The Asia-Pacific Journal | Japan Focus Volume 11 | Issue 32 | Number 2 | Article ID 3981 | Aug 08, 2013

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The politics of global production: Apple, Foxconn and China'snew working class グローバル生産の政治学　アップル、富士康と中国における新労働者階級

Mark Selden, Jenny Chan, Pun Ngai

Abstract

Apple's commercial triumph rests in part on theoutsourcing of its consumer electronicsproduction to Asia. Drawing on extensivefieldwork at China's leading exporter—theTaiwanese-owned Foxconn—the powerdynamics of the buyer-driven supply chain areanalysed in the context of the national terrainsthat mediate or even accentuate globalpressures. Power asymmetries assure thedominance of Apple in price setting and thetiming of product delivery, resulting in intensepressures and illegal overtime for workers.Responding to the high-pressure productionregime, the young generation of Chinese ruralmigrant workers engages in a crescendo ofindividual and collective struggles to definetheir rights and defend their dignity in the faceof combined corporate and state power.

Keywords:

Foxconn; Apple; global supply chains; labour;China; outsourcing; consumer electronicsmanufacturing; collective actions

Introduction

The magnitude of Apple's commercial successis paralleled by, and based upon, the scale ofproduction in its supply chain factories, themost important of them located in Asia (Apple,2012a: 7). As the principal manufacturer ofproducts and components for Apple, Taiwanese

company Foxconn i currently employs 1.4million workers in China alone. Arguably, then,just as Apple has achieved a globally dominantposition, described as ‘the world's mostvaluable brand’ (Brand Finance Global 500,2013), so too have the fortunes of Foxconnbeen entwined with Apple's success, facilitatingFoxconn's rise to become the world's largestelectronics contractor (Dinges, 2010). Thisarticle explores the contradictions betweencapital and labour in the context of the globalproduction chains of the consumer electronicsindustry. Drawing on concepts from the GlobalCommodity Chains and Global Value Chainsframework (Gereffi and Korzeniewicz, 1994;Bair, 2005; Gereffi et al., 2005), the articleanalyses the power dynamics of the buyer-driven supply chain and the national terrainsthat mediate or even accentuate globalpressures.

The principal focus is on labour in theelectronics supply chain, including workingconditions and labour as agency, consistentwith recent studies of labour as the keyelement in global production chains or

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networks (McKay, 2006; Smith et al., 2006;Taylor and Bain, 2008; Webster et al., 2008;Taylor et  al., 2013). In particular, theconcentration of capital in China and theimportant roles played by Asian contractorsopen new terrains of labour struggle (Silver,2003; Appelbaum, 2008; Silver and Zhang,2009). This inquiry evaluates the incentives forApple to outsource and to concentrateproduction in a small number of final-assemblyfacilities in China. It also examines thepotential risks or disincentives that mightcompel Apple to respond more directly, orresponsibly, to negative publicity surroundinglabour conditions and the collective actions ofworkers in its supply chain. While the specificdetail is concerned with the interactionbetween Apple and Foxconn, the article brieflyconsiders the relationship between otherbuyers (e.g. Dell) and contractors (e.g.Pegatron). Consequently, it locates emergentlabour struggles more broadly in theelectronics sector as a whole.

The authors draw on interviews with 14managers and 43 workers outside of majorFoxconn factory complexes, where employeeswere not subjected to company surveillance.The manager interviewees were responsible forproduction management (four persons),commodity procurement (three persons),product engineering (two persons) and humanresources (f ive persons). All workersinterviewed were rural migrants aged 16–28,who worked in assembly (semi-finished andfinished products), quality testing (functionalityand audiovisual appearance), metal processingand packaging. These interview data arecomplemented by fieldwork observationsconducted between June 2010 and May 2013 inShenzhen (Guangdong), Taiyuan (Shanxi) andChengdu (Sichuan), which are major industrialcentres in coastal, northern central and south-western China. New enterprise-level data haveprovided evidence of the replication ofFoxconn's management methods across itsplants, the tensions between Foxconn and its

largest corporate buyers, the workingexperiences and discontents of workers, andexplosive episodes of labour protest. Primaryevidence is supplemented by company annualreports, scholarly studies, reports from labourrights' groups and journalistic accounts.

The article is structured as follows. First, theliterature on global outsourcing and thechallenges to labour will be reviewed. The nextsection will consider the growth of China as anindustrial power and the emergence anddistinctive character of a new working class.These discussions will be followed by ananalysis of the Apple–Foxconn businessrelationship, and the responses of workers toheightened production demands in the ‘just-in-time’ regime. The concluding part will considerthe future of the young generation of China'srural migrant workers who are struggling todefine and defend their rights and dignity inthe multilayered network of corporate interestsand state power.

The politics of global production

The corporate search for higher profits hasbeen enhanced by efficient transportation andcommunications technologies, neoliberal tradepolicies and international financial services, aswell as access to immigrants and surpluslabour. Multinationals have reduced, if noteliminated, major barriers to capital mobilityacross spaces of uneven development(Harrison, 1997; Harvey, 2010). Withincontemporary global supply chains, scholars(Henderson and Nadvi, 2011; Sturgeon et al.,2011) highlight the power asymmetry betweenbuyers and contractors, in which giant retailersand branded merchandisers play decisive rolesin establishing and dominating global networksof production and distribution. Under buyer-driven commodity chains, Lichtenstein (2009)and Chan (2011) find that American retailersand branded merchandisers constantlypressure factories as well as logistic serviceproviders to lower costs and raise efficiency

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and speed. ‘The determination of retailers tocut costs to the bare bone leaves little room for[China-based] contractors to maintain labourstandards’ (Bonacich and Hamilton, 2011: 225).The distinction between retailers andmerchandisers in their control over suppliershas become insignificant when ‘most globalretailers have successfully developed private-label (or store-label) programs, where theyarrange with manufacturers or contractors toproduce their own label’ (Bonacich andHamilton, 2011: 218). In the electronicsindustry, Lüthje (2006: 17–18) observes thatbrand-name firms have focused on ‘productdevelopment, design, and marketing’, gaining alarger share of the value created thanhardware manufacturing, which is mostlyoutsourced and performed by formallyindependent contractors . ‘Contractmanufacturers’ have emerged to provide final-assembly and value-added services totechnology firms and giant retailers (Starosta,2010; Dedrick and Kraemer, 2011).

