Foxconn Getting By On $8 Per iPhone

A blog about business and economics.
Sept. 25 2012 11:29 AM

Foxconn Getting By On $8 Per iPhone

Obviously the top executives at Hon Hai / Foxconn are hardly the wretched of the earth, but an important piece of context for the riot-inducing working conditions at its factories is that the company itself is surviving on incredibly thin margins of around $8 per iPhone:

The company is the sole assembler for the iPhone 5 this year, with 80-85 per cent of shipments next year as well, according to analysts at Barclays. At an estimated $8 a phone, that workload brings in revenue, but has also put the company under strain. To handle Apple’s demands, Citi analysts estimate, Hon Hai must increase headcount at its Zhengzhou iPhone factory from 150,000 workers in June to 250,000 in October.
Labour shortages have been a widespread complaint among Chinese factories recently, and factory owners, including Hon Hai, have raised wages to entice workers back to the shop floor. This is a delicate balancing act for Hon Hai, which survives on gleaning razor-thin profit margins from the vast scale of its operations.
Advertisement

It's Apple itself a step or two removed from the factory floor rather than Foxconn that's earning the high margins. With $319 in operating margin per iPhone, the actual cost they're paying for assembly is trivial compared to the retail price the mobile network operators pay. The components themselves (the memory, the display, etc.) cost a fair amount more than the manufacturing but in essence all of Apple's suppliers are being asked to live in tiny margins in exchange for huge sales volumes.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Jurisprudence

Scalia’s Liberal Streak

The conservative justice’s most brilliant—and surprisingly progressive—moments on the bench.

Colorado Is Ground Zero for the Fight Over Female Voters

There’s a Way to Keep Ex-Cons Out of Prison That Pays for Itself. Why Don’t More States Use It?

The NFL Explains How It Sees “the Role of the Female”

The Music Industry Is Ignoring Some of the Best Black Women Singing R&B

Culturebox

Theo’s Joint and Vanessa’s Whiskey

No sitcom did the “Very Special Episode” as well as The Cosby Show.

Television

The Other Huxtable Effect

Thirty years ago, The Cosby Show gave us one of TV’s great feminists.

Cliff Huxtable Explains the World: Five Lessons From TV’s Greatest Dad

Why Television Needs a New Cosby Show Right Now

  News & Politics
Weigel
Sept. 18 2014 8:20 PM A Clever Attempt at Explaining Away a Vote Against the Farm Bill
  Business
Moneybox
Sept. 18 2014 6:02 PM A Chinese Company Just Announced the Biggest IPO in U.S. History
  Life
The Slate Quiz
Sept. 18 2014 11:44 PM Play the Slate News Quiz With Jeopardy! superchampion Ken Jennings.
  Double X
Doublex
Sept. 18 2014 8:07 PM Crying Rape False rape accusations exist, and they are a serious problem.
  Slate Plus
Behind the Scenes
Sept. 18 2014 1:23 PM “It’s Not Every Day That You Can Beat the World Champion” An exclusive interview with chess grandmaster Fabiano Caruana.
  Arts
Brow Beat
Sept. 18 2014 4:33 PM The Top 5 Dadsplaining Moments From The Cosby Show
  Technology
Future Tense
Sept. 18 2014 6:48 PM By 2100 the World's Population Could Be 11 Billion
  Health & Science
Science
Sept. 18 2014 3:35 PM Do People Still Die of Rabies? And how do you know if an animal is rabid?
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.