Even Apple is having to face the coronavirus music. Product announcements, like last week’s new iPhone SE launch, are now subdued due to being online-only. It is having to convert WWDC to an online-only event. Device sales are predicted to be considerably lower YoY. Fortunately for them, they’re already investing in subscription based services to tide over customers that don’t want to buy new hardware every few months.
I was reading an FT news article detailing how Apple’s Chinese contract manufacturers were having to downsize, well, by not hiring as fast they usually do. Buried in that article was a slight conversation with one factory worker who mentioned that he might be able to get a whole week off in April this year, as compared to just a day in the past years. He was also not working overtime.
Wow. I mean, we all know how hard these contractors have to work to make sure we get our new iPhones on launch day, but this is the first time that it connected to me with the name of an actual person.
While we’re enjoying our work-from-home regimen and safely self-isolating, it’s easy to forget the human toll caused by our mindless consumerism. And, it’s not just physical products that drive this consumerism; we’re also mindless consumers when it comes to financial products.
Apple enjoys one of the, if not the, highest profit margins on its products. Those margins are shared, albeit unequally, with investors and employees vested in Apple’s stock. Over the past few years, the company has been aggressively buying back its own stock to further elevate the stock price and hence the gains for its investors in the short term. So much so that investors expect the company to consistently overshoot its own earnings guidance.
It doesn’t have to be like this — Apple could easily make the gains more equitable across its value chain. While it has been forced to look into labor practices in the past, and has resorted to steps such as installing anti-suicide nets in factories, it can and should do more. There is no justifiable reason to maintain high profit margins, while innovation stays low and stock buy-backs remaining high, and while factory labor still has to work over-time and not enjoy the same amount of holidays and time-off as any software engineer or executive in the company.
Would it really matter that much if the margins reduced a little? Our devices would still cost the same; perhaps the share price would take a little downward beating, but in the long term, it would balance out and the company might in-fact be forced to actually live up to its values of innovation and user-centricity. Investors tend to forget any short-term bumps. It is also probably not a bad idea to simply stop catering to investors that don’t take a long-term view after all.
We should start expecting a higher degree of leadership from companies like Apple.