New Report Delves Into Inner Workings of Foxconn's Zhengzhou iPhone Plant

[MacRumors]

In a lengthy new article posted online today, The New York Times has delved into the inner workings of Foxconn's major iPhone manufacturing plant in Zhengzhou, China, referred to locally as "iPhone City." The article describes how the facility became one of Apple's major global manufacturing plants, as well as the "hidden bounty of perks, tax breaks, and subsidies" uncovered behind the scenes of Foxconn's operations -- negotiations Apple said it is "not a party to."

Looking at the origins of Apple's move to production overseas, the article first details Steve Jobs' decision to manufacture the Macintosh in its facilities in Texas and California in the mid-1980s. Following the company's financial slump in the 1990s, Jobs upon his return made the decision to outsource production in places like China. Partnerships with the likes of Foxconn provided Apple with the "heft and expertise" to create products, including the original iPod, on a massive scale.

Workers leaving the Foxconn factory​

When Apple's sales took off after the introduction of the iPod in 2001, Foxconn had the heft and expertise to meet the demand that accompanied each hit product. Foxconn's factories could quickly produce prototypes, increase production and, during peak periods, hire hundreds of thousands of workers.

"They have brilliant tooling engineers, and they were willing to invest a lot to keep pace with Apple's growth," said Joe O'Sullivan, a former Apple executive who worked in Asia.

As the launch of the iPhone approached, Foxconn began scouting locations for a new facility around China and created an Olympic-level competition among cities to be the home of its new plant. Officials from various cities offered perks like discounted energy and transportation costs, lower social insurance payments, and over $1.5 billion in grants for factory construction and dorms for workers. After Zhengzhou was chosen, it only took a few months between the signing of the deal and the launch of assembly lines in August 2010.

The city created a special economic zone for the project and provided a $250 million loan to Foxconn. The local government also pledged to spend more than $10 billion to vastly expand the airport, just a few miles away from the factory.

"I was impressed," said Jeff Williams, Apple's chief operating officer, who was part of the early discussions about setting up a factory. "They were very focused."

To create its cohesive export system, Foxconn insisted that the Zhengzhou facility be located within a "bonded zone." This allowed Foxconn to bypass China's stringent restrictions on foreign manufacturing and directly import and export iPhone components, which was further expedited thanks to the facility's purposeful proximity to a nearby airport.

The iPhone plant continued to ramp up, and in 2014 included 94 production lines for the iPhone 6 and iPhone 5s, with an estimated 230 million smartphones having been exported from Zhengzhou in the years it had been open. The government referred to it as "one of the nation's crucial export centers." With all of the work came a labor force "the size of a national army," who relied heavily on government subsidies and produced 500,000 iPhones a day at peak.

A crushing work force begins arriving for the early shift at 6:30 a.m. They travel by foot, by bus, by motor scooter and even by pedicab. They file steadily into dozens of factory sites, spread out across 2.2 square miles. At the peak, some 350,000 workers assemble, test and package iPhones -- up to 350 a minute.

The government pays recruiters a subsidy for every worker they hire, Mr. Liu said. "If the demand is high, then they will pay more," he said. "If the demand is low, then the payment will be low, too."

One of the other major topics of the article centered around the help that Foxconn has received from the Chinese government in return for providing its services to Zhengzhou's financial and political surge over the years. Foxconn is said to receive a bonus for each export target it reaches, according to government records discovered by The New York Times, with subsidies totaling $56 million in the factory's first two years of iPhone manufacturing.

Foxconn, in a separate statement, said it was grateful for the support of the government, noting that it was "no different than similar tax breaks all companies get in locations around the world for major investments."

In response to questions, Apple said it was aware of the government's infrastructure support. But the company added that it had no knowledge of specific grants, subsidies or tax breaks given to its manufacturing partner.

Foxconn remains a loyal partner in Apple's manufacturing processes to this day, most recently considering expansion into the United States and gearing up to be a major supplier of the 2017 iPhone.

The rest of The New York Times' findings, discovered through over 100 interviews with factory workers, logistics handlers, truck drivers, tax specialists and current and former Apple executives, can be read in the full coverage here.

Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

Article Link: New Report Delves Into Inner Workings of Foxconn's Zhengzhou iPhone Plant

 

[nepalisherpa]

350,000 workers spread out in a 2.2 sq-mile area during peak hours? Dang!

 

[pat500000]

Those perks going to disappear by Jan 20th.

 

[gertruded]

Economic warfare to weaken the US strategically. The capitalists have sold them the rope.

 

[big-ted]

Don't see iPhone manufacturing moving to the US any time soon, even if they upgrade to robots they will still be based in China

 

[SlowX]

Remember when the People's Republic of China was communist?

