Essay

Commodity Chain Analysis:

X-Box, Microsoft, and Electronics Sweatshops

In today’s society, if a person mentions Microsoft, a whirlwind of products come to

mind. Many of these products help to manage our lives on a daily basis, and to some are

priceless or irreplaceable. From the program used to write this paper, the mouse helping to

operate this laptop, to the Xbox gaming console hordes of teenage boys covet, Microsoft has a

hand in many things that our hands touch. How much does the average person actually know

about this electronics giant and the products we use every day?

Take the Xbox for example. At its introduction, though in direct competition with other

gaming consoles, the Xbox flew off the shelves. Today, the Xbox console remains popular and

sells for an average of $399, and combined with sales of the video games, the system makes a

nice profit for Microsoft. What happens behind the hype and dollars of the gaming system paints

a different picture.

Microsoft seeks to make the most dollars from its products, while keeping market prices

so that the consumer can afford to purchase the product. To do this, Microsoft outsources

various jobs to keep the production costs as minimal as possible. Companies such as Foxconn,

KYE Systems, and Flextronics are sought out to provide production services and labor forces to

complete part of the supply chain demands. For Microsoft, Flextronics and Foxconn are used for

several products’ production. These companies have manufacturing facilities in many countries,

but for the purpose of this essay, I will concentrate on manufacturing facilities in China.

We all became aware of China’s labor woes with the reports of Apple products and the

conditions those products are made. The news and articles relaying this information made it

seem as though this was an isolated incident; Foxconn worked with Apple, and was responsible

for working conditions of laborers making Apple products. What I have discovered, however, is

that the Apple story is not an isolated incident. Foxconn services more than just Apple, and the

labor violations that occurred, didn’t occur under only Apple’s watch. There are, in fact, dozens

of high profile and well-known brands that utilize Foxconn’s manufacturing and labor facilities.

Microsoft contracts manufacturing to Foxconn, in the Chinese city of Wuhan. This plant

is responsible for the assembly of the Xbox 360 model console. According to the Associated

Press, the Wuhan plant employees 32,000 people. On January 12, 2012, dozens to a couple

hundred employees (the figure was never confirmed) threatened suicide during a labor dispute.

The dispute was over job transfers, as Foxconn was looking to transfer assembly line jobs to a

different factory. Ultimately, no one committed suicide as most went back to work and several

did quit. However, this event had such similarity to a threatened mass suicide that occurred two

years ago, that deeper inquiries into manufacturing plants like this one have revealed disturbing

labor practices.

The China Labor Watch (CLW) investigated another Microsoft outsource facility

operated by Flextronics. This facility is located in the Zhuai province of China in the Doumen

Industrial park. This industrial park has a total of over 50,000 workers and encompasses 600,000

sq. foot working space. Flextronics also provides services to other global companies such as

Dell, IBM and HP. The following information was taken from the CLW report issued July,

2012.

The factory is responsible for its own recruitment of laborers. Flextronics uses six

“employment agencies” to help fill open positions. These agencies were found to be falsifying

required documents such as identification, graduation and marriage certificates, charging $3 (US

dollars) per document. Only the forged documents from one of these agencies are accepted by

Flextronics. The average recruit is between ages 16 and 35, must be in good health and have at

least a junior high diploma. If a person is Hepatitis B positive, he or she would have to pay an

additional $75 to forge a document indicating Hep B negative, as the company monitors the

health of the employees. So, prior to being hired, a person could spend as much as $85 to even

apply for a job, if he or she does not have the correct documents.

Flextronics advertises the starting wage as $345 per month. However, the CLW report

interviewed current and former employees who stated they never got paid more than $225 per

month. Working hours also vary depending on the time of year. The factory runs an 8-hour per

day schedule, working 5 days per week. During the peak season of June-October, there is a

mandatory 10.5 hours per day required of each employee each day. Per month, overtime hours

can add up to 130 hours per person, and peak season pay can reach $375 to $450 per month. To

compare, this is a mean wage for a worker in the United States, PER WEEK. Yet, thousands of

people line up outside the facility with hopes of getting hired to make this much money.

