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Foxconn Profit Margin Remains Tight As Apple Flourishes

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paul4339

macrumors 65816
Sep 14, 2009
1,448
732
Didn't Foxconn just open a Brazillian plant for Apple? So obviously, they are still trying to get more business from Apple...BTW, widening Foxconn's profit only makes Foxconn's shareholders more rich (like billionaire tycoon Foxconn chairman Terry Gou), not the workers (unless they offer their 800,000 workers some kind of major profit sharing plan).

So it's either money in Terry's back-pocket or Apple's coffers. Basically it's up to each company to negotiate the best for itself.

Widening Foxconn's margins does not guarantee they will give a penny more to the workers, they just keep it for their shareholders.


.
 
C

Cybbe

macrumors 6502
Sep 15, 2004
369
221
It's highly entertaining to see the fanboy brigade out in numbers, praising Apple as this god-like entity with a right to earn super-profits, asserting its suppliers should join in on the religious praise and be glad they are in business at all.
 
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cambox

macrumors 6502
Jun 8, 2010
256
35
omnipresent
jontech said:
Foxconn doesn't just make Apple products, so how is Apple to blame for another companies slim margins?
Click to expand...

If you read the post I say im not sure how many are working for Apple at Foxconn. I'm beginning to see why Apple dont bring manufacturing back!
 
whooleytoo

whooleytoo

macrumors 604
Aug 2, 2002
6,607
716
Cork, Ireland.
DrMotownMac said:
This is called life, and as everyone's father once told them, it's not always fair.
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Hey, my Dad never told me this! That's so not fair... ;)

cvaldes said:
Guess who convinced Steve to get Apple to dump its factories and outsource manufacturing?

Tim Cook.
Click to expand...

That doesn't surprise me- as one of the crowd who stood in a large assembly room with him as he assured us our jobs were safe and to continue working diligently (and two weeks later the vast majority of us were made redundant).

But I don't bear a grudge. Not me. No, sir. Grrrrrr. ;)

I can't really complain. Many here in Cork had jobs at the expense of higher-paid employees in the US; so we can't really complain when a lower-again cost alternative wins over us.

Moral of the story: unless you're a decision maker in a company, you're expendable. You need to make yourself non-expendable either as an individual by acquiring unique essential skills, or as a group by forming a indispensable collective.

As a company, you need a strategy too. Perhaps at some point in the future Foxconn will be so essential to Apple's plans that it would just be prohibitively expensive and disruptive to move to another vendor; and at that point Foxconn should be able to negotiate better terms. Somehow though, I think Apple are well prepared for that.
 
*LTD*

*LTD*

macrumors G4
Feb 5, 2009
10,703
1
Canada
cambox said:
If you read the post I say im not sure how many are working for Apple at Foxconn. I'm beginning to see why Apple dont bring manufacturing back!
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Apple doesn't bring manufacturing back to the US because it doesn't make any financial sense to do so. And yes, you're correct, production capacity/ability to allocate more workers also figures into the equation.

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Cybbe said:
It's highly entertaining to see the fanboy brigade out in numbers, praising Apple as this god-like entity with a right to earn super-profits, asserting its suppliers should join in on the religious praise and be glad they are in business at all.
Click to expand...

What exactly should we all be bellyaching about? What is there to complain or feel outrage over?

Everyone has the opportunity along the line to earn a profit. Apple has agreements with their suppliers. There are no "dirty secrets" in these agreements that were kept from one party by another. Foxconn has agreements with all their customers.

What's the big issue here?
 
S

samcraig

macrumors P6
Jun 22, 2009
16,779
41,982
USA
*LTD* said:
What's the big issue here?
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There's no real issue. What people are likely responding to is the David and Goliath representation. And Apple is now Goliath. Yes - deals are deals. But I think people look at how amazing Apple is doing and seeing little how that trickles down to their suppliers who you'd think would be doing pretty well. But the evil truth is - Apple is having record breaking profits BECAUSE their supply chain costs them what it does so they can turn around and make large profits.

