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How U.S. Lost Out on iPhone Work


In March 2012, a furor erupted over the accuracy of Daisey's performance. Enter his name in Google search and you can read about it. This American Life has retracted this episode, saying We're retracting the story because we canテ「冲 vouch for its truth. This is not a story we commissioned. It was an excerpt of Mike Daisey's acclaimed one-man show "The Agony and the Ecstasy of Steve Jobs," in which he talks about visiting a factory in China that makes iPhones and other Apple products. Go to their website for full mea culpa, which might be overblown.

Ohanian Comment: Here's what our corporate giants want from their employees: sleep in a dormitory and thus be on call 24/7. Then, in an emergency, 8,000 workers can be roused at midnight and, after being given a biscuit and a cup of tea, they're ready for work. Workers for the 21st Century.

After Steve Jobs' death, Mike Daisey noted in a New York Times op ed, "Today there is no tech company that looks more like the Big Brother from Apple's iconic 1984 commercial than Apple itself, a testament to how quickly power can corrupt."

Here's a partial transcript of Mike Daisey's appearance on This American Life. You can also access the audio here.


Prologue.
Ira Glass: . . . Mike Daisey makes his living doing monologues on stage. He's been doing that for years, though you're going to hear in this story that he turns himself into an amateur reporter during the course of the story, using some investigative techniques once he gets going I think very few reporters would ever try, and finding lots of stuff I hadn't heard or seen anywhere else, not like this.

Act One. Mister Daisey Goes to China.

Mike Daisey: My only hobby is technology. I love technology. I love everything about it. I love looking at technology. I love comparing one piece of technology with another. I love reading rumors about technology that doesn't exist yet. I love browsing technology. I love buying technology. I love opening technology. Even when it's in that bubble packaging, I love opening it. I love the smell of a new piece of technology, that sort of burnt PVC smell when you run electricity through it for the first time. I love that.

And of all the kinds of technology that I love in the world, I love the technology that comes from Apple the most, because I am an Apple aficionado. I'm an Apple partisan. I'm an Apple fanboy. I'm a worshiper in the cult of Mac. I have been to the house of Jobs. I have walked the stations of his cross. I have knelt before his throne.

And like so many of you who may be members of this religion with me, you may know that it can be difficult at times to keep the faith. And I have strayed now and again. In the late '90s I did sleep with a Windows system or two. But who didn't, really? But for the most part, I have been faithful.

But I do think it's important to understand where I sit in that hierarchy of Apple geeks for the purposes of our story. And so the best way I know to describe it is to say that I am at the level of geekishness where to relax after performances like this one, sometimes I will go back to my apartment and I will field strip my MacBook Pro into its 43 component pieces. I will clean them with compressed air, and I will put them back together again. It soothes me.

So the truth is I never would have questioned this religion. I never would have looked deeply at this belief system, because it gave me so much pleasure, if it hadn't been for the pictures. One day I was relaxing on the internet, which for me means reading Macintosh news sites, which I should specify have no actual news in them. They're instead filled with rumors about what Apple will do next, written exclusively by people who have no goddamn idea what Apple will do next. But for some reason I find this soothing.

So I'm reading one of those news sites when this article gets posted. And it's about the fact that someone bought an iPhone, and when they got it, it wasn't blank. It had information on it from inside the factory. And in fact in the camera roll, there were pictures on it from inside the factory. And they posted these pictures into the article. And I looked at these pictures, and they took my breath away.

They're not very good pictures, you know? They're just testing that the camera on the phone works. They're not of anything. But I'll never forget them. There were four of them. First there was a stack of pallets, wooden pallets stacked up. And the second one was the edge of a conveyor belt. And the third was totally out of focus. It could just be an enormous space. And the fourth was a woman. She doesn't know her picture's being taken. She's looking off in another direction. She's wearing a clean suit. She has no expression on her face.

And I looked at these pictures, and I downloaded these pictures to my desktop, and I put them in a folder on my desktop. And in the weeks and months that followed, I found myself returning to them again and again almost compulsively. I would mouse over there, and I would fan them across my desktop, and I would look at them. Who are these people?

Because you have to understand, I have dedicated an embarrassing amount of my life to the study of these machines. I'm an amateur, but I'm a dedicated amateur. I understand as best I can how the hardware works, and how the software rests on the hardware. And in all that time, until I saw those pictures, it was only then I realized I had never thought ever in a dedicated way about how they were made.

It's actually hard now to reconstruct what I did think. I think what I thought is they were made by robots. I got an image in my mind that I now realize I just stole from a 60 Minutes story about Japanese automotive plants. I just copy and pasted that. I was like, pwop, Command-V, pwop. It looks like that, but smaller, because they're laptops.

I started to think how if this phone has four pictures on it taken by hand in testing, then every iPhone has four pictures on it taken in testing, every iPhone in the world, by hand. I started to think, and that's always a problem for any religion, the moment when you begin to think.

Shenzhen is a city without history. The people who live there will tell you that, because 31 years ago Shenzhen was a small town. It had little reed huts, little reed walkways between the huts. The men would fish in the late afternoon. I hear it was lovely.

Today Shenzhen is a city of 14 million people. It is larger than New York City. Depending on how you count it, it's the third largest city in all of China. It is the place where almost all of your crap comes from.

And the most amazing thing is, almost no one in America knows its name. Isn't that remarkable that there's a city where almost all of our crap comes from, and no one knows its name? I mean, we think we do know where our crap comes from. We're not ignorant. We think our crap comes from China, right? Kind of a generalized way. China.

