Inside the iPhone factory

In the past, I have looked at the problems of the Foxconn factory which is now making 137,000 iPhone4s every day. Workers there were killing themselves so the company went into damage control, raising wages, putting up mesh netting to stop jumpers and hiring public relations giant Burson-Marsteller.

So the spin merchants set up this exclusive interview for BusinessWeek/Bloomberg with Foxconn chief executive billionaire Terry Gou. And the interview gives us some fascinating insights into how the company responded to the 11 suicides. "I should be honest with you," Gou says. "The first one, second one, and third one, I did not see this as a serious problem. We had around 800,000 employees, and here [in Longhua] we are about 2.1 square kilometers. At the moment, I'm feeling guilty. But at that moment, I didn't think I should be taking full responsibility."

After the fifth suicide, Gou decided to do something different.

Forbes estimates that Gou, who started out as a television knob maker, is worth $5.9 billion, but he claims he doesn't really know how much he is worth. "I think for me, I am not interested in knowing how much I have. I don't care. I am working not for money at this moment, I am working for society, I am working for my employees."

The piece has some great tidbits on how Foxconn got to be so big. If you look under the hood, you will see that the margins are extremely high and all the parts come from a Foxconn connected company. BusinessWeek writes: "To understand how diversified Foxconn's supply chain is, pry the back off a Nokia 1209 handset. The plastic casing is molded by Foxconn Technology. The speaker is made by Hon Hai Precision, as are the keypad and printed circuit-board connector. The printed circuit board is made by Foxconn Advanced Technology. The TFT LCD screen is made at Chimei Innolux, an affiliate 2.7 percent-owned by Gou. In all, about 70 percent of the phone's components are made by a Foxconn- related company."

In other words, just about every part in a smart phone is made by Foxconn.

Still, despite Apple's success, the company has been making losses, which is a worry both for the workers and Apple. If Apple's biggest manufacturer gets into any more trouble with suicides and financial losses, you can bet Apple will be right on top of it to try and turn things around. Otherwise, it will put Steve Jobs' business at risk.


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