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Who made your laptop, and should you care?

Although contract manufacturing enables big brand name suppliers to force down prices, it’s not necessarily best for users. It means contract manufacturers are working on paper-thin margins in low-wage areas, and will move factories to even lower-wage areas when they can. If they can cut a corner and save 10 cents on a unit, they’re gaining $1 million on a 10-million production run. Well, what would you do?

Perhaps gadget buyers should neither know nor care how their shiny objects are made, but some previously-unseen aspects of working conditions have been widely publicised following a spate of suicides at Foxconn, which makes a lot of Apple products including iPhones and iPads. Hon Hai Precision Industry Co Ltd, which trades as Foxconn, is the world’s largest manufacturer of mobile phones and games consoles. It employs almost a million people, mostly in China, and has a bigger turnover than Apple, Microsoft or Dell.

According to the South China Morning Post, Foxconn runs its Shenzen plants like a military operation with “20,000 or so security guards” who “patrol on foot and speed about on motorbikes, carrying three-foot truncheons”.

A few of the names that make most of the laptops we buy

Although Apple got the publicity, it’s also true that Foxconn makes things for most of the big names including, I think, Amazon, Dell, HP, Intel, Microsoft, Motorola, Nintendo, Nokia, and Sony. You may well own several products made by Foxconn. If not, you could easily find it made your laptop’s motherboard, or at least a few of the components attached to it.

Foxconn responded to the adverse publicity by increasing wages, but Foxconn International Holdings has just revealed that its losses for January-June widened to $142.6 million from $18.7 million a year ago. In the same six months, Apple made $6.3 billion in profits.

The obvious solution for a contract manufacturer, looking enviously at the $40 billion Apple has in the bank, is to develop its own original designs, and its own brand name, so it can start charging premium prices. Stan Shih made this clear two years ago, saying:

“The days of doing OEM and ODM {making boxes and designs for others to put their own brand name on} are numbered. In order to elevate Taiwan to the global business scene with added value, we have to invest in branding right now. This is our social responsibility.”

It’s not easy to build a brand and move upmarket, but Acer and Asus are doing it, and they have already become big brands in Asia. HTC is doing it in mobile phones, having started out making PDAs like the Compaq iPaq. In a few years you might be less bothered about today’s big names, and debating whether to buy a Compal, a Quanta or a Wistron.

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