And seeing how this country (the US) is spending a lot of time debating the 99% vs the 1% and the economy - it's only natural to identify with the underpaid and probably overworked factory employees who make little compared to Apple and Foxconn's executive team.
 
J

JHankwitz

macrumors 68000
Oct 31, 2005
1,911
58
Wisconsin
cambox said:
Isn't it time Apple started to bring manufacturing home?
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They certainly would do bring manufacturing to the States if you would be willing to pay the price. You, the consumer decide what products sell.

I work with a company that purchases components from China. They get quotes from USA companies on a regular basis. China companies bid at 10-15% of what the USA companies bid. Using the US components would cause the final product sale price to jump by 400%. Would you buy an iPad if Apple charged 4 times its current price? I don't think so. They'd be out of business in no time.
 
ericrwalker

ericrwalker

macrumors 68030
Oct 8, 2008
2,812
4
Albany, NY
LTD, I think this is the first time I have ever agreed with you on this forum.

Foxconn is just the contractor to build these APPLE PRODUCTS, they generally go to the lowest bidder. If Foxconn wants higher profits, bid higher on the next contract. They will risk losing the contract to another company. As long as they are profitting, they should count their blessings.

Everyone wants Foxconn to make more money, but I bet most aren't willing to pay more for their products to give them more money.

*LTD* said:
It doesn't make any sense for Foxconn to make their relationship with a major client difficult. Foxconn and Apple saw each others' terms. Foxconn and Apple agreed to those terms. Foxconn has a contractual obligation to Apple. I'm not sure where, in this scenario, giving a partner a "taste of their own medicine" (provided there is actually any wrongdoing in the first place) would actually be rational. :confused:

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The reality of any business relationship is that one party will almost always end up needing the deal more, or needing the other more. If Foxconn feels "exploited" then they can renegotiate with Apple. For now, they have an agreement in place. If Foxconn's workers feel exploited, then it's a matter that is between them and Foxconn, not Apple.
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jasonv1

macrumors member
Apr 7, 2009
39
0
Apple learned from Wal Mart (or Foxconn from Wal Mart suppliers)

Apple wants low costs.
Foxconn wants the business, and can live with a small margin.

Of course Foxconn is setup to build for Apple at this point, so even if the margin goes to zero (or negative) for awhile they will shut up and keep assembling products.

This is pretty much what every Wal Mart supplier goes through. In addition, you better meet their tech needs too (use RFID tags, etc).
 
nylonsteel

nylonsteel

macrumors 68000
Nov 5, 2010
1,552
491
re original article

i have to give foxconn kudos for stepping up to the plate

cranking out aapl products at tight margins

their hard work will probably pay off in the long run
 
Glideslope

Glideslope

macrumors 604
Dec 7, 2007
7,948
5,376
The Adirondacks.
cambox said:
Not sure how many employees Foxcon have on the Apple side of things but theres 80,000 in one of their plants alone. That's thousands of jobs at least Apple keep away from American labour. Is this called being morally corrupt? Business is no business if your consumers are destitue and jobless. Isn't it time Apple started to bring manufacturing home?
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Not until Americans will work for $7.25 a day.

Americans will never work for the wages the FoxCon employees receive. FoxCon actually pays better then the vast majority of Chinese Manufacturers.

Besides, the world is supposed to end Dec 21st 2012. So, can we PLEASE at least try to get through the next 1st Q? :apple:

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GoodWatch said:
So the multiple suicides at Foxconn don't bother you either? Just part of usual business? They should be thankful I guess. Yes, life can be tough.
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Doesn't bother me at all.
Every culture has its share of Mental Health Problems. :apple:
 
ericrwalker

ericrwalker

macrumors 68030
Oct 8, 2008
2,812
4
Albany, NY
Are they committing suicide because they work at Foxconn? Is that Apple's fault? So if Apple stopped using Foxconn and produced in the USA, then I suppose the suicide rate would drop right off? The fact of the mater is, nobody is forcing these suicidal people to work for Foxconn, I am sure the conditions aren't great there, but apparently people still work there. Must be the best opportunity available for some people.