Asian contractors have been upgrading andgrowing in size and scale. Lee and Gereffi(2013) explain the co-evolution process thatcapital concentration and consolidation ofbranded smartphone leaders in China andother global supply bases has advancedalongside the expansion of and innovationwithin their large assemblers, notably Foxconnand Flextronics. Appelbaum (2008) finds thatEast Asian contractors, ranging from footwearand garments to electronics, have beenintegrating vertically in the supply chains.Starosta (2010) focuses on the rise of ‘highlyconcentrated global contractors’ in theelectronics industry, in which they servemultiple brand-name firms in different productmarkets. Not only production tasks, but alsoinventory management, are being increasinglyundertaken by strategic factories, resulting inever stronger mutually dependent relationsbetween buyers and suppliers. Giantmanufacturers, rather than smaller workshops,are more able to ‘respond to shortening

product cycles and increasing productcomplex i ty ’ (S taros ta , 2010 : 546) .Nevertheless, Yue Yuen, the world's largestfootwear producer, could only ‘pass on lessthan a third of the cost increase to itscustomers’, including Nike, when ‘costs rosesharply’ (Appelbaum, 2008: 74). Intensebargaining by big buyers over costs and profitshas kept a tight rein over producers, frequentlyslashing profit margins.

In global outsourcing, electronics suppliers arecompelled to compete against each other tomeet rigorous specifications of price, productquality and time-to-market, generating wagepressure as well as health and safety hazards atthe factory level while shaving profit margins(Smith et al., 2006; Chen, 2011). Brown (2010)argues that ‘contractor factories’ are often notprovided with any financial support forcorporate responsibility programmes requiredby brands; ‘instead they face slashed profitmargins and additional costs that can be madeup only by further squeezing their own laborforce’. High-tech commodity producerstherefore ‘focus their labor concerns on cost,availability, quality, and controllability’ toenhance profitability in the export market(McKay, 2006: 42, italics original).

Workers' adaptation, or resistance, to capitalistcontrol has to be understood in this newcontext of global production, in whichconcentration of capital at the country, sectoraland/or firm level has reconfigured the class andlabour politics. In her longitudinal survey ofworld labour movements since 1870, Silver(2003) documents the rise of new working classforces in sites of capital investment for theautomobile industry in the twentieth century.She defines ‘workplace bargaining power’ asthe power that ‘accrues to workers who areenmeshed in tightly integrated productionprocesses, where a localised work stoppage ina key node can cause disruptions on a muchwider scale than the stoppage itself’ (Wright,2000; Silver, 2003: 13). Recently, Butollo and

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ten Brink (2012) and Hui and Chan (2012)reported the factory-wide strike at an autoparts supplier in Nanhai, Guangdong, whichparalysed Honda's entire supply chain in SouthChina, resulting in wage hikes and increasedworker participation in trade union elections.Periodic and limited worker victories aside,managerial assault and/or state repression oflabour protests are still commonplace.

A neoliberal state collaborates with privateentrepreneuria l e l i tes by provid inginfrastructural support and ensuring law andorder, thereby facilitating capital accumulationand economic growth. In China's capitalisttransformation, on the one hand, the state hasstimulated employment and industrialdevelopment through large-scale financiali n v e s t m e n t a n d f a v o u r a b l e p o l i c yimplementation (Hung, 2009; Chu, 2010;Naughton, 2010). On the other hand, it hasseverely restricted workers' self-organisationcapacity and fragmented labour and citizenshiprights among worker subgroups, despiteongoing pro-labour legal reforms (Solinger,1999; 2009; Perry, 2002; Lee, 2007; 2010; Punet al., 2010; Selden and Perry, 2010). In oursociological research, we explore the dialecticsof domination and labour resistance within thepolitical economy of global electronicsproduction.

Global production and a new workingclass: Japan, China, East Asia

Between 1990 and 2006, the expansion of intra-Asia trade accounted for about 40 percent ofthe total increase in world trade (Arrighi, 2009:22). China's growing dominance has reshapedregional production networks previouslydominated by Japan and its former coloniesTaiwan and South Korea. The rise of Japan andEast Asian capitalism in the 1950s and 1960swas integral to the Cold War geopolitical order.To contain the spread of Communism andconsolidate its global economic reach, theUnited States provided military and economic

resources to its ‘client states’, encouragedTaiwan and South Korea to open up theirmarkets to Japanese trade and investment, andfostered the growth of a regional powercentred on Japan 's export -or ientedindustrialisation (Evans, 1995: 47–60; Selden,1997). Japanese firms received subsidised loansto create new industries and exported finishedproducts to Western markets. In the 1960s,Toshiba, Hitachi, Panasonic, Sanyo, Ricoh,Mitsubishi, Casio and others moved to Taiwanto start operations (Hamilton and Kao, 2011:191–193). Similarly, Japanese tradingcompanies began sourcing garments andfootwear from Taiwan, South Korea and HongKong.

