Chinese sweatshops hit home

At the Foxconn manufacturing facility in Wuhan China, where Apple products are made, a spate of suicides and a threatened mass suicide over working conditions have attracted a lot of embarrassing media attention.

Now, a week after working conditions at the Foxconn plant were featured in an sobering episode of the popular public radio show This American Life, Apple has released its 2012 Apple Supplier Responsibility Report. The report indicates that 69% of audited suppliers were in compliance with Apple policies on wage and benefit practices; while only 38% were in compliance with policies on work-hour practices.

In other categories, suppliers fared better:

  • Antidiscrimination: 78% in compliance on practices
  • Fair treatment: 93%
  • Prevention of involuntary labor: 78%
  • Prevention of underage labor: 97%
  • Juvenile worker protections: 87%
  • Freedom of association: 95%
In his report on This American Life, master storyteller Mike Daisy doesn’t dispute such findings, and he paints an appropriately conflicted picture of life in a Chinese manufacturing facility that employs half a million people. He interviewed several workers who claimed to be as young as 13. He saw the dormitories  of workers – bunk rooms where up to a dozen people share a 12-foot x 12-foot space.
But they are proud of the products they make – even if many have never used them, or even seen them in completed form.
He talked a woman who was labeled a troublemaker and blacklisted from working by the independent labor board – which exists to address worker grievances – after asking it for help in getting paid for her overtime. He met a man who was fired because he couldn’t work quickly enough after losing the use of his hand due to long-term exposure to neurotoxins used (allegedly since replaced with alcohol) to clean iPhone screens. Sixteen-hour shifts and mandatory overtime routinely result in work weeks in excess of 70 hours for which one might be paid $50.
All of which, some workers say, is an improvement from life in the rice paddies or other places they may have worked.
The company has placed netting around the second floor of buildings on its fenced-in manufacturing campus in response to people who were jumping from roofs.
Here in America, we complain of the great divide between the 99 and the 1%. In Taiwan, where Foxconn is headquartered, Chairman Terry Gou entertained guests at a year-end party by telling them that managing a million animals gives him a headache and suggesting that he is working with the director of the Taipei Zoo to learn how to do it better.
But most surprising for American listeners may have been the revelation that the tiny electrical parts in your iPad, iPhone and MacBook were assembled by hand in a culture where people are simply cheaper than machinery.
For its part, Apple hasn’t commented on Daisy’s reporting. And despite whatever similarities Daisy found to our image of what a Chinese sweatshop is like, Apple isn’t necessarily the bad guy here.
For one, it’s not alone sending high-tech production to China – or even to Foxconn. Further, Apple sets a standard for transparency in its auditing (though its report does not mention name of suppliers where large numbers of violations occurred). HP also makes public the results of its supplier audit. It too deserves credit for the gesture.
At the same time, Apple’s business model demands that it use the lowest-cost manufacturing techniques no matter what the consequences. As a provider of premium products, Apple’s good fortune depends on two things:
  1. Introducing at least one or two breakthrough products every year;
  2. Achieving the ability to sell those products for a price that isn’t too much more than the lower cost competitors that follow it.
This because Apple serves a buying market that has been trained for years to value the lowest price above all other variables.
So to a great degree, Western consumers are responsible for whatever reprehensible labor practices are tolerated and institutionalized at places like Foxconn. That’s just one of the prices we pay for $99 gadgets.
Foxconn is not an aberration. And no matter how much effort Apple, HP and others put into monitoring labor practices in developing economies, it couldn’t possibly be enough.
Anyone who has done business in China knows that terms of a contract will often be considered the maximum level of service – and aggressive oversight is necessary to see that it’s achieved. Every time arsenic is discovered in drywall from China, or lead in toys from China, or poison in dog food, the failure belongs to Western manufacturers who outsourced at the lowest cost then winked before closing their eyes to the process. They may claim to be surprised, but none of this is new. Everybody knows.
Here at BigBadBiz, Apple products dominate the vast array of technological tools that are used. (Well, OK, it’s a couple laptops and an aging iPhone). Even if there was a choice, we admit that we wouldn’t give up these products for something else. But we’d be willing to pay more – even 50% more – if they were made in the United States under working conditions that don’t make us squirm.
Because in the end, everything we buy from China or other developing economies really does costs more than is reflected on the price tag.