GoodWatch said:
So the multiple suicides at Foxconn don't bother you either? Just part of usual business? They should be thankful I guess. Yes, life can be tough.
Click to expand...
 
M

MattOfStLouis

macrumors newbie
Jan 7, 2012
9
0
ericrwalker said:
Are they committing suicide because they work at Foxconn? Is that Apple's fault? So if Apple stopped using Foxconn and produced in the USA, then I suppose the suicide rate would drop right off? The fact of the mater is, nobody is forcing these suicidal people to work for Foxconn, I am sure the conditions aren't great there, but apparently people still work there. Must be the best opportunity available for some people.
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Pretty much this, with the caveat that Foxconn's working conditions are probably better than many other factories in the area. Foxconn is subject to international scrutiny because of its size and customers. If the Ultra Steel Molding (Shenzhen) Co. Ltd has unsafe working conditions, few notice and there's little pressure on them to change.

Foxconn employs hundreds of thousands of people. This is a massive company. Just based on size of their workforce, there will be several suicides each year. If Foxconn employee's suicide rate was significantly above the Chinese national average, we should be concerned. But it's not.
 
thewitt

thewitt

macrumors 68020
Sep 13, 2011
2,102
1,523
Profit margins for any Chinese owned companies are not to be believed. Anything they publish will be tightly controlled by the authorities.

Apple forces all of their suppliers to comply with extremely high standards of conduct and quality. Foxconn is no exception. Apple auditors are on site and pay attention to not only quality, but workforce treatment in all aspects; work hours and methods, living quarters, cafeteria, health care, quality of life, etc..

No Apple products are being manufactured by exploited workers in sweatshops anywhere in the world.
 
R

ryuok

macrumors regular
Feb 27, 2011
164
158
Hong Kong
There is nothing unfair about this. One is a great company with a great vision and great execution. The other is a good company with good management. You can't compare good with great.
 
C

carlgo

macrumors 68000
Dec 29, 2006
1,806
17
Monterey CA
cvaldes said:
http://money.cnn.com/2008/11/09/technology/cook_apple.fortune/index.htm

By the way, there was no autobiography. Steve didn't write one. He authorized a biography written by someone else.
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Ooops...and I am usually careful about the difference. I even bought and read it. And the link is to the effect that Cook is the one who closed factories and sent the work to China. This to control inventory it says. Why this would be different making something here rather than there is a question. I tend to believe it is because Apple doesn't have to worry about regulations regarding pollution and such, and overseas income escapes taxation here, not inventory.
 
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H

hh83917

macrumors 6502
Jun 30, 2005
297
65
MattOfStLouis said:
Pretty much this, with the caveat that Foxconn's working conditions are probably better than many other factories in the area. Foxconn is subject to international scrutiny because of its size and customers. If the Ultra Steel Molding (Shenzhen) Co. Ltd has unsafe working conditions, few notice and there's little pressure on them to change.

Foxconn employs hundreds of thousands of people. This is a massive company. Just based on size of their workforce, there will be several suicides each year. If Foxconn employee's suicide rate was significantly above the Chinese national average, we should be concerned. But it's not.
Click to expand...

Yes, and that is very true. I've visited several factories in Shenzhen, not electronic ones, but from those pictures, Foxconn's facility, wages, and conditions are some of the best I've seen. To my knowledge, the suicided workers get compensation from insurance companies for injuries/death at work that will cover their families for a long time and was said to be an easy way out to get a large sum of money. It may not happen in other factories because other companies doesn't even have worker's insurance. Critics can say all they want, but unfortunately almost all the crap we purchase in U.S is made this way. Unless, people are will to pay a fortune for the luxury items made in US, Italy, France...etc. where workers are better treated. It's like politics, it's the unavoidable evil in the business world.
 
