Thursday, November 7, 2013

An iPhone Tester Caught in Apple's Supply Chain

An iPhone Tester Caught in Apple's Supply Chain
Beneath the spotlight in a San Francisco performing arts theater, Apple (AAPL)marketing chief Phil Schiller was about to stage-manage one of the most anticipated product unveilings of the year. It was the first post-Steve Jobs reveal of a new iPhone. Schiller was comforted by what he saw in the darkened audience. “It’s really neat to stand here and see all the Apple logos glowing,” he said of computers on the laps of journalists, analysts, and fans, all poised to send his words into the world.
The lights dimmed, and Schiller stepped backward, stage left. A glowing iPhone 5 came up from beneath the stage, rising on a pedestal. “It is an absolute jewel,” he said. Schiller then pitched the phone’s features, including an 8-megapixel camera. A photo of a quiet cove flashed on the big screen. “The ocean just looks bluer on the iPhone 5,” he said, as an image of two boys, lying on green grass and smiling into the lens, replaced the cove. “Kids look happier. They really do. And the world is just a more beautiful place when you take pictures with the iPhone 5.”
Offstage, something far more extraordinary was under way, a display of the power and reach deployed by one of the largest companies in the world. Apple Chief Executive Officer Tim Cook, who oversaw the supply chain for Apple for years before succeeding Jobs, had planned what executives and analysts called the most aggressive production-and-launch schedule ever attempted by Apple—or, given its scale, speed, and complexity, possibly by any company. Even though relatively few units had been produced by the time Schiller took the stage on Sept. 12, 2012, the iPhone 5 would go on the market in the U.S. and eight other countries nine days later. By year’s end it would be in the stores of 240 mobile phone carriers in 100 countries. Apple would go on to sell iPhones at a rate of 3.7 million per week in the model’s first three months.
Apple, of course, is a designer, not a builder—it says so right on the back of every iPhone box. The builders, such as Foxconn, get the parts for Apple’s products from suppliers that are gigantic companies in their own right. One of Apple’s largest suppliers is Flextronics International (FLEX), a contract manufacturer based in Singapore with about 28 million square feet of factory space spread across four continents, including a plant in an industrial area south of Kuala Lumpur. That’s where the cameras Schiller raved about would be made. That meant Flextronics had to crank up its own supply chain. And that required sourcing and importing people—an army of them—to man factory lines.
Staffing production lines in Malaysia, where 28 plants run by 24 companies worked on Apple contracts last year, usually goes this way: Companies tap an informal, largely unregulated, and transnational network of thousands of recruiters. They fan out, often hiring subrecruiters, into the farm fields and impoverished cities of Indonesia, Cambodia, Myanmar, Vietnam, and even into the Himalayas in Nepal. The positions they’re trying to fill are so coveted that they’re not merely offered, they’re sold. The brokers take fees from families, representing as much as a year or more of wages; frequently the fees are paid with loans that can take years to pay off.
For the iPhone 5 rollout, a recruiter working for Flextronics contacted four brokers in Kathmandu, Nepal’s capital, in late August and early September, urgently seeking 1,500 men to make cameras, according to three of the four brokers. The pressure to move so many men so quickly was unprecedented. “The recruitment agency was telling me, ‘We need these workers, you have to send them by today,’ ” says Rajan Shrestha, managing director of a small company called Sharp Human Resources.

Thank you Bloomberg Buissnes week Technology for the articule.

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