Apple's PR Crisis

Apple's PR Crisis

"All companies have secrets," goes an epigram in Adam Lashinsky's new book. "The difference is that at Apple everything is a secret." Lashinsky's Inside Apple shines an X-ray on the bizarre culture of rivalry and silence that Steve Jobs built at the tech giant's famous campus in Cupertino, Calif. The price of working for Apple in America, it turns out, is security harangues, legal threats, and paranoia--along with extensive explanations of exactly why you, as an Apple employee, ought to be paranoid. Without obsessive secrecy, Apple's new-product rollouts wouldn't have the dramatic quality that keeps the cultists mesmerized.

Under Jobs, Apple was traditionally just as secretive about its manufacturing arrangements abroad. Which is what made the company's Jan. 13 press release so portentous. Its opening words: "The following is an alphabetical listing of Apple production suppliers." Nothing special for a publicly traded company, you might say, but the list, from AAC Technologies Holdings Inc. to Zeniya Aluminum Engineering Ltd., had long been sought by Apple-watching activists and critics without success.

"For Apple, this is huge, the equivalent of the Berlin Wall coming down," says Leander Kahney, a tech journalist who edits the Cult of Mac news website. "It goes against all the company's instincts. There's a lot of trade-secret stuff the company has released here."

The new transparency isn't for the benefit of nerds who like to do day-one "teardowns" of new Apple merchandise. It's part of a conscious effort to counter reputation issues that have plagued Apple for years, issues that began to both fester anew and intensify this month. Most prominent is Apple's relationship with Foxconn, the US$119-billion Taiwan-based manufacturing firm that dominates the world of electronic component assembly. The "Foxconn City" manufacturing complex in Shenzhen--Communist China's low-regulation "special economic zone" opposite Hong Kong--employs half a million workers, and is where most of that lovely technology from iPods to iPads is put together.

Reports of harsh conditions at Foxconn City date back to 2006, and were especially prominent two years ago when it faced a rash of worker suicides. It's generally agreed that Foxconn is one of the better places to work in the region, and that the availability of modern assembly-line jobs there, as part of the story of Chinese progress, is a landmark of history's single greatest advance in mass human welfare. Moreover, there is almost no conceivable way for a Western tech user to avoid ethical entanglement with Foxconn. Name any mainstream consumer electronics brand--Dell, IBM, Microsoft, Sony, Nokia, Toshiba, Philips, the list goes on--and you're likely to find the fingerprints of Foxconn workers.

But Apple, like Nike and the Gap before it, inevitably gets extra attention because of its visibility, its success, and its monolithic mystique. When it uses Third World labour, its customers--among whom students and creative professionals are overrepresented--might well expect it to be a force for good. Under Jobs, however, Apple chose to be inscrutable and unresponsive in the face of concerns over suppliers. That strategy has, so far, worked. The company recaptured the global lead in the smartphone market for the fourth quarter of 2011, a year in which its market capitalization grew to over US$400 billion. Its latest quarterly profit was over $13 billion--the most by any company in corporate history. But how quickly might that change if consumers continue, more and more, to question the morality of buying Apple?

It's undisputed that Foxconn City assembly-line workers face conditions that wouldn't be tolerated in the West. Most of them live on campus in spartan, cramped dorms, and many do their jobs standing up. Laws limiting the lengths of shifts and the minimum age for workers seem to be flouted fairly routinely. Breaks are all but unheard-of. Workers have occasionally dropped dead on the line from exhaustion. The factory is closely policed by a brutal security staff, and "troublemakers" who organize, or even meet privately to discuss their rights, find themselves blacklisted. There has been lingering controversy over the use of hexane, which can cause neurotoxicity after chronic exposure, to clean new touchscreens prior to packaging. (137 workers were poisoned non-fatally by hexane at another Chinese Apple supplier in 2009, and aluminum-dust explosions at two factories making Apple cases and heat sinks, including one owned by Foxconn, killed four and injured 77 last year.)

