During this morning’s Senate hearing regarding Apple’s tax strategies, Apple CEO Tim Cook provided opening statements regarding Apple’s perspective on the issues. Notably, during a time in which Cook was discussing Apple’s United States-based operations and strategies, the Apple CEO said that Apple’s upcoming Made-in-the-USA Mac line will be assembled in Texas…
Details of just what went wrong are sketchy, as the source for this tale is an anonymous Foxconn staffer chatting to China Business. That report, after being forced through a couple of translation engines, suggests Apple sent back at least five million iPhones, and maybe as many as eight million, “due to appearance of substandard or dysfunctional problems.” Read more
Apple has updated its official China website homepage to offer its respect and sympathy following the disastrous earthquake that has affected the country over the past few days.
The acknowledgement present on Apple’s site reads as follows:
Our deepest condolences to those who were taken away by the Sichuan Yaan earthquake, and respect to all the rescuers. May those who have passed away rest in peace, and may the survivors stay strong.
The company has also offered a statement that pledges cash donations and new Apple devices to help schools that have been affected:
In this difficult time our hearts are with the Sichuan earthquake victims. In addition to cash donations to help the victims ride out the storm, we will also commit to donating brand new Apple equipment to some of the schools in the affected region, and the local Apple staff will be on standby to provide support.
Hon Hai Precision Industry Co, better known by its parent company name Foxconn, posted record quarterly profits in the final quarter of last year, citing increased production and improved efficiency of iPhones and iPads, as reported by Bloomberg.
Net income rose 5.6 percent to $1.2 billion, ahead of analyst expectations, but may face more challenging times ahead … Read more
Update: While it’s hard to read too much into these reports, Foxconn told The Wall Street Journal the freeze on hiring is a result of “a high employee return rate following the Lunar New Year holiday.”
According to the report from Financial Times, Apple’s major assembly partner Foxconn has halted new hiring at its facilities due to a slow down in production for the iPhone 5:
The suspension in hiring by China’s largest private sector employer and the biggest assembler of Apple products, is the first such countrywide move since the 2009 downturn, prompted by the financial crisis. It underscores the weakening demand for some Apple products, which has put pressure on the US company’s battered share price.
Foxconn confirmed it is not currently hiring in its plants located in mainland China, and FT reported the company’s employees were informed that hiring would stop until at least the end of March “in response to reduced orders for the iPhone 5.” While the iPhone 5 doesn’t seem to be experiencing a slow down, according to the latest numbers from Strategy Analytics, the March time frame would line up nicely with rumors of iPhone 5S production beginning in March. Many analysts are calling for a June or July launch of the next-generation iPhone, and Apple could begin initial production as early as next month if true. The decreased production at Foxconn is likely thanks to the expected falloff in new sales in the months following the busy holiday season. Less likely is speculation that Apple could be switching manufacturers.
Recruiters in China told FT that Foxconn has stopped hiring specifically for the iPhone and iPad production lines in many of its factories:
In January 2012, The New York Times published a lengthy report covering the problems with Foxconn’s plants in China. The piece caused uproar, and it pushed Apple to perform its own audit in the factories that make its products and work to address the issues the audit found. Close to a year after publishing its first report, the New York Times has followed up with a second piece that found working conditions are getting better. One of the first steps was in March, when top Apple executives met with Foxconn executives to reduce worker hours and increase wages in 2013. This is said to create a ripple effect that will benefit the entire manufacturing industry.
Past wages and hours, changes are also coming about within the plant. According to the New York Times, new safety measures like automatic shut-off devices and protective foam are now in place to protect workers when doing their difficult jobs of assembling various Apple products. The piece told a story of one worker receiving a wooden, sturdy chair more comfortable on her back than the green plastic stool she once used. Apple also tripled the staff at its California headquarters to ensure safe working conditions across the world.
The changes also extend to California, where Apple is based. Apple, the electronics industry’s behemoth, in the last year has tripled its corporate social responsibility staff, has re-evaluated how it works with manufacturers, has asked competitors to help curb excessive overtime in China and has reached out to advocacy groups it once rebuffed.
Earlier this year, CEO Tim Cook spoke a lot about worker safety while changes were underway. “We insist that our manufacturing partners follow Apple’s strict code of conduct, and to make sure they do, the Supplier Responsibility team led more than 200 audits at facilities throughout our supply chain last year,” said Cook in an email. “These audits make sure that working conditions are safe and just, and if a manufacturer won’t live up to our standards, we stop working with them.” Subsequently, Apple issued a statement to the New York Times this week on the recent changes:
Last week, a report from The Wall Street Journal claimed Apple’s much rumored HDTV set is now in the “early stages of testing” with partners Hon Hai Precision and Sharp. Today, we get more details surrounding the rumored product from the Taiwan national news agency’s English language Focus Taiwan. According to the report, citing sources close to Hon Hai Precision Industry Co., the supplier is testing Apple television designs, but the possibility of the product shipping in 2013 is “unlikely”:
Nevertheless, the source said it is unlikely that shipments of the appliances will begin as soon as the end of next year.
