Archived Story

China isn’t all about low wages

Published 10:06am Tuesday, January 24, 2012

Column: Pothole Prairie

Why are so many goods made in China?

I read an article in the online magazine The Week that made me realize the reasons jobs are going to China are not necessarily as a result of low wages. That’s probably the reason most people think China makes everything nowadays.

The story in The Week was actually a tale that originated earlier in the day in a publication called the New York Times. Charles Duhigg and Keith Bradsher wrote a piece detailing President Obama’s visit to Silicon Valley last February. While now-deceased Apple CEO Steve Jobs was speaking, the president interrupted and asked why Apple goods like the iPhone couldn’t be made in the United States?

Jobs was known for his reality distortion field, but he also was known for being unsparingly blunt, too. He told Obama, “Those jobs aren’t coming back.”

It wasn’t about hiring Americans. It was about the supply chain and the flexibility China provides.

Paying American wages to build iPhones would add about $65 to the retail price, estimates state. Apple could handle that. The story said China no longer has wages as low as Americans might believe. And the workforce is more educated than Americans might guess, too, and sometimes Americans generally are too educated for what companies need in the way of engineering.

Speed, flexibility and mid-level skills are what China has.

Here is a snippet of the story in The Week: “When Jobs decided just a month before the iPhone hit markets to replace a scratch-prone plastic screen with a glass one, a Foxconn factory in China woke up about 8,000 workers when the glass screens arrived at midnight, and the workers were assembling 10,000 iPhones a day within 96 hours. Another example: Apple had originally estimated that it would take nine months to hire the 8,700 qualified industrial engineers needed to oversee production of the iPhone; in China, it took 15 days.”

Read this paragraph from the Times story: “When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. ‘This is in case you give us the contract,’ the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

“The Chinese plant got the job.”

Another high-ranking Apple executive said this in the Times story: “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

Apple, the story noted, indeed has expanded in America and has more American employees than ever, while at the same time noting that the value of a company isn’t always sheerly measured in direct employees. Apple executives noted how the product creates jobs in other businesses, from shipping companies to cellphone companies to application programmers.

To be sure, wages are still a factor.

The iPhone is assembled in a place called Foxconn City. The Times says nothing like Foxconn City exists in the U.S.

“The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day.”

Foxconn Technology has plants in Asia, Eastern Europe, Mexico and Brazil. The Times says it assembles 40 percent of the world’s consumer electronics.

Jobs said the United States will remain successful.

“I’m not worried about the country’s long-term future,” Jobs told Obama, according to one observer. “This country is insanely great. What I’m worried about is that we don’t talk enough about solutions.”


Tribune Managing Editor Tim Engstrom’s column appears every Tuesday.