David Barboza takes an in-depth and investigative look into the many moving pieces that have and continue to help Apple maintain the foothold it has in China to this day. Combing through confidential government records and a swath of interviews, Barboza explores the complexities technology companies like Apple have to go through to make manufacturing a success overseas. At the same time, the piece highlights the difficulties companies will encounter when attempting to bring manufacturing back to the U.S.
“We are opening five new stores before the Chinese New Year this year. Four of the stores are in brand new cities for us,” said Ahrendts in a telephone interview with Xinhua. The new locations will be opened in time for China‘s Spring Festival, a popular shopping season that commemorates the Chinese New Year, on February 19. Expand Expanding Close
Foxconn is ceasing production of the iPhone 5c at one of its factories in order to boost production of the iPhone 5s, according to sources cited by Digitimes.
Foxconn Electronics (Hon Hai Precision Industry) will stop production of the iPhone 5c at its factory in Zhengzhou, northern China, and shift the capacity to iPhone 5s, according to industry sources.
Digitimes is not the most reliable of sources, but this one gels with other reports suggesting that Apple is cutting back on production of its plastic handset in order to keep up with demand for the iPhone 5s.
The reports can, of course, be viewed as indicating either success for the 5s or failure for the 5c. Given the numbers reported last month, following on from record opening weekend sales, it seems pretty clear that while Apple got its predictions wrong, the reason is good news rather than bad: more people than expected opting for the high-end handset.
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: Expand Expanding Close
The Wall Street Journal spoke with an unnamed Hon Hai executive today about why the iPhone 5 is experiencing supply shortages, and the Taiwanese manufacturer, also known as Foxconn, apparently blamed it on the smartphone’s complicated design and its subsequent assembly process.
“The iPhone 5 is the most difficult device that Foxconn has ever assembled. To make it light and thin, the design is very complicated,” said the executive to the Wall Street Journal. “It takes time to learn how to make this new device. Practice makes perfect. Our productivity has been improving day by day.”
The official did not wish to be named, but he admitted Hon Hai is attempting to better production capacity while apply more procedures to alleviate the reports of damages such as scratches to the iPhone 5’s metal casing.
As you can see from the image above, TIME magazine’s cover story that hits newsstands tomorrow for both the U.S. and international editions is titled, “Made in China: Why Apple’s future depends on the world’s biggest market”. While noting increasing iPhone sales in China, Taiwan, and Hong Kong greatly contributed to Apple’s record earnings of $39.2 billion and ($7.9 billion for Greater China) reported in April, TIME’s Hannah Beech questions, “How much longer will an increasingly nationalistic government allow foreign companies like Apple to profit so handsomely on its shores?” The full story titled “The Cult of Apple in China” is available to TIME subscribers here. An excerpt is below:
The vast majority of Chinese aren’t up in arms about labor conditions at Apple’s supplier factories. A cluster of suicides by Foxconn workers a couple of years ago elicited much more coverage in the West than in China…. Yet Foxconn keeps signing on new workers, even though many other companies complain of labor shortages as Chinese youth increasingly eschew factory work. (Apple runs educational programs for workers in supplier factories.)… Even after all the criticism of Foxconn—the suicides, the industrial accidents, the punishing hours—young Chinese still want a job making Apple devices…
…Apple’s relationship with the People’s Republic embodies some of the global economy’s brightest opportunities but also its thorniest dilemmas. An American tech giant must decide how much to adapt its practices in a faraway land. Should Apple represent the best of the West in the Middle Kingdom, or must it conform to the less salubrious way China Inc. operates? From China’s side, how much longer will an increasingly nationalistic government allow foreign companies like Apple to profit so handsomely on its shores? Caught in the middle are 1.3 billion Chinese whose toil in factories and taste for luxury products will dictate the future of the world’s marketplace.
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