Apple recently reported astounding financial results in which profits grew by an awe inspiring 50% on a huge basis with Net Profits Margin of 30% which is crazy for a company of Apple’s size. It generates massive cash flows and has over $100 billion in its cash war chest. While there are a number of reasons which makes Apple one of the most successful and profitable companies in world history, the global oversupply of labor is one of the chief reasons which is overlooked at .
A recent breakdown of Apple’s Business Model shows that its get almost 2/3rds of the value generated by its globalized supply chain while its main manufacturer Foxconn does not even reach double digits . Foxconn the HK based global outsourcing giant employs 1 million workers and makes products for major global MNCs like Microsoft and others. The condition of the workers in its factories are pathetic with most workers getting hardly $10/day . For Apple earning more than 50% GM on its products paying $10/ day to its workers would generate massive protests. However since its exploits globalization of labor ,it escapes any public scrutiny or protests. Since it is outsourcing manufacturing to Foxconn it escapes the blame for the numerous suicides and systematic exploitation of the workers. Global Capitalism is working too well for the capitalists, corporations and too badly for the global workers.
One of my theories is that a lot of distortions and opportunities for arbitrage that we are seeing in the world today is because “Labor is not Globalized while Capital and Trade are “.However the Restrictions on the “Globalization” or in other words Free Movement of Labor is being reduced through the following trends
- Improvement in Communication and Transportation, that has given rise to Outsourcing
- Creation of regional blocs like the NAFTA,ASEAN ,EU etc. has allowed broken the labor barriers within the bloc between the members.This has resulted in “winners” in the form of the “poorer members labor” and “losers” in the form of “richer members labor” .
- MNCs like IBM,Applied Materials with operations spread across multiple countries exploiting this situation by moving most of their labor requirements to low cost locations .
Net income more than doubled to $13.1 billion as Apple sold 37 million iPhones and posted $46.3 billion in sales. The total ranks among the highest quarterly profits on record. Apple’s earnings were about 11 times the size of Zambia’s gross domestic product.The company’s almost $100 billion in cash and equivalents is larger than the combined market value of Boeing Co., Alcoa Inc. and Travelers Cos. — three of the 30 Dow Jones Industrial Average companies. For calendar 2011, Apple’s sales rose to $127.8 billion, bigger than the size of New Zealand’s economy, according to data compiled by Bloomberg.
Foxconn, which manufactures gadgets for the likes of Apple, Sony, Nintendo and HP, among many others, has had a grim history of suicides at its factories. A suicide cluster in 2010 saw 18 workers throw themselves from the tops of the company’s buildings, with 14 deaths.In the aftermath of the suicides, Foxconn installed safety nets in some of its factories and hired counsellors to help its workers.Several reports from inside Foxconn factories have suggested that while the company is more advanced than many of its competitors, it is run in a “military” fashion that many workers cannot cope with. At Foxconn’s flagship plant in Longhua, five per cent of its workers, or 24,000 people, quit every month.