What’s Good for Apple is Not Good for the Country


Apple Inc. is the largest technology company in the world, in terms of both revenue and profit. Yet, the California-based company has just 47,000 workers on its payroll in the United States.

Apple recently released a report in which it claimed responsibility for “indirectly” creating an additional 257,000 American jobs in industries that are part of its supply chain, a claim that was “disreputable,” in the words of MIT labor economist David Autor – as if Apple’s suppliers did not have any other customers. Or, as Wharton labor economist Peter Cappelli noted, as if the consumers spending their money on an iPad would not have purchased another product in its absence (see a New York Times article on debates over the report here, including comments from Autor and Cappelli).

While Apple’s claim to have created jobs for UPS and FedEx employees is questionable, however, there is some truth to the argument that Apple is responsible for the employment – and working conditions – at its key suppliers, particularly manufacturers for which Apple is the main customer. This may be the case for some Corning employees in the US (supplying glass for iPhones) and is very likely the case for, tens, perhaps hundreds of thousands of employees at Foxconn in China, which presumably has entire lines or buildings dedicated to Apple.

A recent report by political economist and accountant Karel Williams and his research team at the Centre for Research on Socio-Cultural Change at the University of Manchester looked at the Apple Business Model and its employment effects. They cite a study which found that Chinese workers add $6.50 in value to each iPhone 3, just 3.6% of the phone’s shipping price.

In a counterfactual exercise based on the average wage for electronics workers in the US ($21 per hour) and assuming 8 hours labor per phone, the CRESC team shows that Apple could assemble the phone in the US and still make a gross margin of $293 per phone, which is down from its current gross margin of $452, but still an impressive 46.5% margin.

Assembling the phone in the US would have added benefits for the US economy in terms of direct job creation and multiplier effects – in contrast to the current business model, which decreases US employment and increases the US trade deficit. But healthy profits are not enough, so Apple continues to make superprofits to the detriment of the US economy. What is good for Apple is not good for the US.

But what about Chinese workers? The CRESC team analyzes the financial aspects of the Apple supply chain and argues that, unlike in the Japanese and Korean cases, Chinese suppliers under the Apple model do not have good prospects of moving up the supply chain. Japanese and Korean producers originally had competitive advantage in the international market because their domestic supply chains had a low ratio of labor’s share of value-added. In the context of national supply chains, even suppliers were able to continually upgrade to higher-value added locations in the supply chain.

The story for China is different because it remains at the end of a global supply chain dominated by US firms like Apple, which are able to successfully subordinate their Chinese suppliers through contracts that leave little profit for the latter. As a result, funds for reinvestment are limited and corporate strategy may thus remain defensive.

There is a question, which the CRESC team does not consider, of whether the Chinese suppliers will be able to develop their own R&D capabilities from their own manufacturing operations. For now, most electronics R&D remains firmly embedded in the US, Japan and Korea. But there does remain an open question of whether R&D and manufacturing can remain geographically separate, with the former retaining vibrancy and the latter subordinated to the second- or third-tier via contract. Nonetheless, the CRESC report does crystallize some important questions and provide some provocative answers.

Finally, it must be noted that it is somewhat misleading to call this the Apple business model. The business model of maximizing profit and minimizing domestic employment though global subcontracting was pioneered by many corporations in the 1970s and even earlier, among them Nike, which has always been a brand without its own manufacturing capabilities.

But this model has become a normative business logic among manufacturers since then, and it does, as the CRESC team points out, present fundamental employment problems for home countries of corporations, like Apple, Nike and many others, who take it to its extreme. What was good for GM may have been good for the US, but that was another time, when vertical integration was a normative logic of business.

In contemporary globalized capitalism, maximizing profit is often equated with minimizing (domestic) employment. Is it time yet to get over our collective obsession with sanctifying profit?

Matt Vidal is Lecturer in Work and Organisations at King’s College London, Department of Management. You can follow Matt on Twitter @ChukkerV.

Weekend Edition
November 27-29, 2015
Andrew Levine
The Real Trouble With Bernie
Gary Leupp
Ben Carson, Joseph in Egypt, and the Attack on Rational Thought
John Whitbeck
Who’s Afraid of ISIS?
Michael Brenner
Europe’s Crisis: Terror, Refugees and Impotence
Ramzy Baroud
Forget ISIS: Humanity is at Stake
Pepe Escobar
Will Chess, Not Battleship, Be the Game of the Future in Eurasia?
Vijay Prashad
Showdown on the Syrian Border
Dave Lindorff
Gen. John Campbell, Commander in Afghanistan and Serial Liar
Colin Todhunter
Class, War and David Cameron
Jean Bricmont
The Ideology of Humanitarian Imperialism
Dan Glazebrook
Deadliest Terror in the World: the West’s Latest Gift to Africa
Mark Hand
Escape From New York: the Emancipation of Activist Cecily McMillan
Karl Grossman
Our Solar Bonanza!
Mats Svensson
Madness in Hebron: Hashem Had No Enemies, Yet Hashem Was Hated
Walter Brasch
Terrorism on American Soil
Louisa Willcox
Grizzly Bears, Dreaming and the Frontier of Wonder
Michael Welton
Yahweh is Not Exactly Politically Correct
Joseph Natoli
A Politics of Stupid and How to Leave It Behind
John Cox
You Should Fear Racism and Xenophobia, Not Syrian Refugees or Muslims
Barrie Gilbert
Sacrificing the Grizzlies of Katmai: the Plan to Turn Brooks Camp Into a Theme
Rev. William Alberts
The Church of “Something Else” in “an Ecclesiastical Desert”
Andrew Gavin Marshall
Bank Crimes Pay
Elliot Murphy
Cameron’s Syrian Strategy
Gareth Porter
How Terror in Paris Calls for Revising US Syria Policy
Thomas S. Harrington
Jeff Jacoby of the Boston Globe and the Death of Ezra Schwartz
Michael Perino
The Arc of Instability
Yves Engler
Justin Trudeau and Canada’s Mining Industry
Tom H. Hastings
ISIS and Changing the Game
Lars Jørgensen
Vive la Résistance
John Halle
A Yale Education as a Tool of Power and Privilege
Norman Pollack
Syrian “Civil War”?: No, A Proxy War of Global Confrontation
Sheldon Richman
Let the Refugees In
James Anderson
Reframing Black Friday: an Imperative for Déclassé Intellectuals
Simon Bowring
UN Climate Talks 2009: a Merger of Interest and Indifference
Ron Jacobs
Rosa Luxemburg–From Street Organizer to Street Name
Aidan O'Brien
Same-Sex Sellout in Ireland
David Stocker
Report from the Frontline of Resistance in America
Patrick Bond
China Sucked Deeper Into World Financial Vortex and Vice Versa, as BRICS Sink Fast
Majd Isreb
America’s Spirit, Syrian Connection
James A Haught
The Values of Jesus
Binoy Kampmark
British Austerity: Cutting One’s Own Backyard
Ed Rampell
45 Years: A Rumination on Aging
Charles R. Larson
Chronicle of Sex Reassignment Surgery: Juliet Jacques’s “Trans: a Memoir”
Jeffrey St. Clair - Alexander Cockburn
CounterPunch’s Favorite Films
November 26, 2015
Ashley Nicole McCray – Lawrence Ware
Decolonizing the History of Thanksgiving