But it doesn't come from China. It comes from Shenzhen. It's a city. It's a place.

And I am there in an elevator, going down to the lobby of my hotel to meet with my translator, Kathy. Kathy is fascinating. She's very small. She has these sort of rounded shoulders. And she has these glasses that are way too big for her face, so they keep sliding down, and she has to push them up assiduously. She also has this sort of unnerving habit that when she is listening to you, she leans forward indeterminately, so you really get the feeling that if you were to talk to her for long enough, she would actually fall into your chest, and you would have to pick her back up again.

We go outside and get into a taxi and begin to drive through the streets of downtown Shenzhen. Shenzhen looks like Blade Runner threw up on itself. LEDs, neon, and 15-story-high video walls covered in ugly Chinese advertising. It's everything they promised us the future would be.

We get out to the edge of the core of Shenzhen and we come to the gates. Because 31 years ago, when Deng Xiaoping carved this area off from the rest of China with a big red pen, he said, this will be the special economic zone. And he made a deal with the corporations. He said listen, use our people. Do whatever you want to our people. Just give us a modern China. And the corporations took that deal, and they squeezed and they squeezed. And what they got was the Shenzhen we find today.

And on the other side of the gates it's the factory zone. And whew, it's like going from the Eloi to the Morlocks, everything changes. I've never seen anything like it. Everything is under construction. Every road has a bypass. Every bypass has a bypass. It's bypasses all the way down.

We pull onto an elevated expressway. We begin to drive under a silver poison sky. Because the air in Shenzhen-- it's not good in Hong Kong, but when you get to Shenzhen, you can actually feel it like a booted foot pressing down on your chest. But it's amazing what human beings will get used to, isn't it? Because after you're there just a few days [DEEP INHALATION AND EXHALATION] you hardly even notice it at all.

And as we're driving, we're passing by arcology after arcology, these immense buildings that are so large, they're redefining my sense of scale moment by moment. And then our taxi driver takes an exit ramp, and he stops, because the exit ramp stops in midair. There's some rebar sticking out and an 85-foot drop to the ground. The only sign that the exit ramp ends is a single solitary orange cone. It's sitting there as if to say, we're busy, be alert.

We back back onto the expressway and begin to drive again. And then Kathy turns to me, pushes up her glasses, and says, excuse me, but I do not think this is going to work. And I hasten to assure her that it will work, but I'm talking out of my ass, because I don't know that it's going to work. In fact, I have a lot of evidence that this is not going to work. In fact, all the journalists I have talked to in Hong Kong when I told them about my plan, you can actually see them wrestling with just how to express to me just how totally [BLEEP] my plan is.

My plan is this. We are in a taxi right now in the factory zone. We are driving on our way to Foxconn. Foxconn, a single company, makes a staggering amount of the electronics you use every day. They make electronics for Apple, Dell, Nokia, Panasonic, HP, Samsung, Sony, Lenovo, a third of all of it. That's Foxconn. And at this plant they make all kinds of things, including MacBook Pros and iPhones and iPads.

And so my plan is to take this taxi to the main gate, and then I'm going to get out of the taxi with my translator. And then my plan is to stand at the main gate and talk to anybody who wants to talk to me.

And when I tell journalists in Hong Kong about my plan, they say, that's different. That's not really how we usually do things in China. That's really a bad idea. That's really a bad idea.

But I don't know what else to do. I have been trying to do things the right way. I have been working with a fixer for the BBC. I can't get anywhere. All the doors are closed. And you reach a certain point when you realize you may need to obey your natural inclination. And at the end of the day, I am large, I am American, and I am wearing a goddamn Hawaiian shirt. And we are going to the main gates.

But I have to admit, when we get there, my resolve wavers because the Foxconn plant in Shenzhen is enormous. The Foxconn plant in Shenzhen has 430,000 workers. That can be a difficult number to conceptualize. I find it's useful to instead think about how there are more than 20 cafeterias at the plant. And then you just have to understand that workers told me that these cafeterias can hold up to 10,000 people. So now you just need to visualize a cafeteria that seats 10,000 people. I'll wait.

And I get to the main gate, and I get out of the taxi with my translator. And the first thing I see at the gates are the guards. And the guards look pissed. They look really pissed, and they are carrying guns. And I look back at the taxi, which is now pulling away.

And I'm involuntarily reminded of a Google News alert that popped into my inbox a few weeks earlier about a Reuters photographer who was taking pictures not at the Foxconn plant, but near the Foxconn plant. And Foxconn security went out, scooped him up, and beat him before releasing him.

And I look up past the gates and the guards. I look up at the buildings, these immense buildings. They are so enormous. And along the edges of each enormous building are the nets, because right at the time that I am making this visit, there's been an epidemic of suicides at the Foxconn plant. Week after week, worker after worker has been climbing all the way up to the tops of these enormous buildings and then throwing themselves off, killing themselves in a brutal and public manner, not thinking very much about just how bad this makes Foxconn look. Foxconn's response to month after month of suicides has been to put up these nets.

It's shift change, and the workers are coming out of the plant. And I'm standing there under the hot monsoon sun and the gaze of the guards. I feel ridiculous. I look absurd in this landscape. I mean, I wouldn't talk to me. And Kathy surprises me. Who knew? She turns out to be a spitfire. She runs right over to the very first worker, grabs them by the arm, drags them over to us. We start talking, and in short order, we cannot keep up.

