Sofa Analytics No. 226. Electronics factory outside of China, Apple’s experience in the US


It is not surprising when an ordinary person has a vague idea of ​​what the production of electronics looks like, how different factories can differ from each other. After all, an enterprise that produces microcircuits and a factory for assembling TVs are different as heaven and earth, in fact, they are completely different factories. But the stereotype creates a certain generalized image, which differs depending on the level of a person’s reading – for someone it is a workshop with people in masks and white coats, someone has fully automated lines where a person is redundant. Unfortunately, the reality is much more prosaic, and the production of electronics is always manual labor, on the assembly line there are dozens of operations performed by people, not robots.

In 2014, Tim Cook, Apple’s CEO, visited China for his fifth trip to the country. Photos of the Apple CEO visiting factories that produce iPhones, meeting with children in schools, and discussing business issues with Chinese partners have spread all over the world. In these photos, Tim Cook is always smiling, others play along with him. In some ways, this is a picture of an idyll in which there is a large investor bringing money to China, and local industries capable of doing such work. Behind the scenes is why no country in the world can compete with China in the production of electronics. China’s secret weapon in the fight for production orders is not technology, not some kind of secret, inaccessible to the uninitiated. These weapons are people – adolescents, women and men who are ready to replace robots on conveyors and outperform these robots in efficiency.

Donald Trump, after becoming President of the United States, promised to return the production of electronics to the States, this is only part of a large program to return factories to American soil. As such, there is no program, these are isolated steps, they are designed to raise the status of the label “Made in the USA”, to support the local economy. This applies to any industry, be it clothing and footwear or electronics, this is the desire of the President of the United States, which has no exceptions in the form of certain goods. And electronics production is no exception here, in particular, the US President “opened” a factory in Austin, Texas, together with Tim Cook. This factory makes the Mac Pro, and the president used that fact to loudly proclaim that jobs are returning to America.

The populism of the 45th President of the United States is well known, but in the case of the return or launch of electronics production in America, he shares the stereotypes of many officials, top managers of corporations, not only in his country, but almost all over the world. The further a country is from China, the less people have visited factories and immersed themselves in their lives, the more naive they are. Let me ask you a simple question: who will win the race on the assembly line and will be more efficient, a robot or a human? The answer lies on the surface – a properly configured robot does not know fatigue, it only needs electricity and occasional maintenance, so it will win this competition. In an ideal world, it is possible that such an answer would be fair. In our reality, a person easily outperforms a robot in work efficiency, but this is true only for China, where unique working conditions have been created and the cost of this labor remains very low. Let’s take a closer look at this phenomenon.

My work shift lasts more than 10 hours

You’ve probably heard of Foxconn (Hon Hai Precision Industry Co., Ltd), this Taiwanese company is the largest contract electronics manufacturer in the world, most of the iPhones are made in the factories of this company in China. There are more than a dozen such factories scattered across China, each representing a mini-city with production workshops, dormitories for workers, their own canteens, customs zones for exporting goods, and much more. For example, a factory in Shenzhen is often called the city of Foxconn; production buildings, shops, and its own fire brigade, bank, hospital and bookstore are scattered over an area of ​​three square kilometers. Only in this factory can work several hundred thousand workers, it all depends on the orders received by Foxconn. Usually there are about 200 thousand people here, at a peak load their number reaches 450 thousand.

It seems that this is something impossible, a factory can quickly attract hundreds of thousands of people to expand its production capacity. This is the first secret of the success of production in China, in large cities there are many people who are ready to get temporary and low-paying jobs on the assembly line. For example, in America or Russia, there is nowhere to find such a number of people who can be put on conveyors, they simply do not exist. But there is also no other important component of Chinese production – the total submission of workers to the rules set by the factory.

People live in dormitories in a factory, and work shifts can last more than 10 hours during peak productivity periods. At the same time, the conveyor works non-stop, and if something urgently needs to be changed, then people can be taken to work in the middle of the night. There are no serious restrictions for this, and all the attempts of the Chinese government to regulate the relationship between factories and workers are stumbling upon the fact that the efficiency of the latter is falling, and the economy of specific provinces suffers. It was always a game in which the Chinese government tried to find a compromise between turning people into biorobots and minimally protecting their interests. This is a means of pressure on the companies that own factories, but not at all a social program that protects the rights of workers in full.

In January 2007, Steve Jobs showed the first iPhone, according to him, the company has been creating this device for two and a half years.

Sofa Analytics No. 226. Electronics factory outside of China, Apple's experience in the US

Source: David Paul Morris / Getty Images

The first iPhone user was Steve Jobs himself, sales were scheduled for June 2007, there were almost six months left before the product was released. Jeff Williams, Apple COO, recalls that Steve Jobs called him the day after MacWorld 2007: Everything is great, but there is one problem. I carried the device with me and it got scratched in my pocket. I don’t know what it was, keys or something else, but it got scratched … we need glass.