Employees do get some ‘benefits’, but most of which they take a deduction in pay in

order to take advantage. For example, the factory provides dormitory rooms and food for

employees that need it. A basic meal usually consists of rice and a meat or vegetable, and costs

$0.90. If they want to eat a little more, the cost is $1.50. If an employee relies on the factory to

supply all meals in a day, the cost could be as much as $4.50. As for lodging, one bed in a room

filled with up to 8 beds costs $30 per month. So, for an employee who has to live and eat on

factory grounds, a total of up to $165 is taken from a monthly paycheck of $375, leaving $210

for the employee for the month. Most of the money that is left over is sent home to the

employee’s family.

Safety is an issue on industrial park grounds such at the Doumen Park. There are often

muggings and beatings, and even rape and murder. Yet, the industrial park, Flextronics, or

Microsoft has implemented measures to help protect its employees while on park grounds.

This industrial park and Flextronics facility is slightly different than other facilities in the

area, as they do offer membership in a labor union. However, at hire no information is provided

to the employee on who his/her union representative is, or how to lodge a complaint or concern.

Often the employee goes to his/her supervisor with a concern, but a resolution is rarely reached.

Another Microsoft production facility operated by KYE systems in Dongguan, China was

investigated for its labor practices. This facility employs between 3,600 and 4,500 workers, and

manufactures computer mice and cameras for Microsoft. Details of operations in this facility

were released in a CLW report titled “Tragedies of Globalization: The Truth Behind Electronics

Sweatshops”. Though this report delves into multiple global companies responsible for unethical

labor practices, I would like to highlight some of the results found through their investigation, as

it impacts the outsource-manufacturing realm of the commodity chain.

Overall, CLW’s investigation found five distinct categories where Chinese labor laws are

being violated. The first category relates to overtime. Chinese laws limit overtime per person to

no more than 36 hours per month. However, investigations found routine overtime hours

between 36 and 160 hours per month per person. In an effort to dodge this law, employees were

often coerced into ‘volunteering’ for the extra hours, but were often threatened with loss of other

benefits if they did not comply.

The second category related to wages. It was overwhelmingly found that the minimum

wage of the average factory workers did not provide financial means to afford daily living costs.

If you take the average monthly income of $450 per month mentioned above, that works out to

only $15 per day to live on. And, that is the income during peak overtime months, the amount

drops dramatically in off-peak months.

The third category was level of labor intensity. Most of the facilities were found to have

labor conditions so extreme that only the most efficient workers could withstand the stress. In

one facility, a single worker had to complete their assigned task on the assembly line every three

seconds. Workers have to stand continuously for up to ten hours at a time. Breaks were rarely

afforded, usually a ten minute break during their shift as well as their meal break. A worker

could only go to the rest room if he or she could find someone to cover and complete their duties

while gone.

The last two categories were labor contracts and hiring practices. In most facilities, new

hires were coerced into signing labor contracts without being properly informed of it’s contents

and never receiving a copy of the contract. Also, all factories investigated were found to have

discriminatory hiring practices. They sought the youngest and healthiest candidates and

preferred females over males as they are less apt to confront management.

To summarize, I’d like to go back to my original commodity, the Microsoft Xbox

console. This gaming system is in millions of homes worldwide, a majority of which would be

US households. This system costs, on average, an entire month’s pay of the worker who is

putting it’s components together. It costs Microsoft about $323 to manufacture and ship the

console to be sold in the US, so at first there does not appear to be much of a profit margin.

However, include the costs of the games that you must buy to play on the system, also being

manufactured in facilities such as those mentioned, and the profits shoot upward. Out of those

profits, zero goes back to the laborers who put the machines together. They hardly receive a

raise or bonus, no matter how much or how well the end product sells. I have learned that when

I see the stamp “made in China”, it means more than what’s simply stated. So many global

companies outsource for cheap labor, telling the consumer it’s to keep our costs down so we can

afford to purchase their product. But I ask, how many American teenagers would argue with a

$5 increase in the price of an Xbox, if it meant that extra $5 could trickle back down to the

laborer’s paycheck?

References

China Labor Watch (2012). Tragedies of Globalization: The Truth Behind Electronics

Sweatshops, pages 52-56.

Website http://chinalaborwatch.org/pdf/20110712.pdf

Ting, T (2010). Microsoft to Probe Conditions in China. The Wall Street Journal.website

http://online.wsj.com. April, 2010.

Barboza, D. (2010). Chinese Suppliers to Microsoft Cited for Labor Violations. The New York

Times, Bussiness Day Technology section, April 19, 2010. Website

www.nytimes.com/2010/04/2010/technology.