Apple Making Big Profits but Chinese Workers’ Wage on the Slide

Apple controls costs associated with purchases and workers’ in the supply chain.

In manufacturing the iPhone, over 80% of materials are purchased by Apple.

In addition, Apple supplies the manufacturing equipment whilst factories only purchase cases, screens, circuit boards, packaging and other materials.

In the assembly department, labor costs include workers’ costs which are calculated according to the minimum wage standard for the region, in addition to management fees for the factory.

Since Tim Cook became CEO of Apple, the company has required suppliers to not only increase their productivity but to also decrease costs at a rate between 5% to 10% every year. This has fostered competition between suppliers in decreasing costs.

According to Apple’s official report on their earnings in 2015, total revenue amounted to $233.7 billion USD. Net profit was a total of $53.4 billion USD, 22.85% of total revenue.

In China, Apple received $58.17 billion USD in revenue, which is 25.12% of total revenue in 2015. From this, Apple earned $13.4 billion USD in profits, however, the total base wages of the 1.6 million workers amounted to less than $6.2 billion USD.

This is less than half of the profits Apple earns in China.

Pegatron is one of Apple’s major suppliers, employing almost one hundred thousand workers in Mainland China. Working conditions are terrible, and workers are subject to terrible treatment.

Currently, Apple’s profits are declining, and the effects of this decline have been passed on to suppliers.

To mitigate the impact, Pegatron has taken some covert measures to exploit workers.

This report is based on interviews with Pegatron workers and a comparative study of 2015 copies of paystubs collected in 2015 and 2016. Through our investigation, we have found that Pegatron has taken some surreptitious measures to pass Apple’s audits.

In addition, we discovered that Pegatron’s working conditions have worsened in 2016 compared to 2015.