The True Costs of an Apple iPhone

Summited by Joanna So 405223 EAL 4, Foundation English Thursday 25th November 2010

Michael Seats Taylors College, Perth

The True Costs of an iPhone

[Type text]

So Yung Yung 405223

Contents
Abstract .......................................................................................................................... 3 1. 2. Introduction ........................................................................................................... 4 Production .............................................................................................................. 5 2.1. Exploitation of workers ................................................................................... 5

3. Consumption .............................................................................................................. 6 3.1.Planned obsolescence.......................................................................................... 6 3.2.Perceived obsolescence ....................................................................................... 7 4. Disposal .................................................................................................................. 9 4.1. Toxins in iPhone at the early stage .................................................................. 9

4.2. Apples effort on being a green company ......................................................... 10 5. 6. 7. Conclusion ............................................................................................................ 11 Suggest Solution................................................................................................... 11 References ............................................................................................................ 11

The True Costs of an iPhone

[Type text]

So Yung Yung 405223

Abstract
IPhones are popular all over the world and consumers desire of better and newer models of mobile phones are endless. This has led to plenty of problems which are harmful to our planet. This report will analyze the exploitative methods engaged by the company such as exploitation of cheap labor, strategies for increased consumerism. Also, this report will analyze the underlying causes of an increase in consumption and the effects it has on disposal of electronic waste.

The True Costs of an iPhone

[Type text]

So Yung Yung 405223

1. Introduction
Since first released in 2007, IPhones are popular all over the world. However, consumers desire of better and newer models of mobile phones is endless. This has led to plenty of problems which are harmful to our planet.

The True Costs of an iPhone

[Type text]

So Yung Yung 405223

2. Production
2.1.Exploitation of workers
China labour is famous for its cheap labour. Many manufacturers set up their plants in China so as to lower their production costs. Foxconn, one of the manufacturers of Apple iPhones, is not an exception. According to Bristow (2010), after the second pay raise since the tenth suicide happened in the branch of Shenzhen, their monthly salary is now 2000 RMB only, which means that each worker is now receiving 10 AUD per day. According to Chan (2010), A survey conducted by 60 academics and students from 20 universities in China, Hong Kong and Taiwan showed that 73.3 percent of employees work 10 hours or more a day. Average overtime is 83.2 hours a monthan obvious breach of the official labour laws, which limit monthly overtime to 36 hours. Also, 12.7 percent of workers experienced fainting spells, 24.1 percent of female workers had irregularities in their menstrual cycle and 47.9 percent of workers complained of mental stress (Chan 2010). It is not easy to investigate the true condition in the factory. Therefore, Nanfangdaily sent Li Zhiyi to Foxconn as an undercover worker. According to Liu (2010), [The workers] actually envied those who could take a leave due to work injury, while casually joking about how their station's been toxicated. In 2010, 60 academics and students from 20 universities in China, Hong Kong and Taiwan investigated the working condition in Foxconn. According to The Greater China College Research Group (2010), the factory cut down the welfares of workers and the wages paid for working overtime after the second pay raise, which implies that the pay raise were actually carried out to clam the mass media. It is obvious that the workers in Foxconn are working in a low-paid, exhausting, and toxic condition.

The True Costs of an iPhone

[Type text]

So Yung Yung 405223

3. Consumption
3.1.Planned obsolescence
According to Bulow (1986), Planned Obsolescence is the production of goods with uneconomically short useful lives so that customers will have to make repurchases. According to Snell (2007), Apple is estimating one battery will last for 300 to 400 charges. It is assumed that the battery can last for 13 months if it is charged fully every day. Therefore, iPhone users need to replace their battery after 13 months. According to Apple (2010), battery replacement service arranged by iPhone 3Gs costs 79 USD and it takes approximately a week. However, the most astonishing fact would be buying a new Apple iPhone 3Gs costs only 99 USD (Apple 2010). By only 20 USD difference, why do customers bother to bring the iPhone to the service centre and wait for a week? Moreover, many mobile phone companies, such as Optus (2010), offers free brand new iPhones to customers, all they need is just a signature to a certain period of contract. This phenomenon leads to the increasing demand of iPhones, keeps Apple making money and most importantly, keeps the workers in the manufacturing companies busy. At the end, customers pay 20 USD for something that they do not actually need, while workers are paying the costs, which refer to their high pressure, fatigues due to heavy workload. In this phenomenon of overconsumption, Apple will be the winner of this trading process.

The True Costs of an iPhone

[Type text]

So Yung Yung 405223

3.2.Perceived obsolescence
According to Bayus and Gupta (1992), perceived obsolescence can arise from the desire of people to new feature, style etc. This is one of the marketing strategies of Apple. First released on the 29th June 2007, the 4th generation of iPhone was released in late 2010. Within a short period of time, two and a half year, Apple has released 4 versions of iPhones with different features. Unlike other mobile phone companies, which are keep releasing new models of mobile phone, Apple is just keep upgrading its iPhone specifications and features to keep its sales market. However, Apple is not the only one that should be blamed for this phenomenon. This strategy will not work without customers endless desire of better and new technology. Customers endless desire leads to overconsumption. According to Leonard (2010), overconsumption refers to consuming stuff that is not necessary. According to a survey conducted by Yankee Group and summarized by CNNMoney, 77% of iPhone [3Gs] owners say they'll buy another iPhone [4]. The fact that iPhone 3Gs owners desire a new version of iPhone can be defined as overconsumption. They are actually consuming stuff that is not necessary for them. As the victims of this marketing strategy, they are not only paying for nothing, but also paying for worse.

Customer Satisfaction, (GLG Expert Contributor 2010) 7

The True Costs of an iPhone

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So Yung Yung 405223

According to a research done by ChangeWave shows that satisfaction of iPhone users on the newer version, iPhone 4, is less than the older version, iPhone 3Gs. (please refer to figure 1) The implicit costs for an iPhone is losing a better quality of mobile by paying more.

The True Costs of an iPhone

[Type text]

So Yung Yung 405223

4. Disposal
4.1.Toxins in iPhone at the early stage
According to Greenpeace (2007), in May 2007, Apple announced that all of its new products would be free from brominated flame retardants (BFRs) and the chlorinated plastic polyvinyl chloride (PVC) by the end of 2008. In the following month, Apple released its new product, the iPhone. In order to keep track on Apple on how it led to be a green company, Greenpeace purchased an iPhone and tested the hazardous chemicals and materials in it. The result was disappointing. Half of the iPhone components contained BFRs, while 10% of the circuit board of the antenna of iPhone was made up of BFRs, which can act as a toxic and persistent pollutant when it goes to the waste stream (Greenpeace 2007). Also, 1.5% of PVC was found in the coating of the headset of the iPhone (Greenpeace 2007).

The True Costs of an iPhone

[Type text]

So Yung Yung 405223

4.2. Apples effort on being a green company

According to Greenpeace (2010), Apple kept its word to produce BFRs and PVC free products. Also, Apple did well in recycling its products. Apple is launching free voluntary take-back program which helps recycling of all Apple products in countries where 95% of its products are sold (Greenpeace