15 worst tech failures of 2011

Courtesy of PC World magazine, here is a slideshow of the 15 worst technology failures of 2011. Some represent bad fortune, others are truly stupid. You get to decide for yourself. In case you’re too impatient to view the linked slide show, here are the headlines:

  1. Playstation’s network gets hacked
  2. Netflix introduces/axes Qwikster
  3. BlackBerry’s Playbook flops
  4. Google Chromebooks are slugs
  5. “Color” iPhone app fades
  6. HP introduces/axes Touchpad
  7. Android Tablets sell almost as slowly as Touchpad
  8. TV goes 3D and couch potatoes won’t stand up long enough to buy them
  9. Google TV still goes nowhere
  10. Videogame Duke Nukem Forever is woefully late and lame
  11. HP’s Leo Apotheker announces sell-off of hardware business. HP’s board responds by firing him.
  12. Apple dumbs down Final Cut Pro X
  13. Nintendo 3DS handheld game system is overpriced and underpurchased
  14. Mozilla Firefox alienates users with constant updates
  15. Cisco kills the lovable Flip Video after spending $590 million to buy it





Poorly run HP gives WebOS to the world

HP has finally figured out how it will put the failed purchase of Palm and the even more spectacular failed TouchPad launch behind it. It announced that it’s giving the Palm-developed WebOS mobile operating system to the open-source community.

The gifting of WebOS to the world was probably inevitable; everything HP has touched in the last few years seems to have turned sour, and while WebOS was less than healthy when HP took it on, it’s in even worse shape now. Can anybody do anything with it? Perhaps – if HP promises to get out of the way.

Here’s the background: HP acquired WebOS when it bought Palm in 2010 for more than a billion dollars. Then it used WebOS as the operating platform for its TouchPad tablet, which launched in summer 2011 to compete with Apple’s iPad2.

The TouchPad was an immediate and sensational failure – dropped by HP after just 6 weeks on the market – and resulting in more than $2 billion in write-downs in late 2011.

So in two years, HP has flushed more than $3 billion with nothing to show for it except the possibility of a Thank You note from independent computer programmers.

But those programmers are probably reserving judgment for now. Why?

In its announcement, HP said it would:

“engage the open source community to help define the charter of the open source project under a set of operating principles” that includes “good, transparent and inclusive governance to avoid fragmentation.”

Who knew the people at HP had such a sense of humor. For at least the past six years, if there is one thing HP can’t claim credit for, it’s good governance.

In fact, in September, CNNMoney ran a column headlined “Is HP’s board the worst ever?”

Here’s a basic rundown:

  • In 2005, the board fired celebrity CEO Carly Fiorina amid a range of concerns about earnings misses and company direction (such as the $19 billion acquisition of Compaq that the board approved) – but only after allowing her to sacrifice a handful of top sales executives in an effort to save her job. That’s exactly what you want to do when you believe strategy errors are killing profits: fire the salesmen.
  • In 2006, Board Chair Patricia Dunn tendered her resignation after admitting to allowing private investigators to improperly hack private phone records of individuals inside and outside the company in an effort to stop leaks of proprietary information.
  • A couple days later, Director George Keyworth II resigned after admitting that he was the leak Dunn was looking for. He quit over the privacy violations of Dunn’s investigation (as opposed to the possibility that sharing confidential company information might be a breach in his role on the board.)
  • In 2010, Mark Hurd – the

    HP stock price, Jan. '05-Dec. '11: You call this a recovery?

    replacement for both Fiorina and Dunn – resigned under pressure in a sex scandal, when it was revealed that he had tried to cover up favors he did for an HP contractor with whom he was having a personal relationship. He was givena $12 million severance.

