Changing China
Giant on the move
from MacroScope:
The iPod – the iCon of Chinese capitalism
Walking past Apple's sleek shop along London's Regent Street on Sunday, my wife asked me what I wanted for Father's Day.
"An iPad?" I ventured, half-jokingly.
"Are you sure you want one? Don't you care how they're made?" came her disapproving reply.
She was, of course, referring to the rash of suicides among Chinese workers at Foxconn, the Taiwanese manufacturer of Apple's much desired iPads and iPhones.
The deaths prompted the company to raise salaries and cut working hours but lingering concerns over conditions for its over 1 million workers in China were underscored by a plant explosion last month that killed at least 3 people.
Workers like those who live and work in Foxconn's sprawling Chinese facilities have long been the backbone of the country's vast manufacturing sector which churns out a torrent of consumer goods for export.
But the recent labour unrest that has erupted in parts of China suggests that this low-cost export-fuelled growth model may be wheezing towards its expiry date.
from Summit Notebook:
Apple’s iPhone takes slow boat to China
In China, Apple's iPhone commands a strange presence. Perenially "coming out", already widely available on the black market, viewed with trepidation by local telecom players but with undisguised lust by affluent consumers.
Sanford C. Bernstein Toni Sacconaghi thinks the wildly popular device will arrive in the Middle Kingdom before the end of the year, after a long haul of negotiations with state-run telecom carriers keen to control the content to be sold over the gadget.
Some sticking points thus far: Sacconaghi says Chinese typically spend $10-$15 per month on data services -- everything from stock quotes to weather forecasts -- wheareas your typical iPhone user in the developed world now spends $70. That limits the Chinese carriers' ability to subsidize the iPhone. But the analyst thinks that in one to two months Apple may unveil a cheaper version of the device that can lower the cost of the phone to lower-paying Chinese customers.
"You're struggling with how to monetize the iPhone", he told the Reuters Global Technology Summit. "It could be used to let carriers pay less."
Though conceding that negotiations on that front between the consumer electronics giant and carriers in the world's largest telecoms arena have been "opaque" at best, Sacconaghi thinks Apple is getting tougher.
"It's a testament to the fact that they've been negotiating pretty tough" that the iPhone's introduction had been delayed," he said.
Problem is, Apple may be underestimating the Chinese government's tendency to want to control content -- especially mass consumer content -- and its distribution. Apple, which also jealously guards ultimate control of the applications or programs sold through its Apps store, may have finally met its match.
Maybe if people in these countries earned salaries comparable to western levels, not only would price not be an issue, but maybe we could reverse the trend of falling wages and standard of living for American workers having to compete against wages too low to be legal in this country.
Any thought that I should even indirectly pay more to subsidize a another slice to my own throat is revolting. Should I donate all of my vital organs, too?
Thank you for your comment.
Apple is working with Foxconn to prevent more worker suicides, including auditing the Chinese plants of its supplier to ensure conditions comply with its standards.
The point of my blog is that the iPod is an interesting prism through which to view China’ economy and gauge its shift in emphasis from manufacturing and exports to domestic consumption.
At first glance, the iPod encapsulates China’s manufacturing prowess. It is able to assemble very sophisticated products at a cost that is low enough to attract global companies. So much so that these Made-in-China iPods and iPad contribute to the trade surplus in China’s favour against the U.S.
But a closer examination of the iPod story also reveals the limitations of the Chinese model. The country remains far behind in innovation and doesn’t own the intellectual property behind many of the products it exports.
A University of California study, for instance, found that the iPod accounted for almost 41,000 jobs worldwide in 2006, of which only 30 jobs were in manufacturing in the US.
But more than two thirds of all the wages paid to workers in the iPod value chain were estimated to have been paid to US workers.