Dear Apple, Nintendo, Sony And Microsoft,

Right now, you all might be digging your own holes.

The recent rash of suicides at Foxconn's Shenzhen factory has shined a light on the fact that large companies like Apple, Nintendo, Sony and Microsoft have contracted out the manufacturing for devices like the iPad, the Wii, the PS3 and the Xbox 360 to Chinese factories. In what now seems like a daily occurrence, jumpers at the Foxconn Shenzhen factory continue and now have reached 15.

It can be argued that these factories, with their on-site dormitories and $130 in monthly pay, are modern day slave labour. It can also be argued that they offer better wages and possibly a better life for these migrant Chinese workers. I am arguing neither.

(Of course, paying workers more than $US130 a month would cause the price of electronics to go up. Yet, for decades, workers in factories were paid living wages, were able to do things like buy houses, new cars and products. Too bad the U.S. doesn't have much of that left to kick start its economy!)

Instead, these factories, along with China's significantly undervalued currency, are propelling an economic super power. Companies like Foxconn have been contracted to make everything from complex gadgets and consumer goods to textiles and toys. Goods that used to be made in the countries that bought them no longer are.

The factories are veiled in secrecy. The public doesn't really know what is going on in them. Do you?

Nintendo is launching an investigation into the factory suicides, which appears to indicate that the company is somewhat in the dark regarding the situation at Foxconn. Wouldn't it be better to have factories that were managed directly by your companies in the countries in which you are headquartered?

The counterargument here of course is that it is difficult to meet the demand, hence that is why their products are outsourced. Wonder what companies used to do before outsourcing...

Modern capitalism is built upon the concept of having goods made at the cheapest price possible. Modern capitalism has made China very, very rich.

But what happens these factories decide they no longer want to make stuff for you guys and want to make its own products? Its own electronics. Its own video game consoles. China's no dummy. It already has manufacturing down. R&D cannot be that far off.

You are not creating a future market for your goods. These emerging companies are. Right now they might be producing knock-offs, but they won't always be. China continues to explode, and there will be more and more companies of a Lenovo calibre. You are building up your future rivals.

All of these knock-offs, like the Vii and the iPed, might seem oddly comical, but they're a testing ground for Chinese companies to learn the ropes and master the craft. And for customers in China who possibly cannot afford a Nintendo Wii or an iPod, they are viable consumer goods. When you can't afford a real iPod, you buy the next best thing. The next best thing keeps getting better and better.

So feel free to continue to take manufacturing out of the countries in which you are based. Take it to China. And when China becomes too expensive, there is always Africa. And even if you think that by assembling the most sensitive and hi-tech parts in your home country is a way to avoid knock-offs, it's not.

You may think you have a monopoly on good ideas. You don't. The way you are conducting business shows just that.

Yours truly,

Brian Ashcraft

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Comments

    I think this open letter needed to be longer.

    When China decides to re-value its currency (which it will have to do within the next 5-10 years) we are all (especially the US) screwed. Might help Australian exports, though.

    In Nanjing, there's streets, arcades and malls just dedicated to computer accessories and parts.
    The named brands we know here in the western world arent priced much differently, but Ive come across brands i would never had heard of, and the price i dramatically cheaper almost 1/10th of the price.

    Now, having said that, I am still cautious about the quality of some of these products.

    Like this 4 port gigabit adsl2+ router which I just bought for $40AUD, using it at the moment and working fine, mind you, everything is in chinese, and I can only read a few words in it.
    And 2 bluetooth headsets for $7.50AUD each, but have been working fine with my MacBook.

    They are already there, its just a matter of refinement, and more development, which for the most part is already in the country.

    Could this be one of the greatest articles i've read on Kotaku?
    I think so.

    Well said. Unfortuatly companies are driven by yearly profits and rarely think in advanced.

    Greed rules the world and will be it's downfall, oh and we will all get dragged into the clusterf**k that follows.

    Sorry, Brian...but what is your point?