But most damning have been the Foxconn suicides: 18 attempts in 2010 and 14 deaths. Analysts were quick to point out that the implied rate of suicide was actually low by general Chinese standards, but what stood out was that 17 of the suicide attempts involved leaps from the roofs of Foxconn buildings. The impression that workers were trying to signal desperation to the world was unavoidable. Foxconn raised pay in Shenzhen and announced other reforms, but the netting it had to erect around its rooftops to discourage jumpers has become a symbol of Taylorist productivity mania run mad. Apple is in the business of selling magic and joy, and images of mass suicide comport poorly with that business model.

This month's double attack on Apple from two hip, liberal media icons hit hard. On Jan. 6 the NPR documentary show This American Life broadcast an extraordinary report on Foxconn prepared by a New York stage performer and self-described "Apple superfan" named Mike Daisey. According to Daisey's account, he grew curious about Foxconn and Shenzhen, "where almost all of your crap comes from," and decided to visit. With an uncomfortable translator in tow, he defied the advice of old Hong Kong media hands and peregrinated to the gates of Foxconn City to talk to workers.

"In my first two hours of my first day at that gate, I met workers who were 14 years old, 13 years old, 12," Daisey told NPR. "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?" (Apple and Foxconn both declined to comment on the NPR documentary).

Jon Stewart's Daily Show followed up on Jan. 16 with a segment called "Fear Factory." Showing news clips about the facility's barracks and suicides, Stewart noted that union organizing could get Foxconn workers frogmarched from the plant to a Chinese prison. "I have a question," he added. "What's the difference?" Stewart's irony left viewers nowhere to hide: "This is an abomination, yet I am complicit," he wailed. "I have an XBox and an iPhone and F. Murray Abraham. I have to get rid of them."

Apple's naming of suppliers was not the only glasnost gesture taken by the company Jan. 13. A few hours later, the Fair Labor Association, a non-profit international watchdog group that audits factories in the developing world, announced that Apple had joined up as a participating company. The FLA was formed in 1999 when clothing and footwear retailers began to face the same scrutiny and activism (and satire) that Apple is beginning to confront now. Existing FLA participants include shoe manufacturers like Nike, Puma and Adidas, as well as apparel brands such as H&M and Liz Claiborne. Apple is the first tech company to apply for FLA accreditation, and has two years to meet the organization's standards.

Apple also released an unusually aggressive version of its annual Supplier Responsibility Report. The company performed 229 audits of supplier compliance with its labour and environmental standards in 2011--a figure matching the total for the previous two years. The report owns up to some shocking results that in many ways confirm the anecdotal impressions of observers like Dailey. Fewer than 38 per cent of overseas factories making Apple products met its working-hours requirements, making employees work more than 60 hours in a week or more than six days in a row. Forty-two of the factories audited had at some point delayed paycheques or failed to provide pay stubs; 68 broke local benefits regulations; 67 "used deductions from wages as a disciplinary measure." The audits uncovered cases of foreign workers paying excessive recruitment fees to their employers at 15 facilities and CHILD LABOUR at six.

Apple's report explains, point by point, how it plans to address such problems. Observers don't think it's a coincidence that the company is starting to dismantle its "Berlin Wall" now, four months after the death of CEO Steve Jobs and his replacement by ex-COO Tim Cook. The company's developing-world supplier network is largely Cook's personal handiwork; it's the reason he was tipped to fill the biggest shoes in consumer technology. "This is a scary time for Apple, which has very aggressive competitors, has lost its key leader, and is in an industry where the pace of innovation is relentless," says Tim Calkins, a professor of marketing at Northwestern University's Kellogg School of Management. "Steve Jobs was so revered that he could do pretty much what he wanted. I suspect reporters find it a lot easier to ask Tim Cook tough questions."

"The issue isn't going away," says Kahney. "This is a PR fire Apple has to put out." Kahney balks at proposing that Cook is putting a more human face on Apple--but he notes that among Cook's first acts as CEO was to create a program to match charitable donations by Apple employees. That, too, was a counterintuitive step that might not have been possible while the curmudgeonly, charity-averse Jobs was alive.

Maclean's February 13, 2012