First there's one worker waiting, then there's two, then there's three. Before long the guards are like, er? Er? And we move further and further away from the plant, but the line just gets longer and longer. Everyone wants to talk. We start taking them three or four at a time. We still can't keep up. Everyone wants to talk. It's like they were coming to work every day thinking, you know what would be great? It would be so great if somebody who uses all this crap we make every day all day long, it would be so great if one of those people came and asked us what was going on. Because we would have stories for them.

And I'm just ad hoc-ing questions. I'm asking the questions you would expect. What village in China are you from? How long have you been working at Foxconn? What do you do at the plant? How do you find your job? What would you change at Foxconn if you could change anything?

That question always gets them. They always react like a bee has flown into their faces, and then they say something to Kathy. And Kathy says, he says he never thought of that before. Every time, every time.

And the stories are fascinating. I talked to one young woman who works on the iPhone line. She cleans the screens of iPhones by hand in these huge racks, thousands and thousands of them every day. And she shows me how she does it. And I show her my iPhone. And I hand her my iPhone. I take a picture of her holding my iPhone. And I say to her, we'll never know, but you may have cleaned the screen of this iPhone when it came by you on the line. We'll never know. And she, quick as a whip, she takes my phone and she rubs it against her pants. And then she says there, I've cleaned it a second time.

And I say to her, you seem kind of young. How old are you? And she says, I'm 13. And I say, 13? That's young. Is it hard to get work at Foxconn when you're-- and she says oh no. And her friends all agree, they don't really check ages. The outside companies do have inspections, but workers told me Foxconn always knows when there's going to be an inspection. So what they do then, they don't even check ages then. They just pull everyone from the affected line, and then they put the oldest workers they have on that line.

You'd think someone would notice this, you know? I'm telling you that I do not speak Mandarin. I do not speak Cantonese. I have only a passing familiarity with Chinese culture, and to call what I have a passing familiarity is an insult to Chinese culture. I don't know [BLEEP] all about Chinese culture. But I do know that in my first two hours of my first day at that gate, I met workers who were 14 years old, 13 years old, 12.

Do you really think Apple doesn't know? In a company obsessed with the details, with the aluminum being milled just so, with the glass being fitted perfectly into the case, do you really think it's credible that they don't know? Or are they just doing what we are all doing? Do they just see what they want to see?

Emboldened by my success at Foxconn, I decide to embark on a new plan. But I'm going to need Kathy's help if it's going to work, so I meet with her in the lobby of my hotel. And I say to her, Kathy, now you work with a lot of American businessmen, don't you? And she says, yes, I do. And I say, great, here's what I want you to do. I want you to call all the factories you have connections with, and I want you to call them. And I want you to tell them that I am an American businessman, and that I want to buy whatever they are selling.

And she listens to this, and she says, but you are not a businessman. And I say, that's true, I am not a businessman. And she says, and you aren't going to buy their products. I say, that's true, I'm not going to buy their products. And she says, you will lie to them. And I say, yes Kathy, I'm going to lie to lots of people.

And for a moment I think it isn't going to work. And then you can actually see the idea leap the synaptic gap from a problem to a problem to be solved when she says, you are going to need a lot of business cards.

And two days later we head out into the factory zone. As we come to each factory, Kathy briefs me on what it is they make and what it is I have said I am going to buy. The factories are all different, but really they're more similar than different. There's always gates and guards. When you get past those, there's always a lawn, big and green and plush. No one walks on it. No one uses it. You go into the lobbies. The lobby is these huge empty Kubrickian spaces, totally empty except for a tiny little desk for the receptionist.

And you cross the huge, empty lobby to the tiny little desk. You introduce yourselves, and then the executives always come down in a gaggle, all together. They pick you up, and you go up together to a conference room.

After the PowerPoint, we head down to the factory floor, industrial spaces with 20,000, 25,000, 30,000 workers in a single enormous space. They can exert a kind of eerie fascination. There's a beauty to industrialization on such a massive scale. You don't have to deny it. There's a wonder to seeing so much order laid out in front of you. And people are walking around, whispering statistics in your ear.

It's easy to slip into a kind of Stalinist wet dream, but I try to subvert that by locking onto actual faces. They take me up and down the aisles. And the first thing I notice is the silence. It's so quiet. At Foxconn you're demerited if you ever speak on the line.

At no factory I went to did anyone ever speak on the line, but this is deeper than that. As a creature of the First World, I expect a factory making complex electronics will have the sound of machinery, but in a place where the cost of labor is effectively zero, anything that can be made by hand is made by hand. No matter how complex your electronics are, they are assembled by thousands and thousands of tiny little fingers working in concert. And in those vast spaces, the only sound is the sound of bodies in constant, unending motion.

And it is constant. They work a Chinese hour, and a Chinese hour has 60 Chinese minutes, and a Chinese minute has 60 Chinese seconds. It's not like our hour. What's our hour now, 46 minutes? You know, you have a bathroom break, and you have a smoke break. If you don't smoke, there's a yoga break. This doesn't look anything like that. This looks like nothing we've seen in a century.

They work on the line, and the lines only move as fast as its slowest member, so each person learns how to move perfectly as quickly as possible. If they can't do it, there are people behind them watching them. And there are cameras watching both sets of people, and people watching the cameras. They lock it down. They sharpen it to a fine, sharp edge every hour, and those hours are long.

The official work day in China is eight hours long, and that's a joke. I never met anyone who had even heard of an eight-hour shift. Everyone I talked to worked 12-hour shifts standard, and often much longer than that, 14 hours a day, 15 hours a day. Sometimes when there's a hot new gadget coming out-- you know what the [BLEEP] I'm talking about-- sometimes it pegs up to 16 hours a day. And it just sits there for weeks and months at a time, month after month after month, straight 16's, sometimes longer than that.

