The Top 10 Things You Didn’t Know About Apple

Workers assemble iPhones at a Foxconn facility in Shenzhen, China.
Workers assemble iPhones at a Foxconn facility in Shenzhen, China.

Blame Mike Daisey. He drew me into this mess of a research project with his appearance on This American Life in January 2012. Like many, I was enraptured and sickened by his description of the work conditions and lives of young Chinese laborers at the Foxconn facility in Shenzhen, China that assembles iPhones, and now iPads. What I learned in that podcast made me angry, as both an owner of Apple products and as a critical sociologist who focuses on globalization and labor. Daisey’s account of conditions at Foxconn and the experiences of Chinese workers sparked my initial cursory investigation into Apple’s supply chain and their stance on corporate social responsibility, by way of the their annual Supplier Responsibility Reports. Then, a couple of months later, This American Life aired a retraction episode that revealed that Daisey had fictionalized his account. While host Ira Glass noted that nothing Daisey said was actually untrue, he had not seen all that he said he had, but rather had folded into his monologue the documented accounts of others. Glass, and many Apple consumers, seemed to breathe a collective sigh of relief, and the affair was rather quickly swept under the rug by the consuming public and the press.

These events made me deeply curious about the brand power of Apple. I wondered, how does a company that receives such bad press persist in its popularity? How could it be that, rather than taking a hit in the aftermath of a vicious exposé of labor conditions at their suppliers, Apple revenues surged and broke records throughout 2012? So, I embarked on a really big research project–bigger, more complex, and vastly more difficult than any project I have ever delved into before. I seek to identify all of Apple’s suppliers, map their supply chain, illuminate their financial structure, and understand their brand power here in the US and around the world. While I have a couple of lengthier and more in-depth pieces on this research in the works that will be published in a few months, I wanted to share with you some highlights from the research thus far. Here we go.

10. The iPad is the fastest adopted piece of technological equipment in history. Since Apple introduced the iPad in 2010 the company has sold over 155 million devices, and while sales fluctuate from quarter to quarter, they are on an upward climb annually. The success of the iPad is due in part to the fact that it has become a customer gateway to Apple products, and is increasingly the first Apple product a person purchases. To date Apple has raked in over $80 billion in revenue from iPads alone, which amounts to 18 percent of Apple’s total $434 billion in revenue since the third quarter of 2010, when the iPad was introduced.

apple product percent revenue
Percentage of total revenue by product for third quarter 2013. Chart provided by Francesco Schwarz and published on Barefigur.es.

9. They are the world’s most valuable technology company and the second most valuable company in the world. Measured as market capitalization, or the total value of stock shares of a publicly traded company, Apple is valued at 413.9 billion dollars. Apple has achieved this level of public confidence by posting record-breaking revenues over the last two years, and owes those revenues to the iPhone and iPad. Today these two devices are the company’s bread and butter, and account for over 70 percent of Apple’s total annual revenue, with the iPhone alone comprising 50 percent of revenue for 2012. While Apple’s revenues began a steady climb after they introduced the iPod in 2001, the company’s revenue jumped by over 50 percent between 2008 and 2007 when the iPhone debuted. The iPhone contributed significantly to Apple’s dominance in the stock market, as before the device their total stock value was $30 billion, and just two years later it had increased three-fold to $106 billion. Apple’s introduction of the iPad also had a significant effect on the company’s revenue stream, which increased from $65.2 billion in 2010 when the iPad was introduced to $108.2 billion by the close of 2011.

apple revenue growth chart
Apple’s annual revenues in millions of dollars, as published in company annual reports. Projected revenue for 2013 was calculated based on recent annual rates of increase. Note that the iPhone was introduced in 2007, and the iPad in 2010. Created by author.

8. While they currently have only about 14 percent of the global smartphone market, Apple rakes in the most profit in the industry. In terms of market share Apple ranks third globally, trailing Nokia by a small margin, and well behind Samsung, the global leader. Despite the small percentage of the global market that Apple represents, the company amasses 73 percent of all smartphone profits. How is this possible? The highest profit margin in the business makes it so. Apple rakes in nearly 60 percent of the sale price of an iPhone as profit. Samsung’s profit margin, by contrast, hovers around 18 percent.