From the mid-1960s, IBM, the leader inbusiness computing, shifted its labour-intensiveproduction from the United States and Europet o A s i a i n o r d e r t o c u t c o s t s . T h emicroelectronics components of IBM System360 computers were assembled by workers inJapan and then Taiwan because ‘the cost oflabour there was so low’ that it was cheaperthan automated production in New York (Ernst,1997: 40). RCA, the consumer electronicsgiant, swiftly moved to ‘take advantage ofTaiwan's cheap labour and loose regulatoryenvironment’ in the export-processing zones inthe late 1960s (Ku, 2006; Ross, 2006: 243–244;Chen, 2011). Electronics assembly grew rapidlyin Taiwan, South Korea, Singapore and HongKong (‘the Asian Tigers’), and later Malaysia,Thailand, Indonesia and India. In the early1970s, the Philippines hosted manufacturingplants for semiconductor firms such as Inteland Texas Instruments. In these newlyindustrialising countries, most factory workerswere young women migrants from thecountryside (Ong, [1987] 2010; Deyo, 1989;Koo, 2001; McKay, 2006).

In the late 1970s, China set up specialeconomic zones to attract foreign capital andboost exports as the means to integrateregional and global economies. The inflow of

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overseas Chinese capital has long beensignificant, combined with growing capital fromJapan, the United States, Europe and othercountries since the early 1990s (Huang, 2003).Hong Kong and Taiwanese entrepreneurs,ranging from low-end component processing tosophisticated microchip assembly, invested inthe Pearl River Delta and the Greater Shanghairegion (Leng, 2005). By the mid-1990s,Beijing's Zhongguancun Science Park andShanghai's Zhangjiang Hi-Tech Park becameprominent technology powerhouses, buildingon foundations of industrial development andlocal government support (Segal, 2003; Zhou,2008). Over two decades, the Chinese nationaleconomy underwent a transformation from onebased on heavy industry, with guaranteedlifetime employment and generous welfare forurban state sector workers, to one that reliesheavily on foreign and private investments andmassive use of rural migrant labourers in lightof export-oriented industries (Friedman andLee, 2010; Kuruvilla et al., 2011).

Foxconn became China's leading exporter in2001 following the country's accession to theWorld Trade Organization and furtherliberalisation of international trade. It hasmaintained this position ever since (FoxconnTechnology Group, 2009: 6). Foxconn'sexpansion is intertwined with the Chinesestate's development through market reforms,and it has followed the national trajectory fromcoastal to inland locations in recent years. TheChinese state attempted to rebalance theeconomy by initiating the ‘go west’ project,through which financial capital and humanresources were channeled to central andwestern provinces (Goodman, 2004; McNally,2004). Taking advantage of lower wage levels,the strategy was designed to stimulateemployment and promote ethnic unity whileobtaining foreign investment. Ross (2006: 218)concludes that in Chengdu, Sichuan'sprovincial capital, ‘it was impossible not tocome across evidence of the state's hand in thefostering of high-tech industry’.

The creation of a new rural migrant-centeredindustrial class by domestic and transnationalcapital, with the collaboration of the Chinesestate at all levels, lies behind the growingprotest, driven by multiple factors. Comparedwith older workers, this generation ofemployees, the vast majority being ruralmigrants born since the 1980s, has strongexpectations of higher wages, better workingcondit ions and prospects for careeradvancement (Pun and Lu, 2010). From themid-2000s, labour shortagesii have driven upwages and strengthened workers' power in themarket, although wage gains resulting fromhigher state minimum wage levels and strikevictories have been undermined by inflation(Selden and Wu, 2011). Foxconn, not unlikeother foreign-invested factories, adjusts basicwages and recruits mostly teens and youngadults to run the assembly lines. ‘Over 85percent of Foxconn's employees are ruralmigrant workers between 16 and 29 years old’,according to a senior human resourcesmanager in Shenzhen (Interview, 14 October2011). By comparison, 2009 national datashowed that 42 percent of rural migrants werebetween 16 and 25 years old and another 20percent were between 26 and 30 (China'sNational Bureau of Statistics, 2010).

In recent years, Foxconn has adapted to locallabour market changes to employ more malethan female workers as fewer young womenbecome available as a result of femaleinfanticide,iii reversing the historical pattern ofa feminised workforce in electronics. Companystatistics show that male employees increasedfrom 59 to 64 percent between 2009 and 2011(Foxconn Technology Group, 2012e: 12). Thislabour is employed in a production network inwhich vertical integration, flexible coordinationacross different facilities and 24-hourcontinuous assembly bolster its marketcompetitiveness. It manufactures hardwarecomponents and assembles products for a verylarge number of global companies, with Applebeing its largest client (Chan, 2013).

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The Apple–Foxconn business relationship

Apple, Foxconn and China's workers are at thecenter of high-tech production, but relationsamong them are highly unequal. AppleComputer (later Apple Inc.) was incorporatedin 1977 and is headquartered in Cupertino,California in Silicon Valley. In 1981, Apple,which had init ial ly produced i ts owncomputers, started to contract offshorefacilities in Singapore, along with onshore final-assembly contractors, to ramp up upgradedApple II personal computers (Ernst, 1997:49–52). From the early years, it outsourcedmost component processing, assembly andpackaging to contractors, above all in SouthKorea, Japan, and China. In 1982 AppleComputer President Mike Scott commented:‘Our business was designing, educating andmarketing. I thought that Apple should do theleast amount of work that it could and … let thesubcontractors have the problems’ (Ernst,1997: 49). In the 1990s, Apple, Lucent, Nortel,Alcatel and Ericsson ‘sold off most, if not all, oftheir in-house manufacturing capacity—both athome and abroad—to a cadre of large andh igh l y capab le US -based con t rac tmanufacturers, including Solectron,Flextronics, Jabil Circuit, Celestica, andSanmina-SCI’ (Sturgeon et al., 2011: 236).Today, Apple retains its only Macintoshcomputer manufacturing complex in Cork,Ireland (Apple, 2013a).

