IHS: Apple & Others Will Face Public Backlash Over Labor Issues

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The electronics industry will face a public image backlash over its connection to labor issues among foreign contract manufacturers, according to an analysis by IHS. The research firm said that big electronic brands will find risk being associated with manufacturing concerns with labor concerns, much the same way that shoe brands and clothing lines had trouble in the closing decades of the 20th century.

Foxconn Contract ManufacturerImage via Shutterstock.


Last month’s revelation that accusations of worker mistreatment at Apple supplier Foxconn made by author and actor Mike Daisey were based on fabricated information was greeted with pleasure by media and consumers who supported Apple during its brief but intense moment in the spotlight of labor and human rights ire. 

However, a new examination, independent of Mr. Daisey, has since been conducted by the Fair Labor Association, of which Apple is now a member. The FLA audit revealed that “significant issues” remain at Apple’s Foxconn factories.

From the report:

The nearly month-long investigation found excessive overtime and problems with overtime compensation; several health and safety risks; and crucial communication gaps that have led to a widespread sense of unsafe working conditions among workers.

IHS suggested that, similar to the “sweatshop” manufacturing backlash faced by the clothing and shoe companies in the 1980s, the electronics industry’s own “day of reckoning” is upon us. 

Most of the industry focus has been on the increase in manufacturing costs associated with a rise in worker safety and compensation, and how those increased costs will lower industry profits or be passed on to the consumer. IHS argued that the greater worry for electronics companies should be their relationship with contract manufacturers, which topped $360 billion last year, and how a widespread consumer backlash could jeopardize the profits of both parties. 

“The real impact is on the overall relationship of electronic brands with contract manufacturers like Foxconn,” Thomas Dinges, senior principal analyst, electronics contract manufacturing for IHS, said in a statement. “Brands now realize that the biggest risk in dealing with contract manufacturers lies in the potential public relations disasters that can arise from worker’s rights issues.”

As contract manufacturing is a huge part of the electronics industry, accounting for over 20 percent of all manufacturing revenue in 2011, it is inconceivable that electronics brands like Apple, Samsung, and Sony will sever their ties to companies with labor issues. While these companies may attempt to seek alternative locations for manufacturing in an effort to distance themselves from frequent worker safety violators, IHS points out that the extensive supply chain and infrastructure already established in China means that the bulk of global electronics manufacturing will continue to take place there.

The result, therefore, is that these brands must take action now to improve working conditions at their contracted manufacturers and avoid the imminent public and moral backlash that is likely to occur if the situation fails to improve.

Apple has been proactive in trying to get ahead of the issue in its own supply chain. In addition to joining the FLA, as mentioned above, CEO Tim Cook has spoken publicly on the importance of worker well being. The company has also posted a Supplier Sustainability Report that includes ongoing and updated information about worker safety and conditions.

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Comments

nytesky

Since Apple has already taken a proactive stance, even if they are co spidered the McDonalds and Nike of the tech sector, backlash will be minimal.

geoduck

<cynicism>
When Nike got raked over the coals did it make sweatshops go away? After the protests at Wallmart are Chinese garment factories paragons of excellence when it comes to working environment and worker compensation?
The answer is no.
Sure there will be a focus on this issue. This will result in some cosmetic changes. The public will pat themselves on the back and then will be distracted by the antics of some talentless ‘celebrity’ or the political machinations of some mental midget candidate.
In the end nearly nothing will change.
</cynicism>

skipaq

Well put, geoduck.

Scott B in DC

Oh sure… let’s blame Apple for the labor and political problems of the Chinese. Let’s blame Apple for a contractor, whom they have worked with to improve conditions, who is operating within the laws of its home country and probably treats its workers better than similar companies in China. Let’s blame Apple, who may be Foxcon’s largest customer but only makes up 45-percent of its business. Foxcon does work for Dell, HP, and Sony. Where is their blame?

The “problems” are not Apple’s to resolve, but unlike Dell, HP, and Sony who also contract with Foxconn, Apple is working publically to prevent the conditions in Foxconn from getting worse. They really don’t have to do this because this is a problem in China and not Apple’s, but to continually beat on them and ignore Foxconn’s other customers shows hatred for Apple and not journalism!

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