The iPod – the iCon of Chinese capitalism

June 7, 2011

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.

Even as the world’s largest contract cellphone maker, Foxconn is loss-making, its margins squeezed by rising production costs and falling gadget prices.

Younger Chinese workers are turning out to be more demanding employees, their bargaining power strengthening as a result of the growing labour shortages due to the country’s strict birth control policies.

Noted currency guru Stephen Jen thinks the rapidly greying population may have already pushed the Chinese labour market past the crucial inflection point outlined by Nobel Prize-winning economist Arthur Lewis that will see wages and inflation continue to rise indefinitely.

On the flipside, rising wages will increase the purchasing power of Chinese consumers.

Their hunger for products, particularly ‘Western brands’ such as Apple, appears insatiable.

The frenzied rush for iPads and iPods when they were launched in China last month saw scuffles and near rioting in Apple’s Beijing store. Last week,  a teenager in the southern province of Guangdong reportedly sold a kidney for some $3,100 to buy an iPad.

For China’s evolving economic story — with all its promise and pitfalls — there can be no better emblem than Apple’s iPod.

3 comments

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Well , well ! It seems we human beings do not learn from huge mistakes and continue to repeat abuse against other human beings…Why is this so? Some specialist would say: “because it is in our nature” and I would completely go against that superficial argument. You see, I am an Apple consumer and fan and think the company does not need this kind of bad news spread against them all over. However, abuse means the same thing whether practiced by a dictator or a renown prestige company like Apple.
Excellent report.

Posted by monicamarias | Report as abusive

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.

As the wages and inflation rise in China – it will force some businesses to relocate to poorer areas, but also some will return to the USA.

Posted by jmmx | Report as abusive

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