If Apple's competitive advantage lies in thecombination of corporate leadership,technological innovation, design and marketing(Lashinsky, 2012), its financial success isinseparable from its globally dispersed networkof efficient suppliers based mainly in Asia.Pivotal to Apple's growth is effectivemanagement of production by its suppliers,including final assemblers. Apple's 2012 annualreport filed to the United States Securities andExchange Commission describes a challenge toits highly profitable business:

Substantially all of the Company'sh a r d w a r e p r o d u c t s a r emanufactured by outsourcingpartners that are located primarilyin Asia. A significant concentrationof this manufacturing is currentlyperformed by a small number ofoutsourcing partners, often insingle locations. Certain of theseoutsourcing partners are the sole-sourced suppliers of componentsand manufacturers for many of theCompany's products (Apple, 2012a:7).

Apple identifies the concentration of itsmanufacturing base ‘in single locations’ and inthe hands of ‘a small number of outsourcingpartners’ as a potential risk. However, analystsobserved that, ‘because of its volume'—and itsruthlessness—‘Apple gets big discounts onparts, manufacturing capacity, and air freight’(Satariano and Burrows, 2011). Groupinterviews with two mid-level productionmanagers at Foxconn's Shenzhen industrialtown reveal that during the 2008–09 globalfinancial crisis,

Foxconn cut prices on components,such as connectors and printedcircuit boards, and assembly, toretain high-volume orders. Marginswere cut. But the rock bottom linewas kept, that is, Foxconn did notreport a loss on the iPhonecontract. [How?] By charging ap r e m i u m o n c u s t o m i z e dengineering service and qualityassurance. The upgrading of theiPhones has in part relied on oursenior product engineers' researchanalyses and construct ivesuggestions (Interviews, 10November 2011; 19 November2011).

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In 2009, in the wake of recession, the Chinesegovernment froze the minimum wage acrossthe country. Foxconn accommodated Apple'sand other corporate buyers' squeeze whilecontinuing to reduce labour expenditures,including cuts in wages (mainly overtimepremiums) and benefits (Interview, 9November 2011).

Foxconn's operating margins—the proportionof revenues remaining after paying operatingcosts such as wages, raw materials andadministrative expenses—has declined steadilyover the past six years, from 3.7 percent in thefirst quarter of 2007 to a mere 1.5 percent inthe third quarter of 2012, even as totalrevenues rose in the same period with theexpansion of orders (Figure 1).iv By contrast,Apple's operating margins peaked at 39.3percent in early 2012 from initial levels of 18.7percent in 2007. The changes indicate Apple'sincreased ability to pressure Foxconn to acceptlower margins while acceding to Apple'sdemands for technical changes and largeorders. Foxconn's margins are constantlysqueezed by technology giants including, butnot limited to, Apple. As Foxconn expanded itsplants in interior China (and other countries),expansion costs and rising wages furtherimpacted revenues.

Figure 1. Operating margins: Apple andFoxconn compared, 2007–2012. Data fromJanuary 2007 to September 2012 were non-consolidated results for Foxconn. Startingfrom Q4 2012, Foxconn announcedconsolidated results. Source: From Q12007 to Q3 2011, see Bloomberg (2012);From Q4 2011 to Q3 2012, see Wikinvest(2013) for Apple; From Q4 2011 to Q32012, see Foxconn Technology Group(2012a; 2012b; 2012c; 2012d).

Twelve major business groups within Foxconncompete on ‘speed, quality, engineeringservice, efficiency and added value’ tomaximise profits (Foxconn Technology Group,2009: 8). ‘Two “Apple business groups,” iDPBG[integrated Digital Product Business Group]and iDSBG [innovation Digital System BusinessGroup], are rising stars in these past fewyears’, stated a Foxconn Chengdu productionmanager,

iDPBG was established in 2002. Atthe beginning, it was only a smallbusiness group handling Apple'scontracts. We assembled Macs andshipped them to Apple retail storesi n t h e U n i t e d S t a t e s a n delsewhere. Later we had moreorders of Macs and iPods fromApple. In 2007, we began toassemble the first-generationiPhone. From 2010, we also packediPads, at the Shenzhen and newChengdu facilities (Interview, 6March 2011).

iDPBG currently generates 20 to 25 percent ofFoxconn's bus iness . To increase i tscompetitiveness, Foxconn Founder and CEOTerry Gou established iDSBG in 2010 when thecompany won the iPad contracts. iDSBG nowprimarily manufactures Macs and iPads,

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contributing 15 to 20 percent of companyrevenues. ‘Approximately 40 percent ofFoxconn revenues are from Apple, its biggestclient’ (Interview, 10 March 2011).

Dedrick and Kraemer (2011: 303) find thatcomputer companies currently ‘engage in long-term relationships’ with their main contractorsbut sometimes shift contracts to those who canoffer better quality, lower cost or greatercapabilities. Foxconn's vice president ChengTianzong told journalists, ‘Some major clientsare very concerned with the Foxconn employeesuicides, but many of them are our long-termpartners. So it doesn't affect Foxconn's orders’(quoted in Zhao, 2010). However, soon afterthe spate of suicides at Foxconn's facilities inspring 2010, Apple did ‘shift some iPhone andiPad orders to Pegatron to diversify risks’,according to a Foxconn commodity manager atChengdu's factory (Interview, 13 March 2011).Apple has tightened controls over Foxconn bysplitting contracts with another Taiwanese-owned firm, Pegatron. This diversificationdemonstrates the power asymmetries betweenApple and its manufacturers as Foxconn andothers seek to retain market position asproducers of the iPhone and iPad.

