Burgess COMMENTARY
Why does the stock market price Apple shares to give the company a stock value of $340 billion?

Stock market commentators are excited by the fact that this market valuation puts Apple as the largest in the world, displacing the oil giant ExxonMobil.

The quick answer is that the Apple brand is very well known, they have created iconic products that people all over the world want to own, they are growing rapidly and they are reporting very big profits.

But there is a dark underside to the Apple phenomenon.

Young people might be better off with a good book than an Apple I-phone ir I-pad. The most important thing that has to happen for young people is to become well educated. It is possible for the I-products to help with this, but they are equally efficient at delivering entertainment, some of which is of dubious quality, and all sorts of time consuming addictions.

Apple has very high gross margins. This helps the company to report high profits, and to justify a high stock price. But what costs go into making the I-products low cost. The big theme is that all the compnents of the I-products are manufactured in low wage countries many with rather inadequate workplace safety regulations.

I do not begrudge workers in low wage countries the work that they have courtesy of international trade ... but I do not want to perpetuate the poor working conditions associated with their work, and the danger often associated with the work. I do not like low wages and poor working conditions where they are also linked to no work for workers where safe conditions are the norm. Reasonable profit is good ... but not extreme profit associated with obscene working conditions.

The following is an article from 'Gizmodo' about the working conditions at the Foxconn factory which manufactures Apple products, and after that a PBS Newshour report on another part of the Apple supply chain.
Peter Burgess

BY CHRIS CHANG MAY 19, 2010 2:00 PM 234,946 1249 Share

Undercover Report From Foxconn’s Hell Factory

Chinese newspaper Southern Weekly sent 20-year-old reporter Liu Zhi Yi undercover in Foxconn's factory in Shenzhen, China. For 28 days, he experienced dreadful conditions that the factory's 400,000 employees endure, churning out iPods, iPads, and iPhones for Apple nonstop.

There's no doubt about it. The Foxconn suicides were caused by job stress. Within half a year, there have been nine suicides attempts with seven confirmed deaths at Foxconn's Shenzhen factory. In the last month, that number suddenly increased to 30 new suicide attempts, prompting the company to hire counselors and even Buddhist monks to free the souls of the suicidal from purgatory.

Foxconn is one of Apple's main manufacturer contractors. Thousands of Mac minis, iPods, iPhones and iPads are assembled daily in the Shenzhen factory, which runs 24/7. The company also produces some products for Intel, Dell, and HP, among others.

After the sixth suicide attempt in April, Southern Weekly—described by The New York Times as China's most influential liberal newspaper—sent a young reporter to sneak into the factory as a worker. At the same time, they sent a senior reporter to talk with Foxconn's executives. Their mission: To discover what's really going on in that factory, and find out the true reasons behind the suicides.

During his 28 days of investigation, Liu Zhi Yi was shocked to discover how the factory workers live in a sort of indentured servitude. They work all day long, stopping only to quickly eat or to sleep. They repeat the same routine again and again except on public holidays. Liu surmised that for many workers, the only escape from this cycle was to end their life.

Liu, a graduate student, was chosen because of his young age, since the factory only hires workers in their twenties. He was hired without issue. He signed only one special document: An overtime working agreement that says the company is not responsible for their long hours of working. According to Liu, this voluntary agreement overrules Chinese state regulation.

Foxconn workers only smile on the 10th of every month. That's the day when they get their salaries. That day, the ATM machines inside the factory are crowded with workers. Their monthly salaries start at 900 Chinese Yuan—about $130.

The stress room at Foxconn.

Most of the workers had nothing to say about the popular Apple products they assemble. Most can't afford to own an Apple product. Their salaries can only buy them knockoff versions. While gadget aficionados worldwide discuss which iPhone they should buy, Foxconn workers debate the merits of differing knockoffs.

Tales from the factory

Liu had his most interesting chats with other workers during meals. Some told him that they envied workers who are sick. They get leave approvals and can get some rest. They also discussed about accidents in the factory: One worker got his finger cut-off during production. A few workers think that the machines are cursed. They believe it's dangerous for them to use the machines.

Another worker spoke about one of the favorite activities in the factory lines: He likes to drop stuff on the floor. Why? Workers spend achingly up to eight hours standing up, so they feel that squatting down to grab a fallen object is the most restful moment of their working day.

Workers call their warehouse trolleys their 'BMWs'. While pulling them around, stacked high with tons of goods, they imagine the real BMW they hope to one day own.

According to one worker, they can't live without these dreams. They dream of becoming rich one day. Some spend part of their salaries buying lottery tickets and betting on horse races.

There are other kind of dreams too. Liu says that some of them complain about their love lives. They just can't find lovers in that environment, so they have to find alternatives: In some internet cafes—hiding in restaurants outside the factory—young men can buy access to clandestine porn videos. However, the men say that the movies get boring after long periods of time.

Workers eat in the on-site cafeteria.

Many wouldn't talk of the suicides. Others joked about it. One of the problems may be the lack of communication and friendships between work colleagues. Many workers don't even know the names of the people working next to them. In fact, according to Southern Weekly, the workers find difficult to relate to each other because they are always wearing identical work uniforms and performing the same tasks everyday. They have no interesting topics to chat about because all they do is work. If an employee becomes too stressed, they often have no one with which to share their feelings or to approach for help solving their problems.

Perhaps the 100 counselors hired by Foxconn will help. I wish they had movie theaters and shopping malls inside to help them relax. But, at the end, the most important thing is that Foxconn really needs to be more human and be concerned about the health—mental and physical—of their workers, instead of treating them like dogs.

Chris Chang originally posted about Liu Zhi Yi's Southern Weekly reports on M.I.C. Gadget, a site featuring life, gadgets, and subculture in China.

