The hard truth about iPods

A report on how Apple's iPod is manufactured has put the spotlight on China's manufacturing industry.

Put your iPod on pause for a moment. There is something you should know: The Chinese factory workers who assembled your music player work long hours and do not earn a lot of money.

Many of these workers are employed by Hon Hai Precision Industry Co., a Taiwanese contract manufacturer known by its Foxconn brand, the Mail On Sunday, a U.K. newspaper, reported last weekend.

Low-paid workers toil long hours at Hon Hai's Longhua, China, plant to produce Apple Computer's popular iPod nano music player, the newspaper said. It put the monthly salary of these workers at £27 (AU$67.79). Workers at a different company that produces the iPod shuffle were paid £54 per month. These workers paid for their own room and board, which amounted to around half of their salary, it said.

The manufacturing relationship between Apple and Hon Hai is typical in the electronics industry.

In most cases, electronics manufacturing isn't handled by the company that sells the final product, but by a contract manufacturer. Vendors squeeze the contract manufacturers hard to boost their own profit margins, often playing one off against another to get the lowest price. In turn, contract manufacturers look to reduce their costs as much as possible, and that means keeping wages low.

This hard truth explains how corporations can produce affordable electronic products, such as computers, game consoles, and digital music players, that are exported to the U.S. and Europe.

"The monthly wages earned are, yes, low. However, the buying power of those wages can put food on the table," said Danny Levinson [CQ], publisher and editor of BDL Media's, a corporate social responsibility Web site.

The greater purchasing power of the renminbi, China's currency, was noted in a 2005 report on Chinese factory wages commissioned by the US Bureau of Labor Statistics. "Prices of goods and services vary greatly among countries, and the official exchange rate is not a reliable indicator of the relative difference in prices between China and other countries," the report said.

Most manufacturers, including Hon Hai, rely on migrant workers for labor. These workers, usually young women, come from China's poorer rural areas in search of jobs and a salary. For these workers, a monthly salary of AU$67.79, plus room and board, is more than can be earned at home and provides an important financial boost for their families.

Workers are often housed in company dormitories, usually within the same compound as the factory. Security can be tight. Most factories have security guards stationed at outside gates and entrances to the factory.

For example, at Dell's manufacturing plant in Xiamen, workers pass through a metal detector when leaving the factory. The measure was designed to prevent the theft of valuable computer components, such as memory modules, that can quickly drive up the company's manufacturing costs.

Apple is taking the allegations of difficult working conditions at Hon Hai seriously, it said.

"Apple is committed to ensuring that working conditions in our supply chain are safe, workers are treated with respect and dignity, and manufacturing processes are environmentally responsible," it said, noting that claims made in the Mail On Sunday report are being investigated.

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