  • In January 2011, a board shakeup resulted in the departure of four HP board members and the arrival of five new ones, including Meg Whitman, former CEO of eBay and 2010 California gubernatorial candidate.
  • In September 2011, HP’s board fired the CEO who had been hired to replace Hurd. Leo Apotheker, who held the job for just 11 months, earned a $25million severance for overseeing a freefall in the company’s stock price (on the bright side, his brief tenure didn’t result in any criminal investigations that we know of). Apotheker – who came to HP from the software industry (SAP) – did the predictable: focused HP development on software and the cloud (the doomed WebOS and Touchpad, for example) instead of HP’s bread-and-butter hardware. If his decisions were stupid, the HP board might have seen it coming, except several board members eventually admitted that they voted to hire Apotheker without ever actually interviewing him.

Board member Meg Whitman has taken over for Apotheker. Reserving all judgment on Whitman until she’s had a chance to do something (though others were pronouncing her a bad choice before she was even named CEO), it is possible that HP, over the past six years, has been one of the worst-governed companies in business.

Which is why independent programmers will get the chance to play with WebOS – good governance or not.

HP WebOS All Hands Meeting

HP CEO announces an all-hands meeting for today (Friday, Dec. 9, 2011) with several hundred membes of its webOS division to discuss the future of their jobs and webOS – the operating system it acquired and in its $1.2 billion 2010 acquisition of Palm.

WebOS was supposed to be the plumbing behind TouchPad – HP’s answer to the iPad which launched, bombed and was euthanized all in a 6-week period this summer.

A link to slighly more info in advance of the meeting: HP WebOS All Hands Meeting.

HP spends $1.2 billion to lose $2 billion and get laughed at

On July 1, 2011, Hewlett-Packard introduced its TouchPad, an electronic tablet designed to compete with Apple’s iPad. A base model TouchPad retailed for $499 – the same as a bottom-end iPad.

According to Arik Hesseldahl’s AllThingsD blog, consumer electronics retailer Best Buy went all-in on the device, buying 270,000 of the units.

At the beginning of August, HP cut the price of the TouchPad by $50 – and dropped it yet another $50 a few days later.

On Aug. 16 – 6 weeks after launch – Hesseldahl reported that Best Buy had only sold 25,000 units. (Equivalent to about 3 hours worth of sales volume when Apple released the iPad2 in March 2011.)

And 48 days after the noisy and expensive launch, it was all over. HP announced that it was killing the product.

What went wrong? According to TechNewsWorld, it had a lot to do with HP management:

“First, there was the taint of the firm’s previous leadership, said Charles King, principal analyst at Pund-IT. The TouchPad runs on Palm’s webOS, which HP acquired when it purchased Palm under the leadership of then-CEO Mark Hurd, who left under a cloud.
Second, HP’s leadership, both C-level executives and its board of directors, seem intent on moving the company away from client products, including tablets…
That combination essentially made the TouchPad ‘the Oliver Twist of tablets – an unwanted foundling,’ [King] remarked.”

The other issue may have been the operating system. HP paid $1.2 million for webOS in April 2010, when it acquired the dying producer of Palm smart phones. The purchase price, according to CNNMoney was a 23% premium above the value of outstanding shares of stock on the day the sale was announced.

Even at the time of the purchase, webOS had little support in the marketplace, and when HP launched the TouchPad, only 300 apps had been developed for it, according to TechNewsWorld. At the same time, Google’s Android mobile operating system was eclipsing iPad’s user base, and Microsoft was launching yet another try at its own mobile operating system.

It’s easy to wonder why anyone at HP thought the market needed – or would make room for – another operating system.

At the time of the TouchPad debacle, HP still hadn’t figured it out – indicating it would continue development of webOS. In a late-November earnings call, Meg Whitman, HP’s latest CEO (the company’s fourth in five years, if you don’t count an interim appointeee in the middle), promised a decision on its future within two weeks.

Disclosing that the company was taking a $2 billion writeoff of the Palm acquisition, Whitman said, “I know we didn’t live up to our expectations in 2011.”

Not everyone who has watched HP over the years would agree.