If Apple ordered up a batch of its iPad computers to meet surging market demand and an explosion in the workshop killed three workers and injured 15 others, an army of regulators, cops and plaintiffs lawyers would descend on the company to demand an accounting.
On May 20, that’s exactly what happened—minus the descending and the accounting. The workshop, it turns out, wasn’t in Cupertino, Calif., home to Apple’s campus. It was a legal arm’s length away in Chengdu, China, run by a goliath called Hon Hai Precision Industry, a Taiwanese company that’s become one of the world’s biggest employers and contract manufacturers.
In this, Apple is joined by an A-list of electronics companies – Hewlett-Packard, Dell, Sony and others. All in some form operate at arm’s length from the assembly of many of their products in countries such as China, where labor is cheap. These vast production lines—Hon Hai employs close to a million workers in China—are fueled by U.S. consumers seeking rock-bottom prices, shareholders demanding solid profit margins, national governments keen to boost employment, and local workers eager to move up the economic ladder. It’s a world long on secrecy and fuzzy on accountability.
Two weeks after the explosion, there are only preliminary reports of what happened. Apple doesn’t even publicly acknowledge the iPad is made in Chengdu. What is known is that one of the more primitive of industrial problems sparked the explosion: A metal polishing shop was improperly ventilated or cleaned, dust collected in the air or on surfaces, and then, in a moment of considerable violence, the dust ignited.
Hon Hai, which uses the trade name Foxconn, says it’s still investigating the accident and has resumed operations at its polishing workshops after improving ventilation and other safety-related practices. Apple says it is “working closely with Foxconn to understand” what happened. And the Chinese government, barely raising an eyebrow, has chided Hon Hai for not paying enough attention to safety. In China, where industrial accidents are frequent by-products of headlong, government-led development, this was a notable moment of the pot calling the kettle black.
Hon Hai is a colossus because its founder, Terry Gou, early and adroitly capitalized on labor and supply chains in China, building economies of scale competitors couldn’t easily match. His factories include dorms, dining halls, book stores and recreation facilities. And they are versatile: In meetings with visitors, Mr. Gou is given to leaping from his chair to outline his next idea for integrating production on a large pad of paper.
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