Apple’s iPhone profits dwarf its labor costs

Apple and its key manufacturing partner, Foxconn, have been justifiably criticized for their labor practices in China, which include excessive, oppressive and illegal overtime hours, hazardous conditions, inappropriate and sometimes forced labor of 16-18 year-old student “interns” on night shifts, and wages so low that 64 percent of workers claim they don’t cover basic needs.

Many observers have remarked that with Apple’s gigantic profits, it can afford to ensure better treatment of its production workforce. A close examination of the iPhone’s cost structure leaves no doubt.

Various market researchers, including iSuppli and Horace Dediu of Asymco, have broken down the costs of the iPhone, which Apple sold to wireless carriers for an average price of $630 in the fourth quarter of 2011. All agree that Foxconn’s assembly cost— approximately $15, or 2% of the total—is a miniscule part of the iPhone’s cost. Apple’s estimated $319 profit per phone is at least 20 times the cost of producing the iPhone. In fact, because the labor cost is only part of Foxconn’s costs, which include energy, property, and its own profit, Apple’s profit per phone is more than 20 times the labor cost.

  • benleet

    $15 is the cost to assemble an iPhone. That comes out to less than 8 hours of labor expense. Here’s the BLS Monthly Labor Review, March 2011, “Despite large increases in recent years, hourly compensation costs in China’s manufacturing sector remained only 4 percent of those in the United States in 2008; that year, hourly compensation costs rose to $1.36, as China’s manufacturing employment continued to increase despite the beginning of the global economic downturn.” So US manufacturing costs are 25 times higher, or around $34 an hour, almost $70,000 a year, vs less than $3,000 in China. This was for 2008, labor costs have gone up since then in China, closer to $2. In Mexico, 60% of workers receive less than 3 times minimum wage, $4.50 a day. Less than $13.50 a day, that’s under $2 an hour. Free trade does not include freedom to form unions, or to vote. 

  • Fred Stahl

    So what?
    A basic truth of economics is that markets determine price, not costs. 

    • Dr O

      Freddy — where did you study “economics” and “philosopy”?? Woolworth’s?? — as if there is only one approach to the discussion of “determinants of prices”  but not in markets — they are a socially specific form of non-competive “capitalist markets” — so Freddy, what we got is YOUR TRUTH, not the truth about the determination of prices. And the Christian? or Jewish? or Atheist “SO WHAT?” I only would love to see your children, if any, work for say, 5 years, in some of the Chinese Factories — even some in China Town NYC, or the Central American Textile Factories, even in Jersey City. Freddy, I know they got a filter, but you are one heartless F . . . NAMEANE?

    • drOH

      Freddy — I already replied that your knowledge of “economics” and “basic truth” should be rewritten, so as not to embarass your children. But the moderator must have felt I was tad to aggressive. Anyway, here is your script, since your sure as heck do not know it. “I, Freddy, believe that my stoty of price determination within a non-competitive CAPITALIST MARKET IS [drum roll] that capitalist makets determine capitalist prices. Nor, do I, Freddy, care if people are working themselves to death in particular types of capitalist factories. Amen. Your Brother, Freddy”

  • Fred Stahl

    Exploitation of workers is a serious moral issue regardless of levels of profit. 

  • 北樵 林

    average profit is reasonal. however, Apple is like kind of expoitation monster and doing very little to feedback the society.Its high management enjoys millions time income compared to average people. are they really deserving so high reward? No. The only reason is that they have controled the capital and maintained the inappropriate level of IPR protection which has restrainted competetion. It should be condemned.