Apple (2013b) obtains products and services‘within tight time frames’ and ‘at a cost thatrepresents the best possible value’ to itscustomers and shareholders. Figure 2 showsthe breakdown of value for the iPhone betweenApple and its suppliers. Apple's strength is wellil lustrated by its ability to capture anextraordinary 58.5 percent of the value of theiPhone despite the fact that manufacture of theproduct is entirely outsourced. Particularlynotable is that labour costs in China accountfor the smallest share, only 1.8 percent ornearly US$10, of the US$549 retail price of theiPhone. This ineluctable drive to reduce costsand maximise profits is the source of thepressure placed on Chinese workers employedby Foxconn, many of them producing signatureApple products. While Apple and Foxconn

together squeeze Chinese workers and demand12-hour working days to meet demand, thecosts of Chinese labour in processing andassembly are virtually invisible in Apple'sbalance sheets. Other major componentproviders (such as Samsung and LG) capturedslightly over 14 percent of the value of theiPhone. The cost of raw materials was just overone-fifth of the total value (21.9 percent).

Figure 2. Distribution of value for theiPhone, 2011 Source: Adapted fromKraemer et al. (2011: 5).

Representatives from Apple and other majorclients regularly monitor onsite qualityprocesses and production time to market. Amid-level Foxconn production managerrecalled: ‘Since 2007, Apple has dispatchedengineering managers to work at Foxconn'sLonghua and Guanlan factories in Shenzhen tooversee our product development and assemblywork’ (Interview, 29 November 2011). AFoxconn human resources manager providedthis eyewitness account of Apple's hands-onsupervision:

When Apple CEO Steve Jobsdecided to revamp the screen to

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strengthen the glass on iPhonefour weeks before it was scheduledto shelf in stores in June 2007, itrequired an assembly overhaul andproduct ion speedup in theLonghua facility in Shenzhen.Naturally, Apple's supplier code onworker safety and workplacestandards and China's labour lawsare all put aside. In July 2009, thisproduced a suicide. When SunDanyong, 25 years old, was heldresponsible for losing one of theiPhone 4 prototypes, he jumpedfrom the 12th floor to his death.Not only the short del iverydeadline but also Apple's secretiveculture and business approach,centered on creat ing greatsurprise in the market and therebyadding sales value to its products,have sent extreme pressure all theway down to its Chinese suppliersand workers (Interview, 7 March2011).

Attention to procurement and productiondetail, including last-minute changes of productdesign and tight control over prices, assuressuper-profits for Apple. The purchasing andmarketing policy adopted by Apple, the ‘chaindriver’, conflicts directly with its own supply-chain labour standards and the Chinese law.

Tracking demand worldwide, Apple adjustsproduction forecasts on a daily basis. As AppleCEO Tim Cook puts it, ‘Nobody wants to buysour milk’ (quoted in Satariano and Burrows,2011); ‘Inventory … is fundamentally evil. Youwant to manage it like you're in the dairybusiness: if it gets past its freshness date, youhave a problem’ (quoted in Lashinsky, 2012:95). Streamlining the global supply chain onthe principle of market efficiency and‘competition against time’ is Apple's goal.

Consequently, excessive overtime at final-

assemblers and other suppliers is required tomeet increased work schedules. Two majorsources of production-time pressure commonlyfelt by factory and logistic workers are welldocumented by Apple.

The Company has historicallyexperienced higher net sales in itsf i r s t f i s ca l quar te r [ f r omS e p t e m b e r t o D e c e m b e r ]compared to other quarters in itsfiscal year due in part to holidayseasonal demand. Actual andanticipated timing of new productintroductions by the Company canalso significantly impact the levelof net sales experienced by theCompany in any particular quarter(Apple, 2012a: 8).

In a rare moment of truth, Foxconn CEO'sSpecial Assistant Louis Woo, explained in anApril 2012 American media program theproduction pressures that Apple or Dell apply:

The overtime problem—when acompany like Apple or Dell needsto ramp up production by 20percent for a new product launch,Foxconn has two choices: hiremore workers or give the workersyou already have more hours.When demand is very high, it'svery difficult to suddenly hire 20percent more people. Especiallyw h e n y o u h a v e a m i l l i o nworkers—that would mean hiring200,000 people at once (quoted inMarketplace, 2012).

The dominance of giant technology firms,notably Apple, in terms of price setting, onsiteproduction process surveillance, and timing ofproduct delivery, has profound consequences

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on labour processes. Foxconn's competitiveadvantage, the basis for securing contractsw i t h A p p l e a n d o t h e r b r a n d - n a m emultinationals, hinges on its ability to maintainflexibility. The mega factory has to reorganiseits production lines, staffing and logistics in avery short time to be demand-responsive.Whereas transnational suppliers, such asFoxconn, have grown rapidly through ‘internaldevelopment and acquisition’ (Sturgeon et al.,2011: 235), their drive for profits and higherpositions along the global value chains tend togo with the same pattern: the emergence ofpowerful ‘market makers’, or leading firms, intheir supply networks (Hamilton et al., 2011).The results in competitive manufacturing havebeen coercive factory conditions and,contentious labour relations, on the ground, towhich we now turn.