While I'm in-country, a worker at Foxconn dies after working a 34-hour shift. I wish I could say that's exceptional, but it's happened before. I only mention it because it actually happened while I was there.

And I go to the dormitories. I'm a valuable potential future customer. They will show me anything I ask to see. The dormitories are cement cubes, 12-foot by 12-foot. And in that space there are 13 beds, 14 beds. I count 15 beds. They're stacked up like Jenga puzzle pieces all the way up to the ceiling. The space between them is so narrow, none of us would actually fit in them. They have to slide into them like coffins.

There are cameras in the rooms. There are cameras in the hallways. There are cameras everywhere. And why wouldn't there be? You know, when we dream of a future where the regulations are washed away and the corporations are finally free to sail above us, you don't have to dream about some sci-fi dystopian Blade Runner/1984 bull [BLEEP]. You can go to Shenzhen tomorrow. They're making your crap that way today.

When I leave the factory, as I can feel myself being rewritten from the inside out, the way I see everything is starting to change. I keep thinking, how often do we wish more things were handmade? Oh, we talk about that all the time, don't we? "I wish it was like the old days. I wish things had that human touch." But that's not true. There are more handmade things now than there have ever been in the history of the world.

Everything is handmade. I know. I have been there. I have seen the workers laying in parts thinner than human hair. One after another after another. Everything is handmade.

I'm at a restaurant in the factory zone, seated at a table with Kathy. And this aphorism is running through my head over and over again-- I can't remember who said it originally-- that paranoia is not paranoia when they're actually out to get you.

And I go through my checklist again. I've gone through my pockets and found every slip of paper with an email address or a phone number, and I've destroyed all of these. I've hidden my paper notes off of my person, and I've erased everything on my laptop. And anything I can't erase is on an encrypted partition that I hope is encrypted enough. I've done all of these things because I am in this restaurant to meet with a union.

Because there are unions in China. There are the ones that are fronts for the Communist Party, and then there are actual unions interested in labor reform. They're called secret unions, because in China, if you're caught being a member of or affiliating with a union like that, you go to prison. You go to prison for many years. And that's why I've had to take these precautions.

And getting this meeting involved climbing a ladder of associations, going to meeting after meeting, each step along the way just making good my intentions, just being clear that I am a storyteller. Just want to hear people's stories. Just want to hear what they have to say.

And the union organizers come in and sit down, and it's awkward at first. And then they begin to tell me about the situation on the ground. There is so much turmoil in southern China, so much happening just beneath the surface. They tell me about the two Honda plants that have gone on strike in the north of the province, and how they helped organize that strike. And I think about what it would mean to go on strike in a country where even being a member of a union can get you thrown in prison, what it would take to be pushed to that point.

And I feel provincial saying this, but it's true. I can't stop thinking about how young these people are. They don't even look college age. They look younger than that. And I say to them, how do you know who's right to work with you? How do you find people to help you organize?

And this sort of breaks the narrative, and for a moment they look their age. And they look at each other bashfully, and they say well, we talk a lot. We talk all the time. We have lots of meetings, and we meet at coffeehouses and different Starbucks in Guangzhou. And we exchange papers, and sometimes there are books. And it's so clear in this moment that they are making this up as they go along.

Then the workers start coming in. They come in in twos and threes and fours. They come in all day. It's an eight, nine-hour day. I interview all of them. Some of them are in groups.

There's a group that's talking about hexane. N-hexane is an iPhone screen cleaner. It's great because it evaporates a little bit faster than alcohol does, which means you can run the production line even faster and try to keep up with the quotas. The problem is that n-hexane is a potent neurotoxin, and all these people have been exposed. Their hands shake uncontrollably. Most of them can't even pick up a glass.

I talk to people whose joints in their hands have disintegrated from working on the line, doing the same motion hundreds and hundreds of thousands of times. It's like carpal tunnel on a scale we can scarcely imagine. And you need to know that this is eminently avoidable. If these people were rotated monthly on their jobs, this would not happen.

But that would require someone to care. That would require someone at Foxconn and the other suppliers to care. That would require someone at Apple and Dell and the other customers to care. Currently no one in the ecosystem cares enough to even enforce that. And so when you start working at 15 or 16, by the time you are 26, 27, your hands are ruined. And when they are truly ruined, once they will not do anything further, you know what we do with a defective part in a machine that makes machine. We throw it away.

And the thing that unites all these people is that they are all the kind of people who would join a union in a place where joining a union can destroy your life. I talk with one woman. She's very birdlike, very nervous. And she just wants to explain to me how it is that she came to be in a union, because she never thought she would ever be in a union. It's just that she couldn't get her company to pay her overtime. And she complained and complained. This went on for weeks and for months.

And Kathy says to her kind of sharply, she says, you should have gone to the labor board. That's what they're there for. You should have gone to the labor board. And the woman says, I did. I went to the labor board, and I told them about my problem. And they took down my name and my address and my company, and they took my name and they put it on the blacklist, and they fired me. And then she shows me a copy of the blacklist. A friend of hers in Accounting photocopied it and snuck it out to her. She gives it to me. I hand it to Kathy to translate.

You know, in a fascist country run by thugs, you don't have to be subtle. You can say exactly what you mean. The sheet is very clear that it comes from the labor board. And it says right across the top, the following is a list of troublemakers. If any of them are found in your employ, dismiss them immediately. And then there's just column after column after column of names, page after page after page of them. Kathy's hand trembles as she translates it.