Transcript of PBS Newshour program

JIM LEHRER: Finally tonight, human costs from China's industrial revolution.

Special correspondent Jeffrey Kaye reports from eastern China for our Global Health Unit.

JEFFREY KAYE: Low-wage workers in China's industrial heartland are increasingly speaking out about labor conditions. Workers at this factory say that, in 2009, they were poisoned making iPhones.

MAN (through translator): I want to tell all the American consumers the story behind the iPhones. We made iPhones with our health.

JEFFREY KAYE: Interviewed in a dormitory for factory employees, these workers say they cleaned iPhone screens using n-hexane, a toxic chemical made from crude oil.

WOMAN (through translator): I used my left hand to hold the iPhone screen when it came down the work line. And with my right hand, I used a cotton cloth dipped in hexane to wipe the screen.

JEFFREY KAYE: Independent studies from around the world have determined that the chemical the workers used, n-hexane, causes neurological damage ranging from dizziness to paralysis. Those symptoms compare to ones these workers say they suffered.

MAN (through translator): I have sweaty feet and hands. I feel very tired.

WOMAN (through translator): At the very beginning, I didn't know I was sick. I just felt weak and tired. Then, slowly, I found it difficult to walk or go up the steps of the bus. Then, one day, I fell over and decided I needed to check what was wrong with me. So, I went to a hospital. I went to many hospitals in many cities. I eventually became very ill. I couldn't walk. I couldn't wash my hair. I had become very weak.

JEFFREY KAYE: Is there anyone else here who was hospitalized?

How long were you in hospital?

MAN (through translator): From November 2009 until July 2010, so about eight months.

JEFFREY KAYE: Their employer is a subsidiary of the Wintek Corporation, headquartered in Taiwan.

NARRATOR: Wintek ranks number one among small- to medium-sized LCD display manufacturers.

JEFFREY KAYE: Besides supplying Apple, Wintek also makes touch-screen panels for Nokia, Garmin and other companies.

NARRATOR: Wintek lights up the displays that grant oncoming wishes.

JEFFREY KAYE: The case of the iPhone workers has shed light on some of the human costs of China's rapid industrialization and prosperity. The nation of 1.3 billion people is transforming itself, turning increasingly into a country that consumes as well as produces goods.

For example, Apple's four stores in China, including this one in Beijing, are on average the firm's most profitable. China's increased wealth has raised living standards, although the nation faces a growing gap between rich and poor.

At the same time, authorities struggle to balance the needs of industry with the welfare of the environment and workers. To Ma Jun, a prominent environmentalist, Wintek and Apple illustrate a troubling pattern in the global supply chain.

His Beijing-based organization, the Institute of Public and Environmental Affairs, tries to track China's growing problems with industrial pollution and worker health.

MA JUN, Institute of Public and Environmental Affairs: Wintek represents the fact that China is now the workshop of the world. We're manufacturing for the entire Western world. And while we are exporting all these cheap products overseas, millions of workers are exposed to some of the unhealthy working conditions.

JEFFREY KAYE: Wintek employees went public about their grievances in January 2010. Although China officially bans strikes and independent unions, worker protests are common. And in a several-hour walkout over a wage dispute, the Wintek workers also complained about their exposure to toxic chemicals.

Last May, Wintek announced it had discontinued the use of n-hexane, had provided treatment as well as compensation for affected workers, and had stepped up monitoring at the factory.

MA JUN: Apple's response is very minimal, if not totally nonresponsive.

JEFFREY KAYE: Over the years, Ma has complained to many multinational corporations about their treatment of workers and the environment, but he says Apple stands out for being particularly unresponsive.

MA JUN: We're -- we're not trying to single out any single company. Apple singled out itself through the process by shutting down the door of communications entirely. And so, it's unique among all the -- all the I.T. brands.

JEFFREY KAYE: Both Wintek and Apple declined our interview requests for this story. But in February of this year, Apple issued a supplier responsibility progress report.

It said, 'In 2010, we learned that 137 workers at the Suzhou facility of Wintek, one of Apple's suppliers, had suffered adverse health effects following exposure to n-hexane.' Apple called the incidents a core violation and said it had required Wintek to fix their ventilation system. The report added, 'Apple has verified that all affected workers have been treated successfully, and we continue to monitor their medical reports until full recuperation.'

But the workers here say their recovery is slow.

And this man says his symptoms persist.

MAN (through translator): The specialist in Suzhou Hospital said I need treatment immediately. But I went back to my company, and they said I don't need to. So, there is a dispute going on between the hospital and my company.

JEFFREY KAYE: You're all continuing to work there, knowing that you may be exposing yourself to future sickness. Why do you continue to stay there?

WOMAN (through translator): I wouldn't be able to get a job anywhere else because I have this occupational disease. I wouldn't be able to get health insurance anywhere else.

JEFFREY KAYE: Apple says Wintek has covered the costs of medical care for the workers, but advocate Debby Chan says Apple should do more.

DEBBY CHAN, Students and Scholars Against Corporate Misbehavior: Apple owes the workers an apology and remedy.

JEFFREY KAYE: Chan is with Students and Scholars Against Corporate Misbehavior, a Hong Kong advocacy group that, for six years, has researched worker rights and safety issues.

What more remedy do you expect?

DEBBY CHAN: At least it should cover the long-term health impact to the workers, because the workers, they are really worried that, if they leave the factory, maybe two years, five years, yet, if their health is deteriorating, then there won't be anyone responsible for them.

JEFFREY KAYE: For its part, Apple, in its report, promised to better police its suppliers. It said it was requiring 80 facilities that were not properly storing or handling hazardous chemicals to change their policies.

JIM LEHRER: Jeff Kaye's next report will focus on reforming the health-care system in China.