Summary of the Supply Chain for Iphone in China

Summary of Supply Chain for iPhone Highlights Costs in China David Barboza states that for nearly years, the cost of the supply chain for iPhone in China has increased significantly. However, the labor cost is still remaining unchanged, which is relatively low. This often takes place in the Southern China, where workers are paid less than a dollar an hour in the production process of this high-end product. The company spends only 7 percents of the total cost on paying labors that involved in the final assembly while the remaining parts are spent mostly on the other components involved in the supply chain, such as microchips.

Due to the higher costs in the supply chain, Apple has to squeeze more costs out of the system as Jenny Lai has mentioned in the article. In order to cut down the cost, the company planned to relocate the factories and workers to other parts of China, where the cost for labor and raw materials is cheaper; the strengthening Chinese currency makes exports more expensive, as well as the high inflation rate and housing cost, hence the cost of making devices increased. According to the analysts, the manufacturers with low-margin profit are unflavored for Apple to contract with.

Meanwhile, owing to the comments made by Professor Jason Dedrick, the world of contract manufacturers is unfair to the workers in the fact that they have to work under great pressure with a low wage and insufficient rest. Therefore, since 2005, the underpaid workers started pressing the pressure to the company by acquiring a raised wage. However, Foxconn, one of the Apple’s major manufacturers is considering moving inland. It is because this can help to maintain a lower wage and cheaper source of raw materials for the production of iPhone.

Many analysts are optimistic in finding new innovations to improve profitability in relative to the high cost in the supply chain. Yet, the ways they used is to pressurize the workers to work in an inhuman system. Therefore, Mr. Wang at iSuppli Research has concluded that the labor-intensive model is not sustainable in China. To conclude, this type of low-end assembly work doesn’t produce big returns for iPhone in China. Due to the fact that China doesn’t want to work for other countries, it would like to attain its real value which knowledge can be found.