I talk to an older man with leathery skin. His right hand is twisted up into a claw. It was crushed in a metal press at Foxconn. He says he didn't receive any medical attention, and it healed this way. And then when he was too slow, they fired him. Today he works at a woodworking plant. He says he likes it better. He says the people are nicer and the hours are more reasonable. He works about 70 hours a week.

And I ask him what he did when he was at Foxconn, and says he worked on the metal enclosures for the laptops, and he worked on the iPad. And when he says this, I reach into my satchel, and I take out my iPad. And when he sees it, his eyes widen, because one of the ultimate ironies of globalism, at this point there are no iPads in China. Even though every last one of them was made at factories in China, they've all been packaged up in perfectly minimalist Apple packaging and then shipped across the seas, that we can all enjoy them.

He's never actually seen one on, this thing that took his hand. I turn it on, unlock the screen, and pass it to him. He takes it. The icons flare into view, and he strokes the screen with his ruined hand, and the icons slide back and forth. And he says something to Kathy, and Kathy says, "he says it's a kind of magic."

It's a long day. At the end of it I'm packing up everything to go, and Kathy says something to me out of nowhere. She says, do you think these people are mentally ill? Do you think it is possible they are making all this up? And I look at her as though for the first time, because I mean, let's be clear. She's my Chinese worker. I pay her for her time. I don't think about her very much at all. But now I really look at her. She is exactly who all these workers I've been talking to for weeks, she is exactly what they are all dreaming that their children will one day be. She has a good life in the center of Shenzhen for her, for her family. What does this look like to her?

I say to her, what do you think? Do you think they're mentally ill? And she suddenly looks very tired. She takes off her glasses, and she rubs the bridge of her nose. And she says, no, I do not think they are mentally ill. It's just that you hear stories, but you do not think it is going to be so much. You know? It's just so much.

And I reach across the table, and I touch her hand. It's the first and last time we will ever touch, I and this woman whose real name I don't even know. I say to her, I know exactly what you mean. . . .

Ira Glass: We invited Apple to come onto the program and respond, and they turned us down. We invited Foxconn to come onto the program and respond, and they also said no. Mike, however, was willing to come in and explain his methods at Foxconn's gates and in the factories that he visited. . . .
For the rest of the people with whom Ira Glass talked about the situation in China, go here.


By Charles Duhigg and Keith Bradsher
New York Times


When Barack Obama joined Silicon Valley's top luminaries for dinner in California last February, each guest was asked to come with a question for the president.

But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?

Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can't that work come home? Mr. Obama asked.

Mr. Jobs's reply was unambiguous. "Those jobs aren't coming back," he said, according to another dinner guest.

The president's question touched upon a central conviction at Apple. It isn't just that workers are cheaper abroad. Rather, Apple's executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that "Made in the U.S.A." is no longer a viable option for most Apple products.

Apple has become one of the best-known, most admired and most imitated companies on earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.

However, what has vexed Mr. Obama as well as economists and policy makers is that Apple -- and many of its high-technology peers -- are not nearly as avid in creating American jobs as other famous companies were in their heydays.

Apple employs 43,000 people in the United States and 20,000 overseas, a small fraction of the over 400,000 American workers at General Motors in the 1950s, or the hundreds of thousands at General Electric in the 1980s. Many more people work for Apple's contractors: an additional 700,000 people engineer, build and assemble iPads, iPhones and Apple's other products. But almost none of them work in the United States. Instead, they work for foreign companies in Asia, Europe and elsewhere, at factories that almost all electronics designers rely upon to build their wares.

"Apple's an example of why it's so hard to create middle-class jobs in the U.S. now," said Jared Bernstein, who until last year was an economic adviser to the White House.

"If it's the pinnacle of capitalism, we should be worried."

Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone's screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company's dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

"The speed and flexibility is breathtaking," the executive said. "There's no American plant that can match that."

Similar stories could be told about almost any electronics company -- and outsourcing has also become common in hundreds of industries, including accounting, legal services, banking, auto manufacturing and pharmaceuticals.

But while Apple is far from alone, it offers a window into why the success of some prominent companies has not translated into large numbers of domestic jobs. What's more, the company's decisions pose broader questions about what corporate America owes Americans as the global and national economies are increasingly intertwined.

"Companies once felt an obligation to support American workers, even when it wasn't the best financial choice," said Betsey Stevenson, the chief economist at the Labor Department until last September. "That's disappeared. Profits and efficiency have trumped generosity."

Companies and other economists say that notion is naテャテッツソツステモテつッve. Though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need, executives say.

To thrive, companies argue they need to move work where it can generate enough profits to keep paying for innovation. Doing otherwise risks losing even more American jobs over time, as evidenced by the legions of once-proud domestic manufacturers -- including G.M. and others -- that have shrunk as nimble competitors have emerged.

Apple was provided with extensive summaries of The New York Times's reporting for this article, but the company, which has a reputation for secrecy, declined to comment.

This article is based on interviews with more than three dozen current and former Apple employees and contractors -- many of whom requested anonymity to protect their jobs -- as well as economists, manufacturing experts, international trade specialists, technology analysts, academic researchers, employees at Apple's suppliers, competitors and corporate partners, and government officials.

Privately, Apple executives say the world is now such a changed place that it is a mistake to measure a company's contribution simply by tallying its employees -- though they note that Apple employs more workers in the United States than ever before.