Chinese workers' collective actions

Foxconn not only has factory complexes inShenzhen and al l four major Chinesemunicipalities of Beijing, Shanghai, Tianjin andChongqing, but also in 15 provinces throughoutthe country (Figure 3). Foxconn Taiyuan innorth China's Shanxi province, with 80,000workers, specialises in metal processing andassembly. It manufactures iPhone casings andother components in the upstream supply chainand sends the semi-finished products to alarger Foxconn Zhengzhou complex in adjacentHenan province for final assembly. In 2012, thesubtle shift in production requirements fromiPhone 4S to iPhone 5 and the speedup to meetApple's delivery time placed Foxconn and itsworkers under intense pressure. However, thistightly integrated production regimesimultaneously provided workers with leverage,enabling them to demonstrate their collectivestrength in the fight for their own interests.

Figure 3. Foxconn locations in greaterChina. Source: Foxconn Technology Group(2013a).

Foxconn Taiyuan erupted in factory-wideprotests on September 23–24, 2012. ‘At about11 p.m. on 23 September 2012’, a 20-year-oldworker reported, ‘a number of security officersseverely beat two workers for failing to showtheir staff IDs. They kicked them until they fell’(Interview, 26 September 2012). At the maledormitory, workers passing by were alerted byscreams in the darkness. An eyewitness said,‘We cursed the security officers and demandedthat they stop. There were more than thirty ofus so they ran away’ (Interview, 27 September2012).

Soon after a squad of fifty company securityofficers marched to the dormitory, infuriatingthe assembled workers. At midnight, tens ofthousands of workers smashed security offices,production facilities, shuttle buses, motorbikes,cars, shops and canteens in the factorycomplex. Others broke windows, demolishedcompany fences and pi l laged factorysupermarkets and convenience stores. Workersalso overturned police cars and set themablaze. The company security chief used a

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patrol car public address system to order theworkers to end their ‘illegal activities’. Thesituation was getting out of control as moreworkers joined the roaring crowd.

By 3 a.m., senior government officials, riotpolice officers, special security forces andmedical staff were stationed at the factory.Workers used their cell phones to send imagesto local media outlets in real time. Over thenext two hours, the police contained the labourunrest, detained the most defiant workers andtook control of the factory gates. The factoryannounced a special day off for all productionworkers, on September 24, Monday. A 21-year-old worker recalled:

We demanded higher pay andbetter treatment. In my view, theprotest was caused by veryunsatisfactory working conditions.It was merely sparked by theabuses of the security guards. Overthese past two months, we couldn'teven get paid leave when we weresick (Interview, 28 September2012).

With global consumer demand for the newiPhone 5 at a peak, shipping delays were asource of concern for Apple. On September 21,2012 (eight months after iPhone 4S's Chinarelease), Apple launched the iPhone 5 and soldover five million units during that weekend.CEO Tim Cook stated, ‘we are working hard toget an iPhone 5 into the hands of everycustomer who wants one as quickly as possible’(Apple, 2012b). The ever-tightening shorterproduction cycle pressurises workers andmanagerial staff, so that Foxconn Taiyuanworkers could not even take one day off in aweek, and the sick were compelled to continueto work. At the same time, with Appledemanding fulfillment of impossible targets,the power of workers to display their powerpeaked.

As justification for its use of paramilitary force,Foxconn blamed the workers, alleging that theywere fighting among themselves. The companystatement read:

A personal dispute betweenseveral employees escalated intoan incident involving some 2,000workers. The cause of this disputeis under investigation by localauthorities and we are workingclosely with them in this process,but it appears not to have beenwork-related (quoted in Nunns,2012).

A 2012 walkout at Foxconn briefly haltedproduction of the iPhone 5

The underlying cause was that workers aresubjected to an oppressive management regimedriving them to meet the extreme productiondemands (Ruggie, 2012). Foxconn, Apple andmany other multinational corporations, as wellas the Chinese government, have thus farshown little interest in understanding thedirect relationship between companies'purchasing practices and labour problems inthe workplace. ‘On the factory floor’, an 18-year-old worker informed us, ‘the metal-

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processing section supervisor's attitude is verybad … We're coerced to meet the extremelytight production deadline’ (Interview, 29September 2012) . Foxconn leaders 'investigation of the ‘personal dispute’necessitated turning their eyes away from shopfloor conditions.

Less than two weeks later, on October 5, 2012,over 3,000 Foxconn Zhengzhou workersprotested collectively against unreasonablystrict control over product quality on the line atZone K. From late September to early October2012, consumers in the United States andelsewhere complained about scratches on thecasing of a particular batch of the new iPhone5, leading to product qual ity controlinvestigations of final assembly at the 160,000-strong Foxconn Zhengzhou plant. According totestimony, new quality standards for notexceeding a 0.02 mm appearance defect iniPhone 5 were contributing to workerssuffering eye strain and headache. Whenworkers were penalised for not meeting thenew standards, quarrels erupted betweenworkers and quality control team leaders onFriday afternoon, resulting in group fightingand injuries.

Production managers yelled at the assembly-line workers and threatened to fire them if theydid not ‘cooperate and concentrate at work’. LiMeixia (a pseudonym) posted on her Sinamicroblog that she and her co-workers wereangered and walked out of the workshop. Inresponse, another worker posted a statement,which was quickly removed by October 6:

We had no holidays during theNational Day celebrations and nowwe're forced to fix the defectiveproducts. The new requirement ofa precision level [of iPhone 5screen structure] measured in two-hundredths of a millimeter cannotbe detected by human eyes. Weuse microscopes to check the

p r o d u c t a p p e a r a n c e . I t ' simpossibly strict.

