Shining New Iphone - at What Cost?

Sustainable International Business Fall 2017 / T1
Topic - Group Project

Professor Daniel Traça

Teaching Assistant Vitorino Mello Oliveira[pic 2]

Group members: Ana Correia (20555); Inês Martins (31725); Maria Saraiva (31772)

Title: “Shining new iPhone - at what cost?” – Topic 2: Multinationals and Foreign Investment. We aim to look into why Apple chose to outsource its production in China and what happens in those factories.

Case-study: 

We’ll focus on the partnership between Apple and chinese companies (Foxconn and Pegatron) and its economical and social implications.

 Known for disrupting the mobile phone industry, just in 2016, Apple sold a total of 211.884 thousand iPhone units, resulting in a net sales value of 136.700 million dollars, according to the company's 2016 financial report.

Producing in a large scale while keeping high and innovative standards pressures Apple to find ways to optimize its cost structure. Outsourcing the assembly and manufacture of its components in China was one way of doing it, while also benefiting from the possibility of tracking the emerging market and potentially boost sales and growth.
        However, over the past years, the longtime supplier has come under scrutiny over labor practices in China. Labor conditions in China’s industry-oriented economy have always been a controversial topic despite the fact that recent figures suggest China's labor costs are rising fast (hourly wages hit 3,60 dollars last year according to Euromonitor).

The main motivation of this project is not only to understand what are the implications of such collaborations, socially speaking, but also to study the role of the Chinese government and its policies in such matters – it is becoming a developed country now, how is it possible to have thousands of people still working as slaves?

We’ll analyse the information collected by an “undercover operation” taken by a NYU student in Foxconn’s enormous Longhua plant, last year. His six weeks experience brought back the topic of poor labour conditions in emerging countries, revealing that despite international efforts, the subject is far from its end.

Also, following the news of multiple suicides and complains, the factory of Pegatron, another Apple supplier, opened its doors to the international media for the first time in 2016, providing interesting insights on the production of these gadgets.
        In the end, we hope to be able to analyse the choice of this outsourcing, in opposition to FDI in China.

        Group motivation: The recent release of the new iPhone, which took place last month. Thus, we believe it is an actual, interesting theme, and that affects many of us directly: we sure know someone who walks around with one or more of Apple’s gadgets, how is it possible for such a big company to look the other way when there are people suffering for them to assure big margins?