While the report from WSJ claimed Sharp was involved in the initial testing of the product with Hon Hai, Focus Taiwan’s source claimed the possibility of Sharp displaying panels for the product is “not high”:
Asked whether the new Apple TV will use display panels produced by Japan’s Sharp Corp., the source said the possibility is not high.
The source also claimed that Apple is looking at displays ranging from 46 inches to 55 inches, meaning the company likely wouldn’t rely on Sharp’s plants best suited for production of 60+ inch panels: Read more
From iFixit’s ritual iMac dismemberment yesterday, we learn that the particular 21.5-inch iMac they bought says it was “Assembled in USA”. The moniker isn’t new—we’ve seen it since at least a few iMac models back on the packaging. But as far as we can tell, “Assembled in USA” wasn’t etched in the actual machine’s aluminum, leading people to believe that the iMacs that were shipped were “refurbished in the USA”. However, this forum shows that some were actually assembled and sold new with the “Assembled in USA” label (below—27-inch iMac, previous gen).
Regardless of previous endeavors, Apple is shipping new iMacs “Assembled in USA”. PED at Fortune found one. Jay Yarrow at BI found one, too. This isn’t an isolated incident. We also heard that other new iMacs say “Assembled in China”, as you’d expect.
Still, it makes for an interesting question: Is Apple building some of its iMacs in the United States? Is that percentage growing since it seems much of the first line of iMacs are coming with USA labels?
The “Assembled in USA” label doesn’t just mean that foreign parts screwed together in the U.S. either. The U.S. Federal Trade Commission assumes that a “substantial transformation” must happen in the U.S. for the label to be used.
Specifically, the FTC states that the label “Assembled in the USA” should be the following:
A product that includes foreign components may be called “Assembled in USA” without qualification when its principal assembly takes place in the U.S. and the assembly is substantial. For the “assembly” claim to be valid, the product’s last “substantial transformation” also should have occurred in the U.S. That’s why a “screwdriver” assembly in the U.S. of foreign components into a final product at the end of the manufacturing process doesn’t usually qualify for the “Assembled in USA” claim.
Example: A lawn mower, composed of all domestic parts except for the cable sheathing, flywheel, wheel rims and air filter (15 to 20 percent foreign content) is assembled in the U.S. An “Assembled in USA” claim is appropriate.
Here’s where it gets more interesting. The FTC gives the specific example of a computer manufacture:
Example: All the major components of a computer, including the motherboard and hard drive, are imported. The computer’s components then are put together in a simple “screwdriver” operation in the U.S., are not substantially transformed under the Customs Standard, and must be marked with a foreign country of origin. An “Assembled in U.S.” claim without further qualification is deceptive.
That means one of two things: Either Apple or its contractors have some sort of significant manufacturing operations in the U.S., or it is being deceptive in its marketing (something that sadly, isn’t out of character)… Read more
Apple updated the iPhone 5 section of its online store to show shipping estimates for the handset have improved from “3 -4 weeks” to “2 -3 weeks”. The iPhone 5 has seen shipping delays since it first went on sale in late September due to high demand and problems in production. Today’s improvements follow official word from Foxconn in October that production for the iPhone 5 has improved. Foxconn said the iPhone 5 is “the most difficult device that Foxconn has ever assembled,” and it added production is getting better day-by-day. During Apple’s Q4 earnings call, CFO Peter Oppenheimer said, “We’re working very hard to get more into customer hands as quickly as possible.” CEO Tim Cook added, “The demand for iPhone 5 is extremely robust. We are in a significant state of backlog.”
According to a report from Reuters, citing a statement from Foxconn Chairman Terry Gou, Apple’s assembler is having a hard time keeping up with iPhone 5 demand. Gou confirmed previous rumors that the company is indeed “falling short” of meeting supply for iPhones and its other unit, Foxconn International Holdings, is assisting with production:
“It’s not easy to make the iPhones. We are falling short of meeting the huge demand,” Foxconn Chairman Terry Gou told reporters after a business forum.
Following the launch of the iPhone 5, reports claimed employees at Foxconn’s Zhengzhou plant went on strike over quality control concerns and lack of training. The same quality control issues were linked to scratching found out of the box on some iPhone 5 units, but it’s unclear how much these setbacks have contributed to iPhone 5 delays. Another unnamed executive speaking to The Wall Street Journal last month said the iPhone 5 is “the most difficult device that Foxconn has ever assembled. To make it light and thin, the design is very complicated.”
To speed up production of new iPhones, specifically the production of display components, Reuters suggested Apple could provide cash incentives to Sharp, one of its keep suppliers that was thought to have contributed to initial low supplies. Following rumors yesterday that Apple might even be considering making further investments in the failing company, Asymco’s Horace Dediu (via Fortune) speculated today that a $2.3 billion discrepancy in Apple’s 2012 financials might have already went to Sharp: Read more