 

[ENduro]

"...and, during peak periods, hire hundreds of thousands of workers..." - the fact they have that many desperate workers at their disposal is depressing for a hundred thousand reasons.

 

[Rootus]

"...and, during peak periods, hire hundreds of thousands of workers..." - the fact they have that many desperate workers at their disposal is depressing for a hundred thousand reasons.

And so it was for everyone else going through industrialization. With time worker conditions there will improve, just as happened in the West.

 

[macTW]

And Apple loves this. Apple, being responsible, make sure the operations are as safe as they could be at that scale. Insert suicide net joke. Many forget that Apple launched an internal review process on their contacted factories and discovered and released that information themselves.

 

[theheadguy]

And so it was for everyone else going through industrialization. With time worker conditions there will improve, just as happened in the West.

You do realize, you are drawing a parallel between them and us (the West) that even during our period of Industrialization did not exist. The future is not always a mirror of the past, especially with totally different cultures and political regimes/empires. There are many, many reasons that conditions may not improve. In fact, there are likely more arguments of why it will not when they try to be even more competitive with us after Jan 20. Your prediction is short sighted.

edit: oh, in no way did I mean to imply that anything magical will happen after Jan 20. In fact, I don't mean to set the bar low, but I consider the incoming administration to be wildly successful if they don't get us all killed.

 

[blacktape242]

i wonder what china's tax rate is on what employees make?

 

[Mr Fusion]

I'm looking forward to the day factories such as these will be fully automated, and need only a few people for oversight. No more "slave labor" when machines can do the work.

It's time for the planet to move past the concept of there needing to be a job for everyone. We need to embrace a future where most jobs can be done by machines, and decide how best to proceed from there.

 

[Turnpike]

People need to stop associating Apple with all of the blame and problems of FoxConn. A LOT of companies get their parts made by them, and I'm willing to bet Apple is doing more than any of the other companies that have work done there to monitor and help the people working there. You don't hear of Samsung sending people there and looking into problems.

Also, as far as jobs and work goes, I bet working there is a pretty desirable option for the employed in the area. At least as far as their options go. The problems are with the country and how it's run.

People (the media) just love to mention Apple when they bring up the issues associated with FoxConn and other factories there because with Apple mentioned in the story, they'll get a lot more clicks, views, and attention.

 

[dogslobber]

Don't see iPhone manufacturing moving to the US any time soon, even if they upgrade to robots they will still be based in China

Robots can work in America too. Once robotics are such that they can replace the human component then China's value of cheap, massive labor is gone. The idea that China can move from providing cheap labor to a center for innovation will fail just as it failed at every other country manufacturers pulled out from when labor costs escalated too much.

 

[Mobster1983]

This is exactly why the US has lost so many manufacturing and other jobs. If you want to bring back jobs from overseas, the US needs to start looking at the benefits they give major companies to entice them to invest in the US. We also need to cut the BS in referring to all major companies as "evil" just because they are trying to maximize profits, which is the entire point of pretty much and business enterprise.

 

[thewitt]

I'm looking forward to the day factories such as these will be fully automated, and need only a few people for oversight. No more "slave labor" when machines can do the work.

It's time for the planet to move past the concept of there needing to be a job for everyone. We need to embrace a future where most jobs can be done by machines, and decide how best to proceed from there.

The utopia where no one works and everyone gets everything for free?

Just so you know, Foxconn is actually automating these factories and eliminating thousands of jobs a year. The Chinese government is financially supporting this as it allows them to keep manufacturing costs low in a labor market where costs are increasing and creating a real middle class.

This means Vietnam and India will get the next factory cities unless China does something to stay competitive.

Where there were once 80,000 employees in a single factory city complex in China, there are now only 60,000 generating the same output thanks to automation.

Those 20,000 people are now out of work. I'm sure they are better off somehow for being sent back to their villages where they can farm rice.

 

[Will do good]

I'm looking forward to the day factories such as these will be fully automated, and need only a few people for oversight. No more "slave labor" when machines can do the work.

It's time for the planet to move past the concept of there needing to be a job for everyone. We need to embrace a future where most jobs can be done by machines, and decide how best to proceed from there.

And what will people do to earn a living? Watch TV/surf all day? remove all their goals and ambitions? Live in peace and harmony? Turf wars or gang fights? Entitlements? Love to hear your vision for the billions of people on the planet with no jobs.

 

[Zaft]

This is exactly why the US has lost so many manufacturing and other jobs. If you want to bring back jobs from overseas, the US needs to start looking at the benefits they give major companies to entice them to invest in the US. We also need to cut the BS in referring to all major companies as "evil" just because they are trying to maximize profits, which is the entire point of pretty much and business enterprise.