They say Apple's success has benefited the economy by empowering entrepreneurs and creating jobs at companies like cellular providers and businesses shipping Apple products. And, ultimately, they say curing unemployment is not their job.

"We sell iPhones in over a hundred countries," a current Apple executive said. "We don't have an obligation to solve America's problems. Our only obligation is making the best product possible."

'I Want a Glass Screen'

In 2007, a little over a month before the iPhone was scheduled to appear in stores, Mr. Jobs beckoned a handful of lieutenants into an office. For weeks, he had been carrying a prototype of the device in his pocket.

Mr. Jobs angrily held up his iPhone, angling it so everyone could see the dozens of tiny scratches marring its plastic screen, according to someone who attended the meeting. He then pulled his keys from his jeans.

People will carry this phone in their pocket, he said. People also carry their keys in their pocket. "I won't sell a product that gets scratched," he said tensely. The only solution was using unscratchable glass instead. "I want a glass screen, and I want it perfect in six weeks."

After one executive left that meeting, he booked a flight to Shenzhen, China. If Mr. Jobs wanted perfect, there was nowhere else to go.

For over two years, the company had been working on a project -- code-named Purple 2 -- that presented the same questions at every turn: how do you completely reimagine the cellphone? And how do you design it at the highest quality -- with an unscratchable screen, for instance -- while also ensuring that millions can be manufactured quickly and inexpensively enough to earn a significant profit?

The answers, almost every time, were found outside the United States. Though components differ between versions, all iPhones contain hundreds of parts, an estimated 90 percent of which are manufactured abroad. Advanced semiconductors have come from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chipsets from Europe and rare metals from Africa and Asia. And all of it is put together in China.

In its early days, Apple usually didn't look beyond its own backyard for manufacturing solutions. A few years after Apple began building the Macintosh in 1983, for instance, Mr. Jobs bragged that it was "a machine that is made in America." In 1990, while Mr. Jobs was running NeXT, which was eventually bought by Apple, the executive told a reporter that "I'm as proud of the factory as I am of the computer." As late as 2002, top Apple executives occasionally drove two hours northeast of their headquarters to visit the company's iMac plant in Elk Grove, Calif.

But by 2004, Apple had largely turned to foreign manufacturing. Guiding that decision was Apple's operations expert, Timothy D. Cook, who replaced Mr. Jobs as chief executive last August, six weeks before Mr. Jobs's death. Most other American electronics companies had already gone abroad, and Apple, which at the time was struggling, felt it had to grasp every advantage.

In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn't driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.

For Mr. Cook, the focus on Asia "came down to two things," said one former high-ranking Apple executive. Factories in Asia "can scale up and down faster" and "Asian supply chains have surpassed what's in the U.S." The result is that "we can't compete at this point," the executive said.

The impact of such advantages became obvious as soon as Mr. Jobs demanded glass screens in 2007.

For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.

Then a bid for the work arrived from a Chinese factory.

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.

"The entire supply chain is in China now," said another former high-ranking Apple executive. "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."

In Foxconn City

An eight-hour drive from that glass factory is a complex, known informally as Foxconn City, where the iPhone is assembled. To Apple executives, Foxconn City was further evidence that China could deliver workers -- and diligence -- that outpaced their American counterparts.

That's because nothing like Foxconn City exists in the United States.

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. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. "The scale is unimaginable," he said.

Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility's central kitchen cooks an average of three tons of pork and 13 tons of rice a day. While factories are spotless, the air inside nearby teahouses is hazy with the smoke and stench of cigarettes.

Foxconn Technology has dozens of facilities in Asia and Eastern Europe, and in Mexico and Brazil, and it assembles an estimated 40 percent of the world's consumer electronics for customers like Amazon, Dell, Hewlett-Packard, Motorola, Nintendo, Nokia, Samsung and Sony.

"They could hire 3,000 people overnight," said Jennifer Rigoni, who was Apple's worldwide supply demand manager until 2010, but declined to discuss specifics of her work. "What U.S. plant can find 3,000 people overnight and convince them to live in dorms?"

In mid-2007, after a month of experimentation, Apple's engineers finally perfected a method for cutting strengthened glass so it could be used in the iPhone's screen. The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That's when managers woke thousands of workers, who crawled into their uniforms -- white and black shirts for men, red for women -- and quickly lined up to assemble, by hand, the phones. Within three months, Apple had sold one million iPhones. Since then, Foxconn has assembled over 200 million more.

Foxconn, in statements, declined to speak about specific clients.

"Any worker recruited by our firm is covered by a clear contract outlining terms and conditions and by Chinese government law that protects their rights," the company wrote. Foxconn "takes our responsibility to our employees very seriously and we work hard to give our more than one million employees a safe and positive environment."

The company disputed some details of the former Apple executive's account, and wrote that a midnight shift, such as the one described, was impossible "because we have strict regulations regarding the working hours of our employees based on their designated shifts, and every employee has computerized timecards that would bar them from working at any facility at a time outside of their approved shift." The company said that all shifts began at either 7 a.m. or 7 p.m., and that employees receive at least 12 hours' notice of any schedule changes.

Foxconn employees, in interviews, have challenged those assertions.

Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple's executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company's analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.

In China, it took 15 days.

Companies like Apple "say the challenge in setting up U.S. plants is finding a technical work force," said Martin Schmidt, associate provost at the Massachusetts Institute of Technology. In particular, companies say they need engineers with more than high school, but not necessarily a bachelor's degree. Americans at that skill level are hard to find, executives contend. "They're good jobs, but the country doesn't have enough to feed the demand," Mr. Schmidt said.