7. Apple customers are deeply loyal and tend to own more than one Apple product. As of a report published a year ago, one third of US households owned at least one Apple device, and most of those owned more than two Apple products. I, for instance, own a MacBook, an iPod classic, an iPod shuffle, once owned an iPod mini, and I use an iMac in my office provided by my employer. Some are so loyal that they have tattooed versions of the company logo or power button onto their bodies. Say what?

tattoo_think_different

Apple customers are so devoted because, yes, the company makes exceptional products, but also because the company and the ad firm it works with, TBWA/Chiat/Day, excel at what is known within the marketing world as “emotional branding.” Marc Gobé, who wrote a book about this type of branding, describes it as “…how a brand engages consumers on the level of the senses and emotions; how a brand comes to life for people and forges a deeper, lasting connection.” They do this successfully by tapping into our hopes, dreams, and aspirations. As Naomi Klein astutely observed in her book No Logo, “…corporations may manufacture products, but what consumers buy are brands.” Apple has done an excellent job of selling its brand and all that it promises.

6. They pander to white folks, men especially, who want to be associated with people of color and racially diverse communities. In a study I conducted with Gabriela Hybel analyzing the content of nearly 200 Apple commercials that have run in the US between 1984 and the present, we found clear trends in who is represented in the company’s commercials, and who is targeted by them. We found overwhelmingly that main characters in commercials are white adult men. Similarly, when a product-focused commercial features a hand operating the product, like in the case of many iPhone and iPad commercials, that hand is typically a light-skinned hand. However, we found that background characters are more gender and racially diverse, and include black people and a few Asian folks. Based on these findings it is clear that Apple’s primary target demographic is adult white men, and given the racial and gender representation of background characters, white men who like to see themselves as living among or traveling through racially diverse spaces and communities. I mean really, who’s cooler than a white guy with black friends?

5. Apple receives lucrative government contracts to provide technology to school districts and students. In 2012 the company sold 4.5 million iPads to schools within the US, and a total of 8 million to schools globally. During that year Apple broke its own sales records in the education market. This June the company made headlines when it announced that it had been awarded a $30 million contract to provide iPads to students in the Los Angeles Unified School District, which has pledged to have one of the devices in the hands of each of its students by 2014. The monetary size of this contract and the scope of its application throughout the school district made it newsworthy, but in fact school districts across the country are handing over their funds to Apple, but in smaller, less newsworthy amounts. Just recently the Medina-Gazette of Ohio reported that the Medina school district had signed a $228,620 contract with Apple to lease 190 MacBooks for three years, with the option to then buy them for a dollar each when the lease is up. Back in 2011 the school district of Auburn, Maine spent $200,000 on 300 iPads for kindergarten students, which follows the precedent the district set when it distributed Apple laptops to all middle school students in 2002 and 2003. Similar kindergarten iPad programs are in place in Omaha, NE; Columbiana, OH; Huntington, WV; Paducah, KY; Charleston, SC.; Scottsdale, AZ; and in Minidoka County, ID. An internet news search for “Apple + education” reveals that this is a nationwide trend. One has to wonder, at a time when schools are being closed en masse and teachers struggle to make ends meet on low and declining pay, whether Apple is where the investment in education should be made.

4. Apple has avoided paying over $74 billion in taxes to the federal government since 2009 by moving their cash to offshore holdings. Recently the company executed a cleverly financed $55 billion payout to shareholders to avoid paying $9.2 billion on this year’s tax bill. Isaiah J. Poole, writing for TruthOut, observed that simply by paying these taxes, Apple could have bolstered the federal coffers such that some of the recent round of budget cuts known as “the sequester” could have been avoided. Ironically, Apple, a company whose leadership maintains that “education is in our DNA” helped contribute to the decimation of federal spending on education that hurts poor and special needs students the most. How do you like them iPads?

3. Tim Cook’s announcement in December 2012 that Apple would begin manufacturing a line of Macs in the US is a symbolic gesture that means little given the insignificance of individual Mac lines as revenue streams. For 2013 the percentage of revenue generated by all Mac computers (Mac, iMac, varieties of MacBooks) ranged between 10 and 13 percent, and that number has steadily declined since the iPhone and iPad were introduced and became the revenue workhorses for the company, together accounting for over 70 percent of annual revenue. Given that Cook’s announcement indicates that one line of Macs will be manufactured in the US, the increased cost of production due to higher labor cost will have a marginal impact at best on the company, given the tiny portion of revenue that will be affected by this change in the supply chain. While this announcement might help alleviate the unease consumers and investors feel over labor issues in the Chinese supply chain, this proposed change is nothing but a red herring.

