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Sometimes the Apple Falls Far From the Tree – Economics 101

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At the end of the day, an Apple iPhone X will retail between $649.00 and $999.00. Last year, Apple’s reported profit margin on their iPhones was 30.8%. In other words, the margin on the iPhone yields Apple between $199.00 and $307.00 profit per device, give or take a few dimes.

At Foxconn’s Shenzhen facility, where the iPhones are assembled, the goal is to produce 350 devices per minute. Given the normal 12-hour shifts at the plant, one can easily do the math.  12 hours x 60 minutes x 350 units x 199.00 per unit = $50,148,000.00 per shift in Apple profits- or at 307.00 profit for 77,364,000.00 per shift. The ultimate goal of 252,000 phones per shift would result in an Apple profit of between $18 billion and $23 billion each year.

Foxconn is in a different game for Apple, altogether. Foxconn is playing the VOLUME game. Every domino in the line at Foxconn has to be set up correctly, at the correct angle, with proper spacing, and each piece has to perform exactly the way it should and at the time it should.

Each and every movement that each and every employee makes can either catapult the Foxconn model into a pool of prosperity or a whirlwind of despair- the speed and volume of production are what breathes life into the corporation known as Foxconn. They are only paid $10.00 per iPhone by Apple to assemble them, and their profit is only 1.7%, or 17 cents per iPhone.

While we wave our fingertips over our smartphone screens to go shopping, or watch a music video, or Skype our loved ones across the country, perhaps we should think about the economic ethnocentrism we practice every day- perhaps we could understand and appreciate that migrant worker who left horrible living conditions and poverty to try and get by on $2.00 per hour to assemble iPhones.

 

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