Some aspects of the iPhone are uniquely American. The device's software, for instance, and its innovative marketing campaigns were largely created in the United States. Apple recently built a $500 million data center in North Carolina. Crucial semiconductors inside the iPhone 4 and 4S are manufactured in an Austin, Tex., factory by Samsung, of South Korea.

But even those facilities are not enormous sources of jobs. Apple's North Carolina center, for instance, has only 100 full-time employees. The Samsung plant has an estimated 2,400 workers.

"If you scale up from selling one million phones to 30 million phones, you don't really need more programmers," said Jean-Louis Gassテャテッツソツステモテつゥe, who oversaw product development and marketing for Apple until he left in 1990. "All these new companies -- Facebook, Google, Twitter -- benefit from this. They grow, but they don't really need to hire much."

It is hard to estimate how much more it would cost to build iPhones in the United States. However, various academics and manufacturing analysts estimate that because labor is such a small part of technology manufacturing, paying American wages would add up to $65 to each iPhone's expense. Since Apple's profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward.

But such calculations are, in many respects, meaningless because building the iPhone in the United States would demand much more than hiring Americans -- it would require transforming the national and global economies. Apple executives believe there simply aren't enough American workers with the skills the company needs or factories with sufficient speed and flexibility. Other companies that work with Apple, like Corning, also say they must go abroad.

Manufacturing glass for the iPhone revived a Corning factory in Kentucky, and today, much of the glass in iPhones is still made there. After the iPhone became a success, Corning received a flood of orders from other companies hoping to imitate Apple's designs. Its strengthened glass sales have grown to more than $700 million a year, and it has hired or continued employing about 1,000 Americans to support the emerging market.

But as that market has expanded, the bulk of Corning's strengthened glass manufacturing has occurred at plants in Japan and Taiwan.

"Our customers are in Taiwan, Korea, Japan and China," said James B. Flaws, Corning's vice chairman and chief financial officer. "We could make the glass here, and then ship it by boat, but that takes 35 days. Or, we could ship it by air, but that's 10 times as expensive. So we build our glass factories next door to assembly factories, and those are overseas."

Corning was founded in America 161 years ago and its headquarters are still in upstate New York. Theoretically, the company could manufacture all its glass domestically. But it would "require a total overhaul in how the industry is structured," Mr. Flaws said. "The consumer electronics business has become an Asian business. As an American, I worry about that, but there's nothing I can do to stop it. Asia has become what the U.S. was for the last 40 years."

Middle-Class Jobs Fade

The first time Eric Saragoza stepped into Apple's manufacturing plant in Elk Grove, Calif., he felt as if he were entering an engineering wonderland.

It was 1995, and the facility near Sacramento employed more than 1,500 workers. It was a kaleidoscope of robotic arms, conveyor belts ferrying circuit boards and, eventually, candy-colored iMacs in various stages of assembly. Mr. Saragoza, an engineer, quickly moved up the plant's ranks and joined an elite diagnostic team. His salary climbed to $50,000. He and his wife had three children. They bought a home with a pool.

"It felt like, finally, school was paying off," he said. "I knew the world needed people who can build things."

At the same time, however, the electronics industry was changing, and Apple -- with products that were declining in popularity -- was struggling to remake itself. One focus was improving manufacturing. A few years after Mr. Saragoza started his job, his bosses explained how the California plant stacked up against overseas factories: the cost, excluding the materials, of building a $1,500 computer in Elk Grove was $22 a machine. In Singapore, it was $6. In Taiwan, $4.85. Wages weren't the major reason for the disparities. Rather it was costs like inventory and how long it took workers to finish a task.

"We were told we would have to do 12-hour days, and come in on Saturdays," Mr. Saragoza said. "I had a family. I wanted to see my kids play soccer."

Modernization has always caused some kinds of jobs to change or disappear. As the American economy transitioned from agriculture to manufacturing and then to other industries, farmers became steelworkers, and then salesmen and middle managers. These shifts have carried many economic benefits, and in general, with each progression, even unskilled workers received better wages and greater chances at upward mobility.

But in the last two decades, something more fundamental has changed, economists say. Midwage jobs started disappearing. Particularly among Americans without college degrees, today's new jobs are disproportionately in service occupations -- at restaurants or call centers, or as hospital attendants or temporary workers -- that offer fewer opportunities for reaching the middle class.

Even Mr. Saragoza, with his college degree, was vulnerable to these trends. First, some of Elk Grove's routine tasks were sent overseas. Mr. Saragoza didn't mind. Then the robotics that made Apple a futuristic playground allowed executives to replace workers with machines. Some diagnostic engineering went to Singapore. Middle managers who oversaw the plant's inventory were laid off because, suddenly, a few people with Internet connections were all that were needed.

Mr. Saragoza was too expensive for an unskilled position. He was also insufficiently credentialed for upper management. He was called into a small office in 2002 after a night shift, laid off and then escorted from the plant. He taught high school for a while, and then tried a return to technology. But Apple, which had helped anoint the region as "Silicon Valley North," had by then converted much of the Elk Grove plant into an AppleCare call center, where new employees often earn $12 an hour.

There were employment prospects in Silicon Valley, but none of them panned out. "What they really want are 30-year-olds without children," said Mr. Saragoza, who today is 48, and whose family now includes five of his own.

After a few months of looking for work, he started feeling desperate. Even teaching jobs had dried up. So he took a position with an electronics temp agency that had been hired by Apple to check returned iPhones and iPads before they were sent back to customers. Every day, Mr. Saragoza would drive to the building where he had once worked as an engineer, and for $10 an hour with no benefits, wipe thousands of glass screens and test audio ports by plugging in headphones.

