Global economic prospects harmed by Apple business model, says CRESC

25 Apr 2012

A team of experts at The University of Manchester’s Centre for Research on Socio-Cultural Change (CRESC) says the West’s globalised system of doing business- typified by the multinational company Apple– is hitting profits and jobs in Asia and the United States.

The CRESC report is published as the company’s profits soar to a record $11.6 billion while Taiwanese multinational Foxconn, which assembles electronic components for Apple and other companies, struggles to restructure and relocate to lower wage areas.

Key Western companies, say the inter-disciplinary CRESC team, use their position within the supply chain to pass on ‘misery’ to Asian subcontractors such as Foxconn.

They analyse the effects of a 'relentless quest' for Western companies to enrich their shareholders. The report also examines the dominance of the finance industry on globalised supply chains – known as financialization.

Professor Karel Williams from The University of Manchester, Director of CRESC, said: “Apple’s obsession with providing profits for its shareholders harms its domestic economy’s employment base, while hindering the development of their Asian subcontractors.

“The only benefit is to its multi-billion dollar reserves.

“However, Apple has a fragile business model which generates huge profits from tactical innovation in the volume sale of ‘must have’ devices.

“If Apple were willing to accept lower margins and the assembly labour on the iPhone were onshore and paid at US rates, Apple would still have a gross margin of nearly 50%.

“Apple’s actions should make us all reflect on ‘financialization’ and its effects.”

Historically, new Asian companies with low wages selling into high income markets do well, according to the CRESC analysis.

But because of the effects of the Apple model, Foxconn, according to the team, is suffering the same fate as an unsuccessful Western manufacturing firm.

Professor Williams added: “We ask to what extent does Western corporate power stand in the way of the upward mobility of Chinese firms trying to escape dependence as sub-contractors?

“And why are the assembly jobs in China when the assembly work could be done in the United States if Apple’s profits targets were lower?”