Williams’ attempt to explain the impossibility of solving the problem in such a short time came across what is considered to be Jobs’s corporate management style: No, no, you don’t understand. When deliveries start in June, it should be glass… This is how the collaboration between Apple and Corning Glass began, in such a short time both companies adapted glass created in the R&D laboratory decades earlier. Eleven days before the start of iPhone sales, a mention of glass appears in the press release for the first time, until this moment Apple has not publicly commented on the design change.

But without a Chinese factory, this miracle was impossible in principle. Corning Glass launched glass production in no time, but there was very little time left before iPhone shipments began. Some of these phones had already been produced, it was necessary to change the plastic to glass. We arrived at the Foxconn glass factory in the middle of the night. In the dorms, after the day’s shift, workers slept, they were woken up, each was given a cup of tea and cookies, and then the 12-hour shift began (the story is described in the New York Times). The factory was producing about 10 iPhones a day, and shipments were going according to plan. Foxconn has always denied such practices, as they directly contradict China’s labor laws. But given that Foxconn is praised by managers of many companies for its ability to get workers onto the assembly line at any time of the day, this denial does not hold water.

Young people work on the assembly line, the age of temporary workers can start from the age of 14! The workers do not need any special training, they are taught simple operations, the main thing is to be able to do the same thing for hours without losing the pace. Any mistake, and you will be punished, and the punishment is not only a reduction in wages, but also public humiliation in front of other workers.

To achieve maximum conveyor speed, all operations are measured using electronic stopwatches. It is a kind of competition, where the foremost workers who set records are rewarded with prizes, but their records are then set as the production rate. Over the ten years of this sweatshop at Foxconn factories, productivity at individual operations has increased by 30-60%, which has made it possible to speed up the conveyor by 15-25%, depending on the type of device produced. It is clear that this is achieved due to the extreme stress of the workers, they literally burn out at work. In China, Foxconn employs up to 1.2 million workers, monthly from 10 to 20% of them leave factories, unable to withstand working conditions.

Public punishments are varied, since the pressure in the factory is enormous, these are millstones that grind people’s lives. From the anonymous story of one of the girls from the assembly line:

After the shift, all of us, and this is more than a hundred people, were forced to stay. This always happens when a worker is being punished. The girl was forced to come out in front of us and repent loudly. It should be heard well. The manager will ask the workers at the end how well they hear about her mistakes. Often girls feel that they are losing face. This is very pressing. She is crying. Her voice fades. Then the manager shouts: “If one worker loses only one minute and cannot maintain a working rhythm, then how much time will be lost by a hundred people?”.

So that you understand what this work looks like during at least a ten-hour shift, let’s give the floor to another girl: I take the motherboard off the conveyor belt, scan the logo, put the board in an electrostatic bag, apply a sticker, and put the bag back on the conveyor belt. Each operation takes two seconds. Every ten seconds I finish five operations.

During work, an employee can go to the toilet for ten minutes, and a half-hour lunch break is also usually provided. During periods of peak conveyor load, you cannot leave your place, and the shift can be increased. This work does not just crush, it destroys people in the truest sense of the word. Suicide rates in factories in China are very high, with people being thrown out of the upper floors of dormitories or committing suicide in other ways. After a wave of suicides at Foxconn factories in 2010-2011, safety nets were pulled on all buildings, this was done under pressure from Western human rights organizations.

Sofa Analytics No. 226. Electronics factory outside of China, Apple's experience in the US

Foxconn’s corporate policy has changed slightly, workers are told that they cannot “cause problems.” Many say that nothing has changed, except that now suicides are taking place outside factories and hostels. It is impossible to confirm or deny these words, since there are no such statistics, but formally the situation has improved, the number of suicides on the factory territory has become minimal.

There is huge competition for resources in China, the population is too large and there is relatively little work. Therefore, factories do not lack an influx of fresh blood, people from villages are ready to try their luck at this job, someone withstands and becomes foremen, grows up the career ladder. Most break down and return to their normal lives. But the influx of workers is constant, there is no shortage of people. In most countries of the world, this factor is absent; competition for jobs is not so great. Another point is that people are not ready to turn into robots on a conveyor belt, this is sickening to their perception of the world.

