Apple Manufacturer Foxconn Is Under Fire Again

FoxconnApple (AAPL) is backpedaling -- an unusual move for the world's most valuable tech company.

Foxconn, the Chinese contract manufacturer that probably pieced together your new iPhone or iPad, has come under fire on ABC this week. In a segment that originally aired on ABC News on Monday, and expanded into a special edition of Nightline a day later, Apple allowed a journalist into Foxconn's factory.

Maybe Apple figured that ABC would present a glowing perspective of the facility. ABC parent Disney (DIS) and Apple have been tight since Steve Jobs sold his majority-owned Pixar to Disney. Jobs' estate is Disney's largest single shareholder. Disney CEO Bob Iger sits on Apple's board.

The ABC report seemed balanced enough, but Apple, Foxconn, and even the Fair Labor Association have now chimed in with corrections.

More importantly, people are now talking about why Apple isn't making its cutting edge gadgetry closer to home.

Fox Hunt

Foxconn has come under fire before. An unusual number of suicides at the factory's adjacent dorm -- where many of the employees live -- drew unwelcome attention to the high-tech assembler.

However, that didn't stop thousands of job seekers from lining up for hours in the Chinese city of Zhengzhou in hopes of landing a job at a new factory there.


The Fair Labor Association has been investigating the contract manufacturer's practices, and unconfirmed reports are claiming that Foxconn hid underage employees during the auditing process.

The combination of jingoistic fervor in the United States and bad press for Foxconn is making things difficult for Apple. However, there's more to this story than simply Apple looking to save some money.

The Real Reason Your iPhone Is Made in China

When you call a telephone support line and someone from Bangalore answers, there's no question about why: Outsourcing customer service to an Indian call center saves a company a nice chunk of change.

However, moving manufacturing to Asia isn't just about the access to cheap labor. An eye-opening New York Times article last month details why Apple leans on Foxconn.


Barack Obama approached Steve Jobs at a dinner last February, asking him what it would take to move production back into this country.

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"Those jobs aren't coming back," Jobs reportedly told the president, pointing out how Asia offers shorter lead times and a greater pool of skilled factory workers. You won't find too many companies with U.S. workforces so dedicated that many employees actually live in a factory's dormitory, allowing for quick and cheap assembly line alterations to make sure that hot products go out on time.

Yes, money is an issue, but if folks incensed about Apple moving jobs overseas believe that ripping into Foxconn will bring those jobs back, then they're missing the bigger picture.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article, except for Disney. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and Walt Disney. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.

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