In the case-manufacturing process, workerswere also instructed to use protective cases toprevent scratches of the ultra-thin iPhone 5,and close attention to the most minute detail atthe fast pace was and remains a major sourceof work stress, according to testimony. Thestrike at one workshop eventually paralyseddozens of production lines in Zones K and L.Senior managers threatened to fire the leadingstrikers and the quality control team leaders,and demanded that night-shift workers adhereto stringent quality standards. The brief strikedid not win workers' demand for reasonablerest.

Given the nature of company unions (Traub-Merz, 2012) and strict corporate controls overworkers in both plant and dormitory, Foxconnworkers at the Taiyuan and Zhengzhoufactories have not organised across factories ona large scale in a coordinated manner. Workersw e r e , h o w e v e r , a c q u i r i n g p u b l i ccommunication skills and raising theirconsciousness about the need for joint struggleto achieve basic rights. Soon after theSeptember 2012 protest, a 21-year-old high-school graduate with two years’ workexperience at Foxconn Taiyuan wrote an openletter to Foxconn CEO Terry Gou andcirculated it on weblogs (the following excerptis translated by the authors):

A Letter to Foxconn CEO, Terry Gou

If you don't wish to again be loudly woken atnight from deep sleep,

If you don't wish to constantly rush about againby airplane,

If you don't wish to again be investigated by theFair Labor Association,

If you don't wish your company to again be

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called by people a sweatshop,

Please use the last bit of a humanitarian eye toobserve us.

Please allow us the last bit of human self-esteem.

Don't let your hired ruffians hunt for our bodiesand belongings,

Don't let your hired ruffians harass femaleworkers,

Don't let your lackeys take every worker for theenemy,

Don't arbitrarily berate or, worse, beat workersfor one little error.

In the densely populated factory-cum-dormitorysetting, many rural migrant workers as youngas 16 or 17 years o ld , spoke of the irinvolvement in collective labour protests (Punand Chan, 2013). If the language of strikes andworker participation is new for some, it is notfor others. The testimony of a teenage femaleworker at Foxconn's Shenzhen Longhua plantis illustrative:

I didn't know that it was a strike.One day my co-workers stoppedwork, ran out of the workshop andassembled on the grounds. Ifollowed them. They had disputesover the under-reporting ofovertime hours and the resultingunderpayment of overtime wages.After half a day, the humanresources managers agreed to lookinto the problems and promised topay the back wages if there was acompany mistake. At night, in thedormitory , our ‘b ig s is ter ’exp la ined to me that I hadparticipated in a strike (Interview,15 October 2011)!

The wildcat strikes and labour protests atFoxconn form part of a broader spectrum oflabour action throughout China over recentdecades (Pringle, 2013). The Taiyuan worker'sopen letter to Foxconn CEO Terry Gou closeswith the following paragraph:

You should understand that working in yourfactories,

workers live on the lowest level of Chinesesociety,

tolerating the highest work intensity,

earning the lowest pay,

accepting the strictest regulation,

and enduring discrimination everywhere.

Even though you are my boss, and I am aworker:

I have the right to speak to you on an equalfooting.

The sense in which ‘right’ is used is notnarrowly confined to that of legal right.Chinese workers, facing pressure from thecompany, the local state and their own union,are demanding to bargain with their employers‘on an equal footing’. They are calling fordignified treatment and respect at work and fora living wage.

Conclusion

Marx and Engels ([1848] 2002: 223) analysedcapital's irresistible impulse to create newmarkets globally. ‘All old-established nationalindustries have been destroyed or are dailybeing destroyed. They are dislodged by newindustries … In place of the old wants, satisfiedby the productions of the country, we find newwants …’ Production, distribution andconsumption must continue in perpetuity ifprofits are to be made and capital accumulated.Barriers to trade at all levels have to be

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drastically reduced. In the twenty-first century,consumer electronics has grown to become oneof the leading global industries, and Chineselabour is central to its development. An everquicker and newer product re lease,accompanied by shorter product finishing time,places new pressures on outsourced factoryworkers in the Apple production network. Atthe workplace level, very short delivery timesimposed by Foxconn in response to thedemands of Apple and other multinationalcorporations make it difficult for suppliers tocomply with legal overtime limits. Pricepressures lead firms to compromise workers'health and safety and the provision of a decentliving wage. The absence of fundamental labourrights within the global production regimedriven by Apple and its principal supplierFoxconn have become a central concern forChinese rural migrant workers, who form thecore of the most rapidly growing sector of thenew industrial working class.

The integration of Asian manufacturers inglobal and regional production networks, tightdelivery schedules for coveted products, andthe growing shortage of young workers as aresult of China's demographic changes haveenhanced workers' bargaining power. Theascent of ‘global neoliberal capitalism’ hascreated ‘opportunities for counter-organization’(Evans, 2010: 352), as attested not only by therise of transnational labour movements andglobal anti-sweatshop campaigns butspecifically by growing labor unrest in China.Increasingly aware of the opportunitiespresented by the demand by Apple and othertechnology giants to meet quotas for newmodels and holiday season purchases, workershave come together at the dormitory, workshopor factory level to voice demands. Internet andsocial networking technology enables workersto disseminate open letters and urgent appealsfor support (Qiu, 2009). The question remainswhether workers will be able to win the right tofreedom of association and ultimatelystrengthen a nascent labour movement that is

capable of challenging the unfettered power ofcapital in a milieu in which fundamental laborrights such as the right to strike are lacking.

