Analyst: Apple is subsidizing pay hikes at Foxconn

Analyst: Apple is subsidizing pay hikes at Foxconn
Last quarter, Apple saw its gross margins drop from 47% to 42.8% and it has estimated the number to drop further in the September quarter to 38.5%. At the same time, gross profit margins at contract manufacturer Foxconn have been rising. Analyst Adnaan Ahmad with Berenberg Bank takes this to mean that Apple probably is subsidizing recently instituted pay hikes at the factories. The analyst notes that Foxconn has been seeking better terms from its customers after labor costs increased by as much as 100%.

Ahmad believes that Apple has put up a major part of the pay hikes at Foxconn and that some of the other tech firms that use the contract manufacturer to assemble their products like Sony and HP, are not financially able to help out. The analyst points to Apple's capital expenditures which zoomed from $440 million in the December quarter to $2.1 billion in the second quarter of this year. Considering that Apple had already recognized the costs of expanding its campus in 2010, the jump in expenditures is related to something else.

Foxconn Chief Executive Terry Gou said earlier this year that Apple would help share the cost to improve working conditions at the factory. Last month, the Fair Labor Association said that working conditions had improved at Foxconn factories since an audit made earlier this year. The FLA says that 284 violations have been corrected. The Apple iPad and Apple iPhone are two of the products built at Foxconn's facilities.

source: AppleInsider

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15 Comments

1. TheLibertine

Posts: 484; Member since: Jan 15, 2012

Well, that's a great thing to hear. Apple directors, auctioneers already have so much money they could swim in it. Use it for something useful, for somebody who does really need it. Money is the source of most evil, but in a world where money rules it can also be a positive force.

2. jroc74

Posts: 6023; Member since: Dec 30, 2010

I agree. Apple gets so much negative press these days....its good to hear something positive about Apple for a change.

3. networkdood

Posts: 6330; Member since: Mar 31, 2010

Samsung had a clean audit and apple did not...wow 284 violations. Apple should pay these employees something, or just buy Foxconn.

4. xoutrageousx

Posts: 70; Member since: Dec 22, 2011

clean? wasn't there an article of samsung hiring under age people to work....?

5. downphoenix

Posts: 3165; Member since: Jun 19, 2010

They weren't under the age of 16 though, which is a legal age to work in China. Its looked down upon by countries where these types of jobs usually start at the age of 18, but culturally its acceptable for 16 to work in factories in China. That said, its good to hear that as far as the wages, Apple has picked up some of the slack to ensure the workers are treated a little better. Perhaps its not enough, but it is something.

10. Astreo

Posts: 105; Member since: May 05, 2011

That wasnt an audit of apple. it was of the foxconn facility. learn to read ?

15. remixfa

Posts: 14605; Member since: Dec 19, 2008

the foxconn facility was purpose built to be an apple only production facility under close supervision and contract stipulations by Apple. They are well aware of what goes on there. You dont think one of the most secretive public companies on the planet has no idea what goes on in its production plants do you?? are you that naive?

13. joey_sfb

Posts: 6794; Member since: Mar 29, 2012

Agree, still every bit of good counts. Many people is trying to make ends meet and i should hail the person or group that make this possible.

6. Apple-Royally-

Posts: 16; Member since: Aug 24, 2012

Finally a good news, and making progress on Foxconn and there employees, and working conditions....

7. dnyalexander

Posts: 10; Member since: Sep 03, 2012

You have to be stupid to believe this, this is no a fact. An idiot analyst is suggesting that this might be a possibility, because apple drop its profit?. it's profit are down because they selling of iphones have dropped since the phone feels outdated.

8. remixfa

Posts: 14605; Member since: Dec 19, 2008

I wouldnt call it "subsidizing" Apple is paying the workers regardless through their contracts with foxconn. What is interesting is that IF Apple is giving Foxconn extra money for its workers (a good first step), Foxconn is definitely taking off the top and not giving it all to the workers since their "profit margins are rising" at the same time. Look, Apple's margins are slowly coming down to everyone else's margins since they have to pay their slave labor more than a bowl of ramen noodles a day. Hopefully this is actually an improvement and not more PR nonsense.

9. crysiswarmonger

Posts: 81; Member since: Feb 06, 2012

If this is true it would be amazing. I have yet to see any corporation give $ to anyone if they did not have to. Minimum wages were made to keep corporations conspiring (collusion) to lower the wages so low no one can live on them. Corporations find all kinds of ways to lower the wages or benefits. Like sourcing to a country say CHINA where they have few laws or regulations for companies spewing toxic crap out and have millions of people needing work. So giving them some extra cash might be a part of it, they were not making a living wage to begin with.

11. tmcr7

Posts: 180; Member since: Nov 02, 2011

"Apple probably is subsidizing recently instituted pay hikes at the factories." Wow look! Apple is PROBABLY paying its Chinese slaves.

12. rallyguy

Posts: 620; Member since: Mar 13, 2012

"expenditures which zoomed from $440 million in the December quarter to $2.1 billion in the second quarter of this year." I don't buy it. I think I read the employees are getting an extra $50 a month? There is no way it costs 1.7 billion dollars to give 20k people a raise. If you divide 1.7 billion by 50 it equals 34 million. It's obvious Apple is spending it in other areas. The author should use some common sense and stop being so biased.

14. dragonite99 unregistered

this analyst and the apple insider(source) are both paid by apple to make this s##t up to redeem the respect that they have lost after what they did to samsung....... whatever they do, they are not going to gain mine...... no apple products for me

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