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.