Apple factories in America – a forgotten experience in computer production

In the 80s, Japan’s engineering genius was extolled in America, when the Land of the Rising Sun dominated the US market with its household goods. This was the time when the “Made in Japan” label automatically denoted not only the quality of the product, but also the fact that it was one of the most technically advanced. And this was a real advantage, buyers chose Japanese products because they were associated with quality. It was then that the idea arose that it was possible to create production facilities in America no worse than in Japan. For many companies, this has become a kind of leitmotif in the PR concept, and one of them was Apple. The main product of Apple in the 80s was computers, in 1983 Steve Jobs decided that the production of Macintosh should be located in California, they began to look for a place for the factory. Just in time was the know-how of Japanese companies, and that’s how Apple conceived its factory. It was supposed to be a work of engineering genius, the most automated production, where human participation is minimized. The cost of manual labor in the production of Macintosh was not supposed to exceed 2%.

The factory was built in 1984, huge conveyors produced Apple computers, but unexpectedly it turned out that the share of manual labor is huge. It was impossible to avoid assembly mistakes, the workers did not have a sufficient production culture, which led to marriage, it remained at a high level. Steve Jobs’s dream turned out to be a complete failure. When Jobs was kicked out of Apple, Jean-Louis Gasset took over in the Macintosh division. He decided to spend two days at the company’s factory, try what it means to be a worker, see the picture from the inside. In an interview, he describes his experience with the following words: I awkwardly screwed the display to the computer with a screwdriver. It was embarrassing… At the end of the shift, a lot of dropped parts accumulated under the workplace that did not hit the conveyor. Jean Louis swept them into the trash with a broom. As you can see, the efficiency of the dream factory left much to be desired. It was good old manual labor, and the efficiency was noticeably lower than that of the Chinese factories of the time. Although then their dawn was just beginning. In 1992, the Macintosh factory in California was closed, it was never able to achieve efficiency, and the company did not reach the planned sales volume, the products of this factory were not in demand. The closure was caused by an internal Apple crisis, a combination of different reasons. But a nearby NeXT factory set up by Steve Jobs after leaving Apple also proved it couldn’t work efficiently.

Any market forgets its history, and in America they often want to demonstrate high technologies, they become part of the PR-image of companies. Analogies between Apple’s 1984 factory and modern times can be found in Tesla’s approach. The American plant of the company was positioned as the most robotic, but in practice the machines broke down, they were gradually replaced by people. The analogy with what happened in the past at Apple’s California factory is more than obvious. And the only positive factor is proximity to customers, but it is leveled by the quality of production, a large percentage of defects. And in the case of owning a factory, these are the problems of the manufacturer, not the third party. When the production is located in China, the quality of the goods is higher, the defects are lower, and the contract manufacturers bear all responsibility.

Steve Jobs’ second arrival at Apple was connected with the hiring of Tim Cook, and this actually meant a refusal to develop its own production. Tim Cook’s experience has always been in building a supply chain, building relationships with contract manufacturers. And this became a new chapter in the history of Apple, when the stake in production and partially in development was made on the same Foxconn and other contract manufacturers.

The opening of the American factory in Austin, Texas, did not take place at all in 2019, as the President of the United States said when he was there. It happened in 2013, and the factory is owned by Flex Ltd (the former name of Flextronics). There is an Apple campus not far from the factory, and it really was built by the company to fit its needs. But having its own production in the US is pointless for Apple, it contradicts everything that Tim Cook has done in his professional career. I will quote his words, which characterize well the attitude towards production in America: In the US, if you do decide to hold a meeting of machining engineers, you are unlikely to fill one room. Several soccer fields can be filled in China.

America has no established supply chain, and the Mac Pro factory has always been not a commercial but a political project that was needed by partner Flex, not Apple. Difficulties have plagued the Austin Mac Pro release from its early days. The company’s most expensive computer ran into a lack of conventional screws. A local supplier could only produce a thousand screws a day, their quality was initially lower than what was offered in China by dozens of companies. Therefore, by the time the conveyor was launched, the screws for the Mac Pro were ordered from China, and they were used in the production. Such a trifle as a screw perfectly demonstrates the unreadiness of other countries for local production from scratch, it is necessary to recreate the culture of production, and this applies to both individual components and the assembly as a whole. But in the absence of the fiercest competition between people, this becomes an unprofitable enterprise from an economic point of view. There is no economies of scale, it is impossible to change the performance of lines, the cost of production in a matter of hours due to local labor protection laws. You can list the obstacles for a very long time, they are more or less similar in most countries of the world. The success of China and contract manufacturing rests on the exploitation of people and their labor under very harsh conditions. Nothing like this can be imagined in America or other European countries, it is just an incredible scenario.

Dreamers say that someday there will be automated lines that will produce goods themselves. And these are dreams that are still far from reality. The problem is that such lines are not flexible, any change in the design of the device will lead to the fact that you need to reconfigure the entire line, wasting time and money. The conveyor must always work, 24 by 7, and this is its main task. This is impossible without people and their lives. The stereotypes that modern electronics production almost does not use human labor, unfortunately, is just a delusion. We cannot refuse people, and they are the main force in the production of electronics.

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