Chart created by Francesco Schwarz and published on Barefigur.es in 2013.
The total percentage of company revenue generated by Mac computers has declined steadily over the years. The red line indicates total Mac computer revenue; the brown, all lines of laptops; and the blue, all lines of desktops. Chart created by Francesco Schwarz and published on Barefigur.es in 2013.

2. They once held the record as the most irresponsible labor rights and environmental offender of all 29 major tech companies working with suppliers in China. A report published in August 2011 by a collection of Chinese NGOs included findings from a study of suppliers associated with the 29 biggest tech companies operating in China. While environmental and labor violations were found at suppliers across the board, of all the tech companies contracting work to them, Apple was least responsive to requests from NGOs that it address chronic environmental and labor violations at 27 of its suppliers. As of the publication of the report, Apple had been completely unresponsive to requests for action. Violations at suppliers included hazardous water runoff containing heavy metals waste that pollutes lakes, rivers, and groundwater in and around rural Chinese communities; and noxious emissions of gasses that cause nearby residents respiratory illness, chronic headaches, and dizziness. Some residents of villages near suppliers reported a sharp increase in cancer rates in the decades since tech companies began producing in their regions. In January of this year a third report on Apple was released by the NGO group that revealed that Apple has responded to some of the most egregious environmental violations cited in the previous report, and that effective improvements have been made at a few suppliers. However, the report points out that while labor and environmental violations are systemic, most of the Chinese supply base remains unexamined by Apple. Rather than proactively managing its supply chain, and taking responsibility for its role in shaping what happens at suppliers as a result of the very low cost schedule Apple affords them, the company remains irresponsibly reactive.

1. Apple’s presence in China is not having a “trickle-down” economic effect on the Chinese state or its citizens. When This American Life ran their retraction episode in the aftermath of revelations that Mike Daisey had fictionalized his account of meeting young Chinese who work for Apple suppliers and who have suffered illness, injuries, and injustices on the job, host Ira Glass suggested that the conditions Daisey described and others have documented are necessary evils in the process of modernization and industrialization that China is undergoing. Glass suggested that ultimately China and its citizens will benefit from having become the world’s factory, and from having supplier contracts with successful companies like Apple. The sad reality is that Chinese laborers earn very little for their work in assembling Apple’s i-devices. On Monday, July 29, China Labor Watch released a damning new report that lists a multitude of violations of Chinese and International labor laws, and reveals that workers at Pegatron facilities where the new “cheap iPhone” is in production make the equivalent of US $1.50 per hour. At a 60 hour work week, that’s $90 per week before taxes. As a country, China sees a marginal economic benefit at best from these arrangements. One important fact that is overlooked by many who comment on Apple’s presence in China is that most suppliers the company works with are not Chinese at all–they are Taiwanese, Korean, and Japanese owned. Foxconn, for instance, is owned by the Taiwanese Terry Gou. Pegatron, the group of factories recently identified as labor law violators by China Labor Watch, is also Taiwanese owned. Further, while Apple’s profit margin is nearly 60 percent of the value of an iPhone, Chinese labor for assembling the device accounts for less than 2 percent. Suppliers like Foxconn, where these workers assemble the devices, receive a 1.5 percent profit margin for their services. Labor law violations and occupational safety hazards occur because suppliers are struggling to turn a tiny profit on their contracts with Apple. Steve Jobs was notorious for nickel-and-diming every supplier the company worked with, and his micro-managerial and dictatorial legacy is now built into the cost and profit structures of the company. While Apple consumers might view his legacy as one of innovation, leadership, and genius, for young Chinese workers his legacy is occupational abuse, intimidation, harassment, injury, illness, displacement from their families, and loneliness. Think Different? Not in the slums of Shenzhen.

Acknowledgements: The research this post is based on was compiled with the help of Gabriela Hybel, Tara Krishna, and Zhao Li. Li provided invaluable research of Chinese news media and translation services. Gabi, Tara, and Cortney Anderson provided editorial assistance on this post. I am deeply grateful for their dedication to this project.

Advertisements

15 thoughts on “The Top 10 Things You Didn’t Know About Apple”

  1. Hi Prof. Cole,

    This is a great introduction to your thorough analyses of this company’s affect on society. I really enjoyed how you included the bit about emotional branding, that is definitely something I would like to learn more about as someone who has a mild attachment to my MacBook. The information about how in avoiding taxes, Apple contributed to the harmful and disproportionate decrease in resources in schools were especially shocking and upsetting. Lastly, I love the final point you made about how this directly affects the people who produce the enticing products which many of us have had increasing contact with (iPads, iPhones, etc.).