A historical counterweight to global capital,West and East, exists in workers' and civilsociety's response. Under public pressure, inFebruary 2013, Foxconn proclaimed thatworkers would hold direct elections for unionrepresentatives. If implemented fairly, and ifthe unions are organised to uphold the rightsenshrined in the Chinese Trade Union Law,Labour Contract Law and the internationallabour conventions, this would impact upon thebalance of power between management andworkers. At present, the vast labour force atFoxconn and many workplaces are striving toexpand social and economic rights, bypassingthe state- and management-controlled unions.A new generation of workers, above all ruralmigrant workers, is standing up to assert theirdignity and rights. Workers' direct actions havebeen perceived by political leaders and elites asso threatening to social stability thatgovernment and employers have been forced togrant certain policy concessions, includinghigher wages, and to propose higher minimumwages. The Chinese state is also seeking toraise domestic consumption and hence livingstandards, in part in response to the struggle ofaggrieved workers and farmers (Hung, 2009;Carrillo and Goodman, 2012). Apple andFoxconn now find themselves in a limelight thatchallenges their corporate images and symboliccapital, hence requiring at least lip service insupport of progressive labour policy reforms. Ifthe new generation of Chinese workerssucceeds in building autonomous unions andworker organisations, their struggles will shapethe future of labour and democracy not only inChina but throughout the world.

Acknowledgements

We are very grateful to Phil Taylor, DebraHowcroft and four reviewers for their insightfulcomments. We also thank the independent

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University Research Group on Foxconn,SACOM (Students and Scholars AgainstCorporate Misbehavior), GoodElectronicsNetwork, Jeffery Hermanson, Gregory Fay,Chris Smith, Jos Gamble and Sukhdev Johal. Anearlier version of this paper was presented atthe Center for East Asian Studies in theUniversity of Bristol on November 15, 2012,where Jenny Chan enjoyed constructivediscussions with Jeffrey Henderson and theseminar's participants.

This is a revised version of an article publishedin New Technology, Work and Employment28(2): 100-15.

Article first published online: 18 JUL 2013 (fullart ic le freely accessible onl ine here(http://onlinelibrary.wiley.com/doi/10.1111/ntwe.12008/full)).

© 2013 John Wiley & Sons Ltd.

Recommended citation: Jenny Chan, Ngai Punand Mark Selden, "The politics of globalproduction: Apple, Foxconn and China's newworking class," The Asia-Pacific Journal, Vol.11, Issue 32, No. 2, August 12, 2013.

The Authors:

Jenny Chan (wlchan_cuhk@yahoo.com(https://apjjf.org/mailto:wlchan_cuhk@yahoo.com)) is a Ph.D. candidate, Great Britain-ChinaEducational Trust Awardee and Reid ResearchScholar in the Faculty of History and SocialSciences at Royal Holloway, University ofLondon. She was Chie f Coordinator(2006–2009) of Hong Kong–based labour rightsgroup Students and Scholars Against CorporateMisbehavior (SACOM).

N g a i P u n ( p u n n g a i @ g m a i l . c o m(https://apjjf.org/mailto:punngai@gmail.com))is Professor in the Department of AppliedSocial Sciences at Hong Kong PolytechnicUniversity and Deputy Director in the ChinaSocial Work Research Center at Peking

University and Hong Kong PolytechnicUniversity.

Mark Selden (mark.selden@cornell.edu(https://apjjf.org/mailto:mark.selden@cornell.edu)) is Senior Research Associate in the EastAsia Program at Cornel l Univers i ty ,Coordinator of The Asia-Pacific Journal andProfessor Emeritus of History and Sociology atState University of New York, Binghamton.

The authors have jointly written a book entitledSeparate Dreams: Apple, Foxconn and a NewGeneration of Chinese Workers (Ngai Pun,Jenny Chan and Mark Selden, forthcoming).

Related articles

• Jenny Chan, A Suicide Survivor: the life of aChinese migrant worker at Foxconn(https://apjjf .org/-Jenny-Chan/3977)

• Jenny Chan and Ngai Pun, Suicide as Protestfor the New Generation of Chinese MigrantWorkers: Foxconn, Global Capital, and theState (https://apjjf.org/-Ngai-Pun/3408)

• Mark Selden and Wu Jieh-min, The ChineseState, Incomplete Proletarianization andStructures of Inequality in Two Epochs (https://apjjf.org/-Wu-Jieh_min/3480)

• Ching Kwan Lee and Mark Selden, China'sDurable Inequality: Legacies of Revolution andP i t f a l l s o f R e f o r m(https://apjjf .org/-C_K_-Lee/2329)

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Notes

1 Foxconn's parent corporation is Taipei-basedHon Hai Precision Industry Company. Thet rade name Foxconn a l ludes to thecorporation's ability to produce electronic

connectors at nimble “fox-like” speed.

2 Gu and Cai () conclude that Chinese fertilityis presently 1.6 children per woman, down fromaround 2.5 children per woman in the 1980s. Inthe next few years the number of younglabourers aged 20 to 24 years will peak.China's 2010 Population Census, moreover,showed that the age group 0–14 comprised16.6 percent of the total population, down 6.29percent compared with the 2000 census data.

3 The National Bureau of Statistics hasacknowledged that the gender imbalance hadreached 119:100 in 2009 before dippingslightly to just under 118:100 in 2010. The2011 data reported 117.78 baby boys for every100 girls (China Daily, ).

4 Foxconn's revenues or net sales increasedfrom US$51.8 billion in 2007 (FoxconnTechnology Group, : 11) to US$131 billion in2012 (Foxconn Technology Group, ). During thesame period, the net sales of Apple soared fromUS$24.6 billion (Apple, : 24) to US$156.5billion (Apple, : 24).