They are evil, they should pay for my college education, food and housing.

 

[sir1963nz]

Those perks going to disappear by Jan 20th.

1.Trump does not control the perks in China.
2. Any tariffs Trump applies only applies to goods going to the USA, the rest of the world will simply get Cheaper products than the USA.
3. Impacted countries will put a tariff on US imports. Airbus for example would be pleased to see Boeing being 5% more expensive, as will Japanese car manufacturers. Just because China puts a tariff on US imports does not mean they will put a tariff on ones from the EU.

If anything Trump will create a slow down of world trade, creating a global recession and even MORE US jobs lost.

The rest of the world could also turn around and reduce copyright and patent terms, especially medical ones, so that generics will come quicker and cheaper.

Dump the FAA,FDA etc from having sway over policy outside the USA, the EU I am sure would love to take up the mantle.
Dump the US$ as the standard for trade, the euro will do just as well.

Trump is a warning bell to other countries, reduce your exposure to the US and its policies.
Its is also an opportunity to increase trade internationally (excluding the USA) with the understanding that Asia holds 60% of the worlds population, and 96% of the worlds population lives outside of the USA.

The US (if not already) will soon be only the 2nd largest economy, China will be the biggest, and if the EU plays its cards right, they will soon become 2nd leaving the US 3rd.

Unfortunately the US response will be to sow political discord, and if need be start a few wars around the world to try and maintain their grip on world affairs.

 

[Joe The Dragon]

Watch Apple convince the new administration to create a special "Apple economic zone" in the USA, so the Apple public relations team can move those Chinese workers to the USA and call it in-sourcing.

This is exactly why the US has lost so many manufacturing and other jobs. If you want to bring back jobs from overseas, the US needs to start looking at the benefits they give major companies to entice them to invest in the US. We also need to cut the BS in referring to all major companies as "evil" just because they are trying to maximize profits, which is the entire point of pretty much and business enterprise.

benefits like mini-wage of $0.50-$1.50 /hr no overtime compensation / making low wage workers pay to live on site. and letting them dump waste out in the cheapest ways.

 

[Born Again]

yah i dont see iphones coming to the USA anytime soon. it just doesnt make sense financially.

 

[smacrumon]

Heft, expertise. Maybe. But. The main reason Apple uses Foxconn is that the can pay the lowest wages possible, something that would not fly in many other countries. It's a form of exploitation. As a stockholder, I wish to have nothing to do with this side of Apple. Completely deplorable. Many other stockholders agree. I am part of the change that will see Apple stop exploitation of workers in developing countries. Unethical. Inhumane.

 

[daveak]

People need to stop associating Apple with all of the blame and problems of FoxConn. A LOT of companies get their parts made by them.

While I agree with your point about it not just being Apple, the association is, while a little unfair, also positive. Apple respond by trying to improve things, be that increased wages or better checking of working conditions. By mentioning Apple, as you say, it means more clicks / views. This means awareness of the conditions is raised, hopefully leading to more pressure to improve things.

 

[satchmo]

Robots can work in America too. Once robotics are such that they can replace the human component then China's value of cheap, massive labor is gone. The idea that China can move from providing cheap labor to a center for innovation will fail just as it failed at every other country manufacturers pulled out from when labor costs escalated too much.

Is there any global company currently using robotics to the scale that Apple might need? Serious question.

I'm just wondering if this is possible and what sort of time frame we're looking at.

 

[Mr Fusion]

The utopia where no one works and everyone gets everything for free?

Yes, utopia. Does happiness irritate you so much that if everyone were equal, that would just piss you off to no end? Because it sure sounds like it.

Those 20,000 people are now out of work. I'm sure they are better off somehow for being sent back to their villages where they can farm rice.

So your solution is to impede technological advancement so that everyone may have a job? You're proving my point, and you need to accept the fact that there aren't enough jobs in the world for everyone. I'm saying we as a society need to figure out a solution to this. Moving backwards is not a solution.

And what will people do to earn a living? Watch TV/surf all day? remove all their goals and ambitions? Live in peace and harmony? Turf wars or gang fights? Entitlements? Love to hear your vision for the billions of people on the planet with no jobs.

Virtual Reality. And you might think I'm joking, it sounds stupid... But I'm dead serious about this. If every person on the planet had the choice to live their daily lives in reality or a utopian virtual reality, how many of us you think would willingly jack ourselves into the Matrix and stay there? (And keep in mind I'm talking VR a generation from now which is perfect in every way and in every sense.) I'm willing to bet nearly all of us.