Saturday, March 31, 2012

Apple Could Move To Increase Wages And Benefits For Chinese Workers - How Will Competitors React

It's inevitable that the wages and benefits for Chinese workers will increase. We've already seen that happening in China for years. For reasons that are obvious, the media has decided to make Apple their whipping boy in all this. While they have largely ignored its competitors like HP, Dell, HTC, Sony, and others in the Android and Windows market, that include PCs, tablets, televisions, and smartphones, use some of the same factories Apple does.

What will happen to the cost of their products? Well, the answer is simple: it'll go up. However, the true question is how this impact this margins of some of these companies that do not necessarily have the benefits of Apple's higher margin.

For Android device makers, it helps some what in that they don't have to pay Google for the cost of licensing Android. But facing competition on all fronts, Android device makers could be forced to cut back in features to maintain margin. Perhaps, this has to do with the announcements earlier in the year that HTC and Samsung will release less models. It has nothing to do with confusing consumers. Rather, it may have more to do with trying to maintain margins and profit if they have to deal with less models.

PC makers are already having a hard time of it with thin margins. While most are still profitable and have tried to move into other markets like mobile and services, we might see a price increase at Best Buy once the manufacturing costs take place.

The thing is that the cost of each device will not go up by much. A few dollars. However, when a company that sells tens of millions of device like Apple, Samsung, HP, and Dell does, that adds up quickly. HP who can sell forty to fifty million devices a quarter, not just PCs, a $5 increase means $150 to $200 million less quarter. For Apple, that means $300 million profit less for the last Christmas quarter. Between the two, Apple is likely better to weather this than HP.

Perhaps, what this means is that device makers and factories will need to figure out new ways to keep cost down if they don't wish to shift the cost to us harding working consumers.

Now, you'd think the anti-Apple camps might very happy to have Tim Cook and Apple face the brunt of fire on the Chinese labor issues in the media. That might be true in the short-term. However, Apple gets to negotiate the terms with labor groups and Foxconn and that could end up dictating the terms to its competitors.

If anything, other tech giants should be coming forward and begin to talk about these same labor issues they're facing and how they want to address it. Otherwise, they stand to lose the moral ground forever to Apple. And in an increasing media-savy consumer market that demands fairness, Apple could come out of this looking very rosy while burdening its competitors with higher costs.

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