S17: Profits and Rights

China and Taiwan

• 1974: Founding of Foxconn as Hon Hai Precision Industry in Taiwan
• 1988: Foxconn created first factory in Shenzhen
• 2008: Beijing Olympics
• 2010: 18 young rural migrant workers attempted suicide at Foxconn
• 2012: Xi Jinping becomes CCP General-Secretary

Apple

• 1976: Founding of Apple
• 1984: Mac released
• 1997: Steve Job returns to following near bankruptcy
• 2003: iPod launched
• 2007: iPhone 1.0
• 2011: Job dies; Tim Cook becomes CEO

• How did Apple change China? How did China change Apple?
• Foxconn, Apple, and the Chinese state: How did they create China’s new working class?
• Was Apple wrong to tie its fortunes to China? What would de-risking look like? When commercial interests conflict with national interests

• One of the first entrepreneurs to understand that the personal computer would appeal to a broad audience
• First success: Apple II, complete with a keyboard, and they arranged to have a sleek, molded plastic case manufactured to enclose the unit.

IBM

• Contract manufacturers like SCI, Solectron, and Flextronics emerged, ending the era of vertically integrated computer companies.
• IBM used SCI’s automated surface mount technology for efficient circuit board assembly.
• This innovation allowed IBM to produce PCs at high volume and low cost, gaining market dominance.

Apple

• Apple II parts were assembled by immigrant women in a decentralized network.
• The original Mac failed due to poor memory, few apps, high price, and flawed manufacturing.
• Steve Jobs left Apple in 1985 after losing a boardroom showdown.

Apple’s product development followed a pyramid structure.

• Jony Ive’s Industrial Design team defined the product’s look and feel.
• Manufacturing engineers worked with component makers and assembly partners.
• Operations optimized for scaling, price, and competition, and found new vendors.

The Problem

• The company had a design-first approach with zero tolerance for imperfection.
• Tensions arose between teams due to different incentives, like Ops focusing on price/volume versus quality.

How Foxconn Helped

• In 1998, Cook partnered with Foxconn, a less experienced company at the time.
• Foxconn built specialized production lines for Apple, creating a supply chain hub around assembly.
• This system enabled a just-in-time process, keeping Apple’s inventory virtually zero.

• Terry Gou founded Hon Hai Plastics (later Foxconn) in 1974 from humble beginnings with $7,500.
• Gou entered the PC revolution in the early 1980s, making computer sockets and connectors.
• The name “Foxconn” combines “Fox” (Gou’s favorite animal) and “conn” (for connectors) – an aspiration to produce electronic connectors at nimble foxlike speed.

• What is Foxconn? What is its business model?
• How does Foxconn work with Apple?

OEM Model:

• Foxconn pursued a vertical integration strategy, controlling components and sourcing.
• They focused on being an Original Equipment Manufacturer (OEM), not a designer (ODM).
• As an OEM, Foxconn prioritized meeting client manufacturing needs above design.
• This narrow focus enabled deeper supply chain control and greater scale.

“6C” products:

• computers: laptops, desktops, tablet (such as iPads)
• communications equipment (iPhones)
• consumer products (digital music players, cameras, game consoles, TVs)
• car parts (automotive electronics)
• content (e-book readers such as Kindle)
• health care products.

• Gou realized the value of working with Apple was learning, not just profit: He offered to iMacs at a lower cost.
• Foxconn gained deep education and skills by collaborating with Apple engineers, with the goal of applying these lessons to other, more profitable clients.
• Foxconn’s revenue grew from $1.8 billion in 1999 to $98 billion by 2010 – most of it driven by Apple

Typical outsourcing:

• Parts made by different manufacturers
• Final assembly selects components off the shelf

Apple:

• Apple’s strategy required close integration with
• Vertically integrated manufacturing: Apple embedded its engineers with suppliers to design custom parts, develop manufacturing processes, and train local workers.
• Yet Apple doesn’t theoretically own anything: it purchased and dedicated machinery to its suppliers for its exclusive use.

• Who are Foxconn’s workers? How is labor organized? What is their work condition?
• What’s the relationship between Foxconn and local governments like?

