Friday, December 10, 2010

Apple's ripple effects, and their ripple effects

Bloomberg reports that Foxconn, Apple's largest manufacturing partner, has exceeded one million employees in China. That's approximately 1/10 of 1% of China's overall population, or one person in every thousand, who are being exposed, hands-on to Apple's high standards in design, materials, fabrication, and assembly, developing skills that are applicable elsewhere, and earning enough to be able to send a little home, save a bit, or make the occasional purchase of some non-essential product, like the iOS devices they're building. They're also participating in a massive exercise in logistics, as Foxconn scales up to handle the increasing demand for their primary customer's products.

Just as happened in Japan, which in the wake of World War II was the cheap, semi-skilled labor pool of the 1950s, Foxconn's workers are beginning to demand even better wages and working conditions. So long as Apple's competition is also going to China for their manufacturing needs, and accommodating the demands of workers can be accomplished without it working to the disadvantage of one player or another, workers can expect to see gradual improvement in both wages and working conditions. At some point, however, the temptation of lower labor costs elsewhere will surely result in the movement of some operations to Central or Southeast Asia, India, Africa, or South America. If that difference in costs translates to a market advantage, others will follow. No doubt Foxconn is very aware of this possibility and determined to remain competitive.

Foxconn's CEO has already stated that the company plans to eventually replace most assembly line workers with robots. Right now that's an expensive proposition, but if any company has both the means and the motivation to drive down the price of automation, it would be Foxconn. So, for some large percentage of those one million workers, their present jobs will last only so long as they don't price themselves out of the market, or until their places are taken by robots, whichever comes first. (Because the wages paid to Foxconn's workers are valued in proportion to the average income of a population 1000 times larger, those wages won't result in the same degree of inflation as occurred in Japan, so smaller wage increases can be expected, making the job loss to automation scenario more likely.)

That's, say, 800,000 at least semi-skilled workers, presumably with an acquired taste for quality, that will be released back into the Chinese labor pool, most likely gradually enough to be absorbed into other enterprises. Some of these will surely return to school to become engineers, while others will learn new trades and apply to them the uncompromising standards they're now learning by osmosis. The net effect will undoubtedly reach far beyond the wages they were paid while working for Foxconn, helping to boost China's fortunes generally and giving the country an even greater stake in maintaining stable relations with their neighbors and trading partners, improving the prospects for peace.

Meanwhile, those iOS devices they're producing will be helping to enliven minds around the world, with incalculable ripple effects.

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