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January 27, 2012

Over the past several months, some stories about grim working conditions at Chinese factories such as Foxconn and others have been brought to light, and it gives some American consumer electronics manufacturers such as Apple, Dell, HP, Motorola and a few others a black eye in the public's mind.

And to be fair, Apple has had more than its share of this negative publicity as of late, but the truth of the matter is that almost any electronics products manufacturer has its devices made and assembled in China, so almost all companies are responsible for the bad press.

For instance, there were spikes of awareness when a large explosion at the Foxconn factory in Chengdu, China, killed four workers last year. Then again, there was yet another factory explosion that occurred a few weeks later, just a few kilometers from the first one.

Most recently, an amazingly detailed story from The New York Times highlighted current working conditions in China's factories, which are bleak to say the least, and the article also detailed Apple's role specifically as the largest contractor of consumer-electronics devices in the country.

And while the media has been talking about these poor working conditions for about eighteen months already, Apple has known firsthand about the issues for years, and has allowed them to continue all that time.

Apple has been actively auditing its suppliers for labor, health, safety, and other concerns for about five years now. Yet, as the Times points out, several issues remain-- the kinds of problems that actually kill workers. It's time for Apple and all the many other companies to get serious about addressing health, safety and rights violations, and firing suppliers who don't comply.

Is it fair to single out just Apple? No, of course not, since it's an industry-wide problem. Some have argued that the consumers share the blame for these problems by turning a willful blind eye to abuses in other parts of the world, and greedily buying just about every new electronic device that rolls off the factory.

Of course, consumers are part of the larger picture, and their money speak a lot more than words. But fair or unfair, one company has the economic power and the sheer volume to make a real change, and that company is Apple.

And Apple is the only consumer-electronics manufacturer in the world pulling in oil-company caliber revenues. Think about it-- Apple just announced $13 billion in pure profit in just a single quarter. In total, it sold $46.33 billion in goods and services.

The company got there by riding its legendary legacy of never compromising, never accepting "no" for an answer, and of squeezing margins so it can release new and improved products virtually every year at the same price as the year before.

The New York Times' sources point specifically to Apple's particularly demanding cost and efficiency standards, which drive factories to make safety trade-offs in order to get the work done.

By contrast, Times sources made it clear that not every company has such strict insistence on high margins. From the story-- Executives at multiple suppliers, in interviews, said that Hewlett-Packard and others allowed them slightly more profits and other allowances if they were used to improve worker conditions.

In addition, no company does planned obsolescence as well as Apple. The upgrade cycle for Apple products is punishing-- you will be left behind if you don't upgrade regularly. You'll be left out of key features like Siri or system-wide speech to text.

And future software upgrades will be so demanding as to virtually require new hardware. You'll buy an amazing laptop that mysteriously lacks a feature it used to have, like a backlit keyboard, and the backlit keyboard will reappear in the next model a year later.

And of course, you'll be bombarded with ads and social messaging about the latest upgrade. No company markets its products as efficiently as Apple-- we all know this. Every other tech company in the world, whether it's IBM, HP, Dell or Microsoft, is trying to stage its own keynote events, dreaming of creating the kind of media frenzy that Apple can generate even with a fairly pedestrian announcement.

Should those consumers be less enthralled? Should they be immune to marketing magic, a nation of Upton Sinclairs questioning every message and demanding to know how it is that these iPhones just keep appearing, as if by magic, at the exact same price year after year?

Well if they did that, there'd be no $13 billion in pure profit--and that's just exactly the problem. Charles Duhigg wrote The New York Times piece detailing suppliers' accounts of working conditions in China. As he points out in this episode of Reporters' Roundtable, the textiles industry suffered a legitimate PR onslaught over its use of child labor and cruel labor practices in manufacturing Nike shoes and Gap clothes a number of years ago.

He points to a "consistent drumbeat of awareness" and criticism that reminds companies about their social obligation to the world. In the case of Gap, the company made serious, public changes and moved to protect its reputation and improve its practices.

Apple probably has never been in a better position to do the right thing. Tim Cook has already responded, even if just internally, to employee and media concerns over Foxconn and other plants. He promises the company will "dig deeper," and he notes "We know of no one in our industry doing as much as we are, in as many places, touching as many people."

In other mobile news

A German court today rejected Samsung's lawsuit against Apple, the second such dismissal in a week. The claim, similar to another lawsuit, alleged Apple had infringed on Samsung's patents related to 3G wireless technology.

No reason was given for the dismissal by the court, however. For Samsung, this outcome must be disappointing. But the Korean electronics giant is known for its fighting spirit and unlikely to back down, according to some.

Samsung swiftly dismissed the loss. "Today's ruling relates to only one of several patents asserted by Samsung at the German justice system, and it is of no indicative value as to whether Apple may be found to infringe on Samsung's other intellectual property rights in that country," Samsung said.

Apple wasn't immediately available for comment. The lawsuits are part of a broader legal battle between the two companies that span multiple countries and several courtrooms.

The idea is to score a decisive enough legal victory in just one major market, forcing the two sides to resolve their differences and come to terms on a cross-licensing agreement. So far, that has been difficult to achieve, and there are different opinions from some wireless industry analysts that think Samsung is up against many odds with this.

Additionally, Samsung has other lawsuits pending in German courts. "A ruling on an additional Samsung patent relating to telecommunications standards is due to be handed down by the Mannheim court in the next several weeks," Samsung said.

Beyond the dueling in the courtroom, Apple and Samsung are increasingly fighting in the market for smartphone dominance. While Samsung was the leading smartphone manufacturer in the third quarter, Apple retook that crown in the fourth quarter, thanks to the iPhone 4S.

In other mobile news

Amazon said earlier this morning that it has dropped the price of the Samsung Galaxy Nexus smartphone, Google's flagship Android 4.0 phone, to just $99 on its Amazon Wireless store.

The decision is seen by some wireless industry analysts as a desperate move to fight off growing competition from Apple's immensely popular iPhone. But there is a small catch though. The low price (about half that of similar online deals from places like Letstalk.com) is only available to new Verizon Wireless customers and naturally requires a new contract with the wireless carrier.

That means that if you're already locked into a Verizon contract, you can still upgrade from your Droid 2.

For existing Verizon customers looking to upgrade, Amazon charges $259 for the Galaxy Nexus. Not such a great deal, but better than what you'll pay if you're the type who wants to have your Ice Cream Sandwich and travel with it, too.

An unlocked Galaxy Nexus from Amazon gets only a $70 discount, bringing the price down to $729-- still a pretty expensive proposition.

If you're looking to jump to Verizon and are in the market for a top-of-the-line Android phone, this deal might be for you.

In other mobile news

AT&T Mobility this morning delivered its fourth quarter financial results, saying that it witnessed a huge growth in mobile broadband sales and smartphone activations, with Apple's iPhone accounting for about 81 percent of all devices sold and activated by the wireless carrier.

Overall, AT&T sold no less than 9.4 million smartphones in its last quarter, with the iPhone contributing 7.6 million of that total. Despite the big increase in iPhone activations, it was also a record quarter for Android activations as well.

In comparison, Verizon activated 2.3 million 4G devices and 4.3 million iPhones, doubling from the third quarter’s 2 million, but even then AT&T still sold about 77 percent more iPhones than Verizon in the last quarter.

This simply means that AT&T’s sales growth between the third and fourth quarters was 181 percent, with Verizon Wireless posting impressive numbers as well of 115.2 percent.

An average of about 70 percent of all smartphones sold by the U.S.' two largest wireless carriers were iPhones. It’s no wonder that Apple posted sales of 37 million iPhones this week.

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Source: CFNT.

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