• Foxconn ran facilities with extreme, military-like efficiency, enforcing strict rules like forbidding talking on the production line.
• Workers performed highly specialized tasks, shifts were long (often 12 hours), and managers closely monitored output and defects. Beatings were common.
• Employees were given a “Little Red Book” with Gou’s sayings, which ranged from inspirational to threatening.

• Foxconn relied a specific migrant working class, often referred to as “peasant-workers,” who lack urban rights and are tied to rural economies.
• Over 85% of employees are rural migrants between 16 and 29 years old.
• “Dormitory labor regime”: weeks of 60-70 hours common, and student interns were increasingly used.
• Foxconn’s factories employed over a million workers in total in 2010; a single factory could employ over 400K.

• How do we make sense of the deaths of Foxconn workers? Was it suicide or murder?
• Why did corporate social responsibility and supply chain audits fail to address workplace oppression?
• Could such a migrant working class resist the combined power of powerful corporations and the Chinese state?

• Foxconn workers won some limited victories, like wage increases and better conditions.
• Company, state, and unions prevented rights like striking or independent unions.
• Local governments encourage Foxconn factories to boost GDP, often overlooking labor law violations and worker protections.

• In 2022, employees at the world’s biggest Apple iPhone factory (Foxconn) in Zhengzhou were beaten and detained in protests over pay amid anti-virus controls.
• Thousands of workers faced police in protective suits who beatings and clubs against protesters.
• Apple warned of iPhone 14 delivery delays; analysts estimated roughly $1 billion a week in lost iPhone sales.

• 2025: Chinese influencer Hu Chenfeng censored for comments that reinforced social divisions: He classified people and items as either “Apple” or “Android” - with the latter used to describe things that are inferior to the former.
• The censorship was part of a broader campaign to curb social media posts that “excessively exaggerate negative sentiments” amid economic slowdown and high youth unemployment.

It is isn’t a story about the globalization of electronics, but rather, about its Chinacation. […] It’s not merely that Apple has exploited Chinese workers, it’s that Beijing has allowed Apple to exploit its workers, so that China can in turn exploit Apple.”

• How did Apple change China?
• How did China change Apple?

• Investment pledges: Apple’s annual investments in China reached $55 billion by 2015.
• Censorship in the App store: VPN
• Data sovereignty: In 2018, Apple announced a new data center in Guizhou province as part of a partnership with GCBD to house mainland Chinese iCloud data.

• Apple historically used Taiwanese companies (Foxconn, Pegatron, Wistron) for manufacturing in China.
• Chinese contract manufacturers like Luxshare and Wingtech have recently emerged.
• These Chinese manufacturers are now producing a growing share of Apple’s products.

• Luxshare co-founder Grace Wang started as a migrant worker at Foxconn in 1988.
• Luxshare began by making cables and connectors for Apple.
• Luxshare moved into iPhone production by acquiring a plant in 2020.

• What responsibility, if any, does Apple bear?
• What’s wrong with shareholder capitalism?
• What should companies do when business and national interests don’t align?

Washington made a bet on China—a bet that free trade would liberalize the country and perhaps catalyze the creation of the world’s biggest democracy. Instead, trade enriched China and empowered its rulers. Cook shouldn’t be blamed by politicians for enmeshing Apple’s operations in China two decades ago, but he has erred by doubling down over the past decade […] The problem was, shareholder-first capitalism enabled — indeed, even encouraged — corporations to ignore, if not undermine, the national interest.

• What should be Apple’s government strategy in China? And in the US?
• Where should Apple manufacturer its products, given the trade barriers and political tensions?

• Chinese firms are helping move production to countries like India and Vietnam.
• Production moved outside China may still be under Chinese ownership.
• China’s manufacturing share grows as it focuses on high-tech components while lower-end production moves out.

• China’s expanding manufacturing value chains can mask its growing overall share.
• China’s advancement in high-value manufacturing might limit how far other countries can progress up the value chain.
• China’s strong manufacturing ecosystem, partly developed by foreign companies, also benefits Chinese brands.

• 2025-10: Apple announced plans to expand its manufacturing in Vietnam for smart home devices and iPads, partnering with BYD for final assembly, testing, and packaging of upcoming products.
• This collaboration highlights BYD’s growing influence as a hardware supplier beyond electric vehicles.