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     Aug 29, '13

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Apple et al create new working class
By Jenny Chan, Ngai Pun and Mark Selden

Apple's commercial triumph rests in part on the outsourcing of its consumer electronics production to Asia. Drawing on extensive fieldwork at China's leading exporter - the Taiwanese-owned Foxconn - the power dynamics of the buyer-driven supply chain are analyzed here in the context of the national terrains that mediate or even accentuate global pressures.

Power asymmetries assure the dominance of Apple in price setting and the timing of product delivery, resulting in intense pressures and illegal overtime for workers. Responding to the high-pressure production regime, the young generation of Chinese rural migrant workers engages in a crescendo of individual and collective struggles to define their rights and defend their dignity in the face of combined corporate and state power.

The magnitude of Apple's commercial success is paralleled by,

and based upon, the scale of production in its supply chain factories, the most important of them located in Asia (Apple, 2012a: 7). As the principal manufacturer of products and components for Apple, Taiwanese company Foxconn [1] currently employs 1.4 million workers in China alone. Arguably, then, just as Apple has achieved a globally dominant position, described as "the world's most valuable brand" (Brand Finance Global 500, 2013), so too have the fortunes of Foxconn been entwined with Apple's success, facilitating Foxconn's rise to become the world's largest electronics contractor (Dinges, 2010).

This article explores the contradictions between capital and labor in the context of the global production chains of the consumer electronics industry. Drawing on concepts from the Global Commodity Chains and Global Value Chains framework (Gereffi and Korzeniewicz, 1994; Bair, 2005; Gereffi et?al, 2005), the article analyses the power dynamics of the buyer-driven supply chain and the national terrains that mediate or even accentuate global pressures.

The principal focus is on labor in the electronics supply chain, including working conditions and labor as agency, consistent with recent studies of labor as the key element in global production chains or networks (McKay, 2006; Smith et al, 2006; Taylor and Bain, 2008; Webster et al, 2008; Taylor et al, 2013). In particular, the concentration of capital in China and the important roles played by Asian contractors open new terrains of labor struggle (Silver, 2003; Appelbaum, 2008; Silver and Zhang, 2009).

This inquiry evaluates the incentives for Apple to outsource and to concentrate production in a small number of final-assembly facilities in China. It also examines the potential risks or disincentives that might compel Apple to respond more directly, or responsibly, to negative publicity surrounding labor conditions and the collective actions of workers in its supply chain.

While the specific detail is concerned with the interaction between Apple and Foxconn, the article briefly considers the relationship between other buyers (eg Dell) and contractors (eg Pegatron). Consequently, it locates emergent labor struggles more broadly in the electronics sector as a whole.

The authors draw on interviews with 14 managers and 43 workers outside of major Foxconn factory complexes, where employees were not subjected to company surveillance. The manager interviewees were responsible for production management (four persons), commodity procurement (three persons), product engineering (two persons) and human resources (five persons). All workers interviewed were rural migrants aged 16-28, who worked in assembly (semi-finished and finished products), quality testing (functionality and audiovisual appearance), metal processing and packaging.

These interview data are complemented by fieldwork observations conducted between June 2010 and May 2013 in Shenzhen (Guangdong), Taiyuan (Shanxi) and Chengdu (Sichuan), which are major industrial centers in coastal, northern central and south-western China. New enterprise-level data have provided evidence of the replication of Foxconn's management methods across its plants, the tensions between Foxconn and its largest corporate buyers, the working experiences and discontents of workers, and explosive episodes of labor protest. Primary evidence is supplemented by company annual reports, scholarly studies, reports from labor rights' groups and journalistic accounts.

The article is structured as follows. First, the literature on global outsourcing and the challenges to labor will be reviewed. The next section will consider the growth of China as an industrial power and the emergence and distinctive character of a new working class. These discussions will be followed by an analysis of the Apple-Foxconn business relationship, and the responses of workers to heightened production demands in the "just-in-time" regime. The concluding part will consider the future of the young generation of China's rural migrant workers who are struggling to define and defend their rights and dignity in the multilayered network of corporate interests and state power.

The politics of global production
The corporate search for higher profits has been enhanced by efficient transportation and communications technologies, neoliberal trade policies and international financial services, as well as access to immigrants and surplus labor. Multinationals have reduced, if not eliminated, major barriers to capital mobility across spaces of uneven development (Harrison, 1997; Harvey, 2010). Within contemporary global supply chains, scholars (Henderson and Nadvi, 2011; Sturgeon et?al, 2011) highlight the power asymmetry between buyers and contractors, in which giant retailers and branded merchandisers play decisive roles in establishing and dominating global networks of production and distribution.

Under buyer-driven commodity chains, Lichtenstein (2009) and Chan (2011) find that American retailers and branded merchandisers constantly pressure factories as well as logistic service providers to lower costs and raise efficiency and speed. "The determination of retailers to cut costs to the bare bone leaves little room for [China-based] contractors to maintain labor standards" (Bonacich and Hamilton, 2011: 225).

The distinction between retailers and merchandisers in their control over suppliers has become insignificant when "most global retailers have successfully developed private-label (or store-label) programs, where they arrange with manufacturers or contractors to produce their own label" (Bonacich and Hamilton, 2011: 218).

In the electronics industry, Luthje (2006: 17-18) observes that brand-name firms have focused on "product development, design, and marketing", gaining a larger share of the value created than hardware manufacturing, which is mostly outsourced and performed by formally independent contractors. "Contract manufacturers" have emerged to provide final-assembly and value-added services to technology firms and giant retailers (Starosta, 2010; Dedrick and Kraemer, 2011).