    Thank you for informing us all about the top 10 shocking things that we rarely hear about Apple. Hopefully this post will encourage readers to more deeply consider their impact as consumers within the competitive capitalist system. I really look forward to working on this research with you!

    Cortney

    1. Similar situation in México, where foreign and local companies pollute waters, air, and pay low salaries. i am surprised that in China manufacturer workers receive almost 3 times the mexican mínimum salary…

      1. Sergio, thanks for raising this point. Indeed, exploitation of workers by transnational companies is a global problem. I’m sorry to hear that the low wages in China are outpacing those in Mexico three-fold. Thanks for stopping by the blog; I hope you’ll come back some time.

  2. Interesting post! Thank you for bringing my attention to this. Although I hadn’t thought too much about it, Apple’s presence in the schools and their educational discounts struck me as beneficial to students’ education. Certainly it also creates brand loyalty from a young age though. What is your thought?

    1. Alison, thanks for your thoughtful question. As for the discounts, they are minimal, and given Apple’s very high price point, other brands are cheaper even after the discount. As far as their presence in schools, I’m not sold that personal computers or tablets in the classroom is as beneficial to education as many like to think. As a teacher, it seems to me that creative and engaging pedagogy that resonates with students’ lives, experiences and goals is far more important. Technology is often conceived as a silver bullet for educational reform. “Give children in Africa solar powered laptops and watch the world change!” I just don’t buy it. What do you think?

      You are absolutely right about building brand loyalty. Just prior to Christmas in 2012, 48 percent of children between the ages of 6-12 polled by Nielsen said an iPad was on the top of their wish list! See here: http://www.nielsen.com/us/en/newswire/2012/u-s-kids-continue-to-look-forward-to-iholiday.html

      I think people have come to see Apple products as synonymous with education because of how they market them too. They sell the idea that their products will allow us to express our intellectual and cultural creativity, to share the results of those, and be successful and revered because of what their products allow us to do. They speak to cultural creative and intellectual types, who tend to have more money to spend on these products, and so the products get associated with those types of people and pursuits. At Pomona College where I teach Apple laptops are the norm, and students are always very surprised when I point out that they are not the norm in the rest of society. Apple leads in none of its product sectors, but it has colonized intellectually and culturally elite spaces.

      Thanks for reading, and for the question!

  3. Nice piece of research. My question is now do you still own Apple products? If I were to do such a piece of research, the first practical consequence would be that I would quit using Apple products, no matter how technologically brilliant and qualitatively exquisite they are. (Which I doubt – Apple nowadays is more about design than useful and intuitive technology – but advertising is working well …).

    1. Salex, thanks for reading, for your compliment, and for your critical question. In fact, I am responding to you from my MacBook, which I purchased in 2008. I’ve thought a lot about the issue you raise, and there are two key reasons for why I have not divested.

      One is very practical: I need this machine to research and write. As a temporary, part-time faculty member earning a very low salary, I am not in a position to purchase a new computer, nor would the low sale price of this old model allow me to replace it with a comparable machine.

      The second is philosophical: I believe that the best way to honor the labor that went into producing this machine is to use it until it has absolutely no use-value left. In the last two years I’ve replaced a battery, bought a new power cord, and had my CD drive repaired. I will continue to maintain it to keep it going, but when it has nothing left, I will have to move on to another brand. You are right to point out that as a critical researcher I can’t in good conscience buy anymore Apple products, and I haven’t since I started learning about their supply chain in 2012.

      But, I also want to point out that I don’t think it’s fair to hold researchers accountable for “divesting” of any ties to subjects that they approach from a critical point of view. Should those who critique capitalism be forced to live outside of our global society? What would that mean? How could they survive? Should those who critique the oil industry never be allowed to ride in any kind of petroleum powered vehicles, airplanes included? What about those who study policing? Are they not allowed to seek the protection of police? I think you raise a provocative point, but it resides on a very slippery slope.

      Thanks for stopping by. I hope you’ll be back!

  4. It’s actually a nice and useful piece of information. I am satisfied that you shared this helpful information with us.
    Please keep us informed like this. Thank you for sharing.

Join The Conversation

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s