H

hh83917

macrumors 6502
Jun 30, 2005
297
65
Akack said:
Would have figured Foxconn's profit margin were a little higher.
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I believe they were, but that also can mean they have to make more and make them cheap. Foxconn has to answer to it's creditors/stock holders. They, or any company, will not want to reduce they margin and spare it raising their workers' wages. What happened few years ago when China government suddenly raised the minimum wage in the cities (ie. Shenzen), many businesses scrambled to leave the country. Foxconn survived by moving inland in rural areas in order to survive and compete. Entrepreneurs applauded Foxconn's strategy of keeping costs down, but in another point-of-view, that also means they will start to explore low wage labor at that part of China. Which is the same low-wage, maltreatment, ..etc. complaints from the 1st world countries over and over again. And to be fair, what people called sweat shops in the western world is NO sweat shops at all in the standards over there.
 
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q64ceo

q64ceo

macrumors 6502a
Aug 13, 2010
518
785
I feel very sick.

I do not want to buy items made by exploited workers.

I hate this country

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DrMotownMac said:
I don't get the problem here. Who cares if Foxconn has a narrower profit margin than Apple? If they don't like it, they can either figure out ways to cut costs or raise revenue, like Apple does. For example, they can try charging Apple more money for the parts, but my guess is that Apple will look to competitors as an alternative. Or, they can try to reduce staff or sell off equipment, but then they might not be able to keep up with demand.

This is called life, and as everyone's father once told them, it's not always fair. But it seems to me that the executives at Foxconn are doing pretty well, otherwise they wouldn't remain at Foxconn and Foxconn wouldn't remain in business. If there were no Apple, they probably WOULD go out of business, so they should be happy they have Apple's business and call it a day. For them to try to raise prices with Apple would be stupid and suicidal.

As a physician, I get paid by insurance companies who have much higher profit margins than I do. But if I try to raise my prices, then Blue Cross Blue Shield would simply terminate my contract and I'd be out of business. So, what do I do? I shut-up and act happy that I have a fulfilling job I enjoy which makes me a comfortable living (at least until single-payer medicine is instituted, at which time I'll probably go into the computer business or something else, because I'll no longer to be able to operate my small medical practice).

Bottom line: This shouldn't even be a story. Foxconn is lucky to be in business and should be thankful Apple is doing as well as it is.
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I guess you would have (if you lived in that time frame) preferred cotton picked by American slaves because it was cheaper, too. I mean, those slaves were rather lucky that they got one meal a day, and should be thankful when their slavemaster increased his sales off of his own slaves back.
 
H

hh83917

macrumors 6502
Jun 30, 2005
297
65
q64ceo said:
I feel very sick.

I do not want to buy items made by exploited workers.

I hate this country

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I guess you would have (if you lived in that time frame) preferred cotton picked by American slaves because it was cheaper, too. I mean, those slaves were rather lucky that they got one meal a day, and should be thankful when their slavemaster increased his sales off of his own slaves back.
Click to expand...

Just understand that you are lucky to be born in a country where everything is so readily available, where average salary is extremely high when comparing to the 2nd/3rd world countries. And view what China is going through as a process toward industrialization and high-tech. The communist government over there had opened up to a market economy couple years ago and is already seeing the benefits of it. They are already taking huge strides on improving when you think about other countries like Africa..etc.

And I think the factory owners in China is nicer than the plantation owners back in those day. Slaves don't get paid and weren't even counted as a person, they get raped, and are treated like animals that work 24/7.
 
M

MattOfStLouis

macrumors newbie
Jan 7, 2012
9
0
thewitt said:
Profit margins for any Chinese owned companies are not to be believed. Anything they publish will be tightly controlled by the authorities.
Click to expand...

I think the first sentence is generally true but maybe not for the reason given in the second sentence. Tax evasion is very common among Chinese companies. (A good explanation if anyone is interested.) I think it's more likely that Chinese owned companies underreport profits for their own reasons.

With respect to the article, I don't think Foxconn's profits are abnormally low. Profit margins vary greatly across different industries and manufacturing margins are typically on the low end. This is really an apple/oranges comparison because Apple & Foxconn are different types of companies.
 
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