    Digging their own holes - for what - economic doom, losing their grip as ideas powerhouses, trying to hold up any business ethics, being held up as paragons of fanboy adoration, being false prophets of innovation, all of the above?

    If anything, this, and the Oil Spill in USA show how much things never change. Big Money is Big Money - no matter what "ethical" standards they try to hide behind. It's obvious that, even though the athletics industry went through this kind of maltreatment investigation 20 years ago, people/companies are still ruled by the bottom line.

    Even if Nintendo/MS/Apple are digging some holes in that, their place will be filled with other similar companies, and they will adapt or perish. Nike did, during the time when they were under incredible scrutiny for their outsourcing of labour.

    I am not trying to justify the factories by any means, or being cynical. I am just asking - where are you going with this?

      The point is Apple, Nintendo, Sony and Microsoft are complicit in these events, whether they like it or not.

        As are all of us. Most of us either know what kind of conditions our goods are produced under and turn away, or we don't want to find out, we willfully ignore how someone could possibly make a tech product and ship it halfway around the world and sell it for $2 and still make a profit and what that must mean.
        Id recommend anyone read "No Logo" as a bit of a starting point if you do want to know how this all came about.

        http://en.wikipedia.org/wiki/No_Logo

        And perhaps we have to face up to the fact that we are living a lie, that an XBOX 360 shouldn't be able to be sold for $199 and that we should morally pay considerably more.

    Ok... Just to get things straight, the chinese suicide average rate is actually HIGHER than this months.

    Yeah, it needs to be pointed out that the suicide rate at the Foxconn factory is lower than the average suicide rate for the country. The factory has over 400,000 employees at the Longhua facility. so that is about one in 27,000. The suicide rate in Australian males is about one in 4,600, i.e. the rate among Australian males is about 6 times higher than at the Foxconn factory.
    Neither rate is good, no suicide is ever a good thing, but stats can make things look different to what they are in reality.

    Now I do believe that western companies need to take far-far more responsibility for their contractors, and stop hiding behind just simply going 'we put out a tender, they gave us the best price, they assured us their workers are looked after'. At the least companies should tour the factories they contract their work to.

    I left Disney because of the conditions their toys are made under, the animals in the films I worked on were treated way better than the people and kids in the factories that made some of their stuffed toys at the time. The garment industry has similar issues.

    Outsourcing without responsibility is horrible in the true sense of the word, and terrible conditions are in many offshore factories. I don't know about Foxconn, the reports of the hours worked seem pretty bad, but be careful taking the suicides as a direct indicator that it is the factory causing them, when the rates outside the factory are much higher than among those who work in it.

    You're also assuming the these products can be produced free of any US or worldwide patents. Whilst a Vii might sell in China, there's now way you'd every see these land on US or many other countries soil. Big money in this space are the Sony, MS and Nintendo's and they have their hooks very firmly in the US system, through lobbying and the gov't they can lock out China, there's already been a number of US takeover efforts come from China and they've been blocked. Not that China doesn't have a sizeable internal market of their own.

      The point is not that we'll be buying "Vii" or "iPed", it's that it's a relatively small step to go from making obvious knock-offs and building other people's products to designing and making YOUR OWN products. Just look at HTC for an example of a company that has already done it.

    The unfortunate fact is, while it's easy to lay down the white guilt, the cost of living in a first-world country is far too high to just move all spheres of manufacturing and unskilled labour back home. And unless we're willing to pay double or triple our current costs for consumer goods, there's no way around it.

    Most of these companies pay their workers crumbs so they can pass savings onto us (or in Apple's case, keep their criminally high profit margins for themselves). If indeed more Chinese companies start taking on R&D for themselves and elevate their credibility, then it's going to cause huge problems for Apple, Sony and co (Microsoft should be fine, it's mostly software).

    Look at how much HTC has shaken up the smartphone market in barely 2 years. It went from a design manufacturer (making phones for other companies to stamp their logos on) to a full-fledged label that's synonymous with quality hardware.

