren't butterfly nets
As Daisey approaches the factory, he can't help but note the anti-suicide nets on the edges of each building's roof. Those nets are the company's response to a rash of suicides around the time of his visit -- 18 jumped at Foxconn factories in 2010, with 14 deaths.

In response, Apple issued a statement saying, "We are saddened and upset by the recent suicides at Foxconn. We're in direct contact with Foxconn senior management and we believe they are taking this matter very seriously."

Dell's statement: "We expect our suppliers to employ the same high standards we do in our own facilities." And HP said that it was looking into "the Foxconn practices that may be associated with these tragic events."

Meanwhile …
Daisey spent hours outside the factory talking to a long line of Chinese workers while under the suspicious eyes of Foxconn guards. He listened to a gush of stories from workers telling him what it's like working for Foxconn. He talked to underage workers, some 14, 13, even 12 years old. Daisey wonders how a company like Apple, one so concerned with every detail of its products, somehow didn't seem aware of this.

Later in his journey, Daisey infiltrates a number of different companies' factories and is struck by the deep silence inside the assembly areas. It is a place without noisy machinery, just thousands of workers assembling each piece by hand, all of the workers silent. Labor is cheaper than machinery in China. At Foxconn, Daisey says, workers who speak on the line receive demerits.

He is told it is not uncommon, under peak demands created by the release of some hot new device, for workers to have month after month of 16-hour days. He learns that while he has been in China, a worker died after working a 34-hour shift, an event that was not unprecedented.

He talks to workers, members of illegal unions, who were made to work with n-hexane, a solvent used to clean iPhone screens. Those workers' hands now shake uncontrollably from constant exposure to that toxic chemical. Others have sustained such repetitive motion injuries their joints have been essentially destroyed.

Threatened mass suicide
Earlier this month, at a Foxconn factory in Wuhan, China, a group of workers, reported to number between 80 and 200, climbed to the roof of a six-story dormitory and threatened to jump. The reasons for this threat were reported to center around the company's attempt to transfer some employees from assembling Microsoft (Nasdaq: MSFT  ) Xbox gaming consoles to other jobs.

A protesting worker who wanted to remain anonymous, told The Telegraph that the new "assembly line ran very fast and after just one morning we all had blisters and the skin on our hand was black. The factory was also really choked with dust and no one could bear it."

Microsoft issued this statement: "Microsoft takes working conditions in the factories that manufacture its products very seriously, and we are currently investigating the issue."

On the other hand
This is not a black-and-white world, and what may seem like a clear-cut case of worker exploitation also has another side. The "This American Life" episode also interviewed New York Times columnist Nicholas Kristoff, who explained that the manufacturing in Shenzhen and surrounding areas has been "a tremendous benefit, not only to southern China, but indeed to much of Asia." For many Chinese, he said, "the grimness of factories like Foxconn was better than the grimness of rice paddies."

But Mike Daisey points out the great irony of companies manufacturing expensive high-tech products in a country where so few could ever afford them. He met one worker who hand was left mangled from working on an iPad assembly line. Daisey brought out his own iPad to show it to the man who had never even seen one turned on. The wide-eyed man slid his useless hand back and forth across the screen, watching the icons moving around, then tells the translator that "it's a kind of magic."

I encourage folks to listen to the episode. It's an i-opener.

To learn more about other American companies that have set their sights on dominating emerging markets, get this special free report.

Fool contributor Dan Radovsky has no financial position with any of the above-mentioned companies. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter service shave recommended buying shares of Apple, Microsoft, and Dell. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (8) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 12, 2012, at 8:10 PM, bsimpsen wrote:

    Start thinking about how many people commit suicide to bring you drywall, produce, jeans and coffee. It's not zero.

  • Report this Comment On January 12, 2012, at 8:21 PM, stanleyliu2003 wrote:

    First of all, if you do some research, you will see that the factories in question belongs to Foxconn, not Apple. Apple is being singled out in the title because everyone knows every bit of news about Apple will be read widely. Foxconn makes virtually all the most popular gadgets from Sony Playstation to Nintendo Wii so it shouldn't be Apple's responsibility alone that Foxconn workers are committing suicide.

    Secondly, the working conditions at Foxconn is really not that bad considering other options in China. There are plenty of other tech factories with worse pay and worse working environments. Foxconn is the 1st company to start increasing the wage of Chinese workers and ushers in a growing middle class in China.

    Thirdly, let's examine our own issues. How many people in the US goes out daily to look for non-existent jobs and are facing foreclosure of their homes and have fallen in to proverty? I bet they wouldn't mind having a Foxconn job right now.

    We should not sit there in the comfort of our living room pointing fingers and judging other countries when we got much bigger problems in our own backyard!!

  • Report this Comment On January 12, 2012, at 8:45 PM, HawaiiHaze wrote:

    Cut the crap already. If you will do an ounce of research, you will find that the suicide rate for employees at Foxconn is LOWER than the national average suicide rate in China. The company employs half a million people. And people commit suicide for a variety of reasons. Could be that many people in China commit suicide because they *don't* have a job. Ever think about THAT correlation??

  • Report this Comment On January 12, 2012, at 9:57 PM, H3D wrote:

    "I just had a morbid thought: I wondered how many Chinese workers committed suicide in the making of my iPhone."

    Less than the number that died of boredom trying to read this article.

  • Report this Comment On January 13, 2012, at 12:49 AM, justaskme wrote:


  • Report this Comment On January 13, 2012, at 1:34 AM, OkayPlay wrote:

    All of these: hear and say.

    Please check your fact. Shenzhen is not the the third largest city in China.

    Foxconn employs more than 400,000 people in its Shenzhen plant alone.

    ....Those nets are the company's response to a rash of suicides around the time of his visit -- 18 jumped at Foxconn factories in 2010.

    This gives only 4.5 suicides per 100,000 people per year.

    WOW, this is much lower than US suicide rate of 11.5 DEATH per 100,000 people per year.

    Perhaps a solution to lower suicide rate is to let us all work for Foxconn.

    People commit suicide for all kinds of reasons, how can you correlate it one cause and one cause only??

  • Report this Comment On January 13, 2012, at 3:13 AM, HawaiiHaze wrote:

    Excellent points OkayPlay. And don't forget that China's NATIONAL suicide rate in 2010 was 22 per 100,000, meaning workers at Foxconn committed suicide at a rate of only 20% of the national average.

  • Report this Comment On February 02, 2012, at 9:27 PM, MHedgeFundTrader wrote:

    Apple has become a monster cash flow generator. Apple now has the envious problem in that sales of several of its products are going hyperbolic at the same time.

    Apple announced net profits of $13.06 billion, or $13.87 per share, up 11% from the previous year. If the company just maintains that rate for the rest of the year, it will generate $55.48 in earnings, which at the current 11.5 multiple should take the stock up to $638, up 40%. If Apple makes it up to a market multiple, the stock should rise to $721, a gain from here of 58%.

    If the multiple expands to its pre-crash average of 35 X, that would take the stock to a positively nose bleeding $1,941, giving you a 424% return from current levels. Then the company would be worth $2.8 trillion and rank 5th in the world in GDP, more than France, and just behind Germany. Wow!

    It all reinforces my view that Apple shares will reach my long term target of $1,000 sooner than anyone thinks. Long term readers are well aware that I have been making this call for the past two years back when it was trading at a lowly $240. More recent subscribers will also recall that I predicted that Apple would be the top performing technology stock in my 2012 Annual Asset Class Review.

    I'm not saying that you should rush out and load up on stock today. But it might be worth taking a stake on the next wave of fear that strikes the market.

    The Mad Hedge Fund Trader

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