Paydays for Apple

As Apple's overseas operations and sales have expanded, its top employees have thrived. Last fiscal year, Apple's revenue topped $108 billion, a sum larger than the combined state budgets of Michigan, New Jersey and Massachusetts. Since 2005, when the company's stock split, share prices have risen from about $45 to more than $427.

Some of that wealth has gone to shareholders. Apple is among the most widely held stocks, and the rising share price has benefited millions of individual investors, 401(k)'s and pension plans. The bounty has also enriched Apple workers. Last fiscal year, in addition to their salaries, Apple's employees and directors received stock worth $2 billion and exercised or vested stock and options worth an added $1.4 billion.

The biggest rewards, however, have often gone to Apple's top employees. Mr. Cook, Apple's chief, last year received stock grants -- which vest over a 10-year period --that, at today's share price, would be worth $427 million, and his salary was raised to $1.4 million. In 2010, Mr. Cook's compensation package was valued at $59 million, according to Apple's security filings.

A person close to Apple argued that the compensation received by Apple's employees was fair, in part because the company had brought so much value to the nation and world. As the company has grown, it has expanded its domestic work force, including manufacturing jobs. Last year, Apple's American work force grew by 8,000 people.

While other companies have sent call centers abroad, Apple has kept its centers in the United States. One source estimated that sales of Apple's products have caused other companies to hire tens of thousands of Americans. FedEx and United Parcel Service, for instance, both say they have created American jobs because of the volume of Apple's shipments, though neither would provide specific figures without permission from Apple, which the company declined to provide.

"We shouldn't be criticized for using Chinese workers," a current Apple executive said. "The U.S. has stopped producing people with the skills we need."

What's more, Apple sources say the company has created plenty of good American jobs inside its retail stores and among entrepreneurs selling iPhone and iPad applications.

After two months of testing iPads, Mr. Saragoza quit. The pay was so low that he was better off, he figured, spending those hours applying for other jobs. On a recent October evening, while Mr. Saragoza sat at his MacBook and submitted another round of resumes online, halfway around the world a woman arrived at her office. The worker, Lina Lin, is a project manager in Shenzhen, China, at PCH International, which contracts with Apple and other electronics companies to coordinate production of accessories, like the cases that protect the iPad's glass screens. She is not an Apple employee. But Mrs. Lin is integral to Apple's ability to deliver its products.

Mrs. Lin earns a bit less than what Mr. Saragoza was paid by Apple. She speaks fluent English, learned from watching television and in a Chinese university. She and her husband put a quarter of their salaries in the bank every month. They live in a 1,080-square-foot apartment, which they share with their in-laws and son.

"There are lots of jobs," Mrs. Lin said. "Especially in Shenzhen."

Innovation's Losers

Toward the end of Mr. Obama's dinner last year with Mr. Jobs and other Silicon Valley executives, as everyone stood to leave, a crowd of photo seekers formed around the president. A slightly smaller scrum gathered around Mr. Jobs. Rumors had spread that his illness had worsened, and some hoped for a photograph with him, perhaps for the last time.

Eventually, the orbits of the men overlapped. "I'm not worried about the country's long-term future," Mr. Jobs told Mr. Obama, according to one observer. "This country is insanely great. What I'm worried about is that we don't talk enough about solutions."

At dinner, for instance, the executives had suggested that the government should reform visa programs to help companies hire foreign engineers. Some had urged the president to give companies a "tax holiday" so they could bring back overseas profits which, they argued, would be used to create work. Mr. Jobs even suggested it might be possible, someday, to locate some of Apple's skilled manufacturing in the United States if the government helped train more American engineers.

Economists debate the usefulness of those and other efforts, and note that a struggling economy is sometimes transformed by unexpected developments. The last time analysts wrung their hands about prolonged American unemployment, for instance, in the early 1980s, the Internet hardly existed. Few at the time would have guessed that a degree in graphic design was rapidly becoming a smart bet, while studying telephone repair a dead end.

What remains unknown, however, is whether the United States will be able to leverage tomorrow's innovations into millions of jobs.

In the last decade, technological leaps in solar and wind energy, semiconductor fabrication and display technologies have created thousands of jobs. But while many of those industries started in America, much of the employment has occurred abroad. Companies have closed major facilities in the United States to reopen in China. By way of explanation, executives say they are competing with Apple for shareholders. If they cannot rival Apple's growth and profit margins, they won't survive.

"New middle-class jobs will eventually emerge," said Lawrence Katz, a Harvard economist. "But will someone in his 40s have the skills for them? Or will he be bypassed for a new graduate and never find his way back into the middle class?"

The pace of innovation, say executives from a variety of industries, has been quickened by businessmen like Mr. Jobs. G.M. went as long as half a decade between major automobile redesigns. Apple, by comparison, has released five iPhones in four years, doubling the devices' speed and memory while dropping the price that some consumers pay.

Before Mr. Obama and Mr. Jobs said goodbye, the Apple executive pulled an iPhone from his pocket to show off a new application -- a driving game -- with incredibly detailed graphics. The device reflected the soft glow of the room's lights. The other executives, whose combined worth exceeded $69 billion, jostled for position to glance over his shoulder. The game, everyone agreed, was wonderful.

There wasn't even a tiny scratch on the screen.


— Charles Duhigg and Keith Bradsher & Ira Glass
New York Times & This American Life

2012-01-22

http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?hp

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