The employees and customers of Apple might be pleased with the groundbreaking steps Foxconn and Cupertino have undertaken to guarantee the health, safety and mental well-being of their workers today… but Apple’s competition are probably not.
Apple’s move to help improve working conditions in its factories by putting its weight behind an independent Fair Labor Association audit of Foxconn’s facilities could indirectly raise costs (and lower margins) of products from Dell, Hewlett-Packard, Amazon, Motorola, Nokia, Sony and more.
According to Paul Martyn, vice president of Supply Strategy at BravoSolution, speaking to The Chicago Tribune, Apple’s move today could cause labor-intensive manufacturers all over Asia to spend more on wages and accept lower products.
In other words, workers at other factories might soon expect to be treated as well as at Foxconn. And that could cause lower margins across the whole tech industry.
That’s not to say that the price of iPads and iPhones are going to shoot up. Labor costs are actually a very small percentage of the overall cost of most gadgets. For example, labor costs are estimated to only make up about 5% of the cost of an iPhone.
But in the high pressure, high stakes world of tech manufacturing, every penny counts. And while Apple might be in a position to accept slightly smaller margins to ensure the well-being of its supply chain workers, more beleagured companies might not.
There’s reason to believe, though, that whatever happens, the price of your next iPhone or iPad will roughly say the same.
“Wages in China have been increasing significantly for years and that hasn’t had any effect on retail prices,” said Brad Gastwirth, co-founder of ABR Investment Strategy, an independent research firm.
Good news for everyone… except Apple’s competitors.