Member Article

Apple “model” damaging to Asian profits and jobs

A team of experts at the University of Manchester say the West’s globalised system of doing business, exemplified by Apple, is hitting profits and jobs in Asia and United States.

The report from the Centre for Research on Socio-Cultural Change (CRESC) was published as the multinational company’s profits soared to a record $11.6bn while Taiwanese multinational Foxconn, which assembles electronic components for Apple and other companies, struggles to restructure and relocate to lower wage areas.

CRESC says key western companies are using their position within the supply chain to “pass on misery” to Asian subcontractors such as Foxconn.

They look at the effects of a “relentless quest” for Western companies to enrich their shareholders, and also examine the dominance of the finance industry on global supply chains.

Professor Karel Williams from The University of Manchester, Director of CRESC, said: “Apple’s obsession with providing profits for its shareholders harms its domestic economy’s employment base, while hindering the development of their Asian subcontractors.

“The only benefit is to its multi-billion dollar reserves. However, Apple has a fragile business model which generates huge profits from tactical innovation in the volume sale of ‘must have’ devices.

“If Apple were willing to accept lower margins and the assembly labour on the iPhone were onshore and paid at US rates, Apple would still have a gross margin of nearly 50%.

“Apple’s actions should make us all reflect on ‘financialization’ and its effects.”

Historically, new Asian companies with low wages selling into high income markets do well, according to CRESC analysis, however because of the effects of the Apple model, Foxconn, is suffering as an unsuccessful Western manufacturer would.

Professor Williams added: “We ask to what extent does Western corporate power stand in the way of the upward mobility of Chinese firms trying to escape dependence as sub-contractors?

“And why are the assembly jobs in China when the assembly work could be done in the United States if Apple’s profits targets were lower?”

This was posted in Bdaily's Members' News section by Tom Keighley .