      Apple doesn't make much money on the iPad, certainly not what I'd call criminally high profit margins, and who are 'themselves'? I'd be surprised if they make 15% on the base model iPad.

    Give it a few years (or decades), manufacturing by robotics will be cheap enough to stamp this kind of thing out. Whether or not that is a good thing remains to be seen.

    Ummm,

    Most of these migrant workers come from rural china.

    Yes, by our Western standards, the Chinese workers are treated appallingly. But,

    1) $130 USD per month is, in China, not too bad when you adjust for purchasing power parity.

    2) Their Foxconn conditions are actually MUCH better than the squalid absolute poverty they would have suffered in rural China (stop romanticizing rural life, it isn't idyllic).

    3) They aren't forced to work there. They choose to work at Foxconn. This is nothing like actual slavery, which was anything BUT a voluntary contractual relationship.

    This article is researched poorly. It is a perfect souffle of recycled cliches.

    Study some economics before you start squealing about "injustice" "caused" by "international capitalism."

    It's a bit unfair to say companies like Nintendo and Microsoft are at equal fault to Apple and Sony.

    Just, hypothetically assuming that all of those companies use Foxconn as their only production facility, MS and Nintendo produce FAR fewer products than Apple and Sony.

    Apple makes computers and portable devices (which there are an obscene number of now).

    Sony makes TV's, consoles, phones, media devices, etc.

    On the other hand, Nintendo ONLY makes consoles and Microsoft produces relatively few devices. Just the 360 and Zune. And a few peripherals.

      well, microsoft has sold 32 million 360s, the ds has sold a staggering 130 million units, whereas the combined iphone and touch sales are around 40 million.

    well its a huge country they may have a few people to spare JOKZ but maybe they should open more factory's around the world. so what they would be paying more to build in other country i am sure the heads of them company's got lots to spare shit i hear all the time about big people in companys leaving with 90m To 50b Wtf Thats Why We Are All Going Broke Its Like That Old Saying The Rich Get Richer And The Poor Get Poorer Its a Dam Shame I Say Its Why I Got into Rap When I Was Young And Now Iam A Rapper Making Songs About trying to stay alive in Fu**ed up world shit maybe that shit about 2012 is right we are killing our self's just remember if the poor dies off so does rich Think about it

    stupid story.
    1 word. Patents.
    As china get more savvy, so will there patent system, which is slowly coming into line with the rest of the world. And in the meantime, knockoffs are mostly illegal outside of china.

    I would pay extra for a product if the company could guarantee that it was made in a factory with some semblance of basic human rights. Maybe have a factory in a developed western country that produces more expensive versions of the same products.
    I agree that these companies deserve to have their patented technology ripped off by the Chinese.

    You are not creating a future market for your goods. These emerging companies are. Right now they might be producing knock-offs, but they won’t always be. China continues to explode, and there will be more and more companies of a Lenovo calibre. You are building up your future rivals

    Precisely, you are educating your future rivals, and there is nothing wrong with that.

    Regions on China, which were in the past popular targets for outsourcing are no longer the cheap labour mekkas they used to be. Wages rise, workplace standards and workers' education levels and living standards rise.

    Sweat shop factories moved to less developed regions, which eventually follow the same path up the economic development ladder. The sweat shop factories will continue to move until there are no more cheap regions in China to move to, and then they go on to India, Brazil, whatever country is still cheap. However, eventually the standards (and costs) will rise there too.

    That is the beneficial side of economic globalisation; not a mistake or a trap. Yes China will be very competitive, and some Western companies will loose. That is fair enough; it is just the nature of the game.

    Even if all the Western companies ganged up together and decided to produce at home at a much higher cost, it would not help them... they would loose in the global competition, including in their home markets.

    Hello guys / Moderation admin.

    Apparently my quote-tags were stripped out. Are you able to please remove the quote (the top paragraph) from my comment all together?

    Thank you...

    Kind regards,
    Anna

    Good work... Thank you for the valuable information.

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