Asian contractors have been upgrading and growing in size and scale. Lee and Gereffi (2013) explain the co-evolution process that capital concentration and consolidation of branded smartphone leaders in China and other global supply bases has advanced alongside the expansion of and innovation within their large assemblers, notably Foxconn and Flextronics. Appelbaum (2008) finds that East Asian contractors, ranging from footwear and garments to electronics, have been integrating vertically in the supply chains.

Starosta (2010) focuses on the rise of "highly concentrated global contractors" in the electronics industry, in which they serve multiple brand-name firms in different product markets. Not only production tasks, but also inventory management, are being increasingly undertaken by strategic factories, resulting in ever stronger mutually dependent relations between buyers and suppliers.

Giant manufacturers, rather than smaller workshops, are more able to "respond to shortening product cycles and increasing product complexity" (Starosta, 2010: 546). Nevertheless, Yue Yuen, the world's largest footwear producer, could only "pass on less than a third of the cost increase to its customers", including Nike, when "costs rose sharply" (Appelbaum, 2008: 74). Intense bargaining by big buyers over costs and profits has kept a tight rein over producers, frequently slashing profit margins.

In global outsourcing, electronics suppliers are compelled to compete against each other to meet rigorous specifications of price, product quality and time-to-market, generating wage pressure as well as health and safety hazards at the factory level while shaving profit margins (Smith et al, 2006; Chen, 2011). Brown (2010) argues that "contractor factories" are often not provided with any financial support for corporate responsibility programs required by brands; "instead they face slashed profit margins and additional costs that can be made up only by further squeezing their own labor force". High-tech commodity producers therefore "focus their labor concerns on cost, availability, quality, and controllability" to enhance profitability in the export market (McKay, 2006: 42, italics original).

Workers' adaptation, or resistance, to capitalist control has to be understood in this new context of global production, in which concentration of capital at the country, sectoral and/or firm level has reconfigured the class and labor politics. In her longitudinal survey of world labor movements since 1870, Silver (2003) documents the rise of new working class forces in sites of capital investment for the automobile industry in the 20th century. She defines "workplace bargaining power" as the power that "accrues to workers who are enmeshed in tightly integrated production processes, where a localized work stoppage in a key node can cause disruptions on a much wider scale than the stoppage itself" (Wright, 2000; Silver, 2003: 13).

Recently, Butollo and ten Brink (2012) and Hui and Chan (2012) reported the factory-wide strike at an auto parts supplier in Nanhai, Guangdong, which paralyzed Honda's entire supply chain in south China, resulting in wage hikes and increased worker participation in trade union elections. Periodic and limited worker victories aside, managerial assault and/or state repression of labor protests are still commonplace.

A neoliberal state collaborates with private entrepreneurial elites by providing infrastructural support and ensuring law and order, thereby facilitating capital accumulation and economic growth. In China's capitalist transformation, on the one hand, the state has stimulated employment and industrial development through large-scale financial investment and favorable policy implementation (Hung, 2009; Chu, 2010; Naughton, 2010).

On the other hand, it has severely restricted workers' self-organization capacity and fragmented labor and citizenship rights among worker subgroups, despite ongoing pro-labor legal reforms (Solinger, 1999; 2009; Perry, 2002; Lee, 2007; 2010; Pun et al, 2010; Selden and Perry, 2010). In our sociological research, we explore the dialectics of domination and labor resistance within the political economy of global electronics production

Global production and a new working class
Between 1990 and 2006, the expansion of intra-Asia trade accounted for about 40 percent of the total increase in world trade (Arrighi, 2009: 22). China's growing dominance has reshaped regional production networks previously dominated by Japan and its former colonies Taiwan and South Korea.

The rise of Japan and East Asian capitalism in the 1950s and 1960s was integral to the Cold War geopolitical order. To contain the spread of communism and consolidate its global economic reach, the United States provided military and economic resources to its "client states", encouraged Taiwan and South Korea to open up their markets to Japanese trade and investment, and fostered the growth of a regional power centered on Japan's export-oriented industrialization (Evans, 1995: 47-60; Selden, 1997).

Japanese firms received subsidized loans to create new industries and exported finished products to Western markets. In the 1960s, Toshiba, Hitachi, Panasonic, Sanyo, Ricoh, Mitsubishi, Casio and others moved to Taiwan to start operations (Hamilton and Kao, 2011: 191-193). Similarly, Japanese trading companies began sourcing garments and footwear from Taiwan, South Korea and Hong Kong.

From the mid-1960s, IBM, the leader in business computing, shifted its labor-intensive production from the United States and Europe to Asia in order to cut costs. The microelectronics components of IBM System 360 computers were assembled by workers in Japan and then Taiwan because "the cost of labor there was so low" that it was cheaper than automated production in New York (Ernst, 1997: 40). RCA, the consumer electronics giant, swiftly moved to "take advantage of Taiwan's cheap labor and loose regulatory environment" in the export-processing zones in the late 1960s (Ku, 2006; Ross, 2006: 243-244; Chen, 2011).

Electronics assembly grew rapidly in Taiwan, South Korea, Singapore and Hong Kong ("the Asian Tigers"), and later Malaysia, Thailand, Indonesia and India. In the early 1970s, the Philippines hosted manufacturing plants for semiconductor firms such as Intel and Texas Instruments. In these newly industrializing countries, most factory workers were young women migrants from the countryside (Ong, [1987] 2010; Deyo, 1989; Koo, 2001; McKay, 2006).

In the late 1970s, China set up special economic zones to attract foreign capital and boost exports as the means to integrate regional and global economies. The inflow of overseas Chinese capital has long been significant, combined with growing capital from Japan, the United States, Europe and other countries since the early 1990s (Huang, 2003). Hong Kong and Taiwanese entrepreneurs, ranging from low-end component processing to sophisticated microchip assembly, invested in the Pearl River Delta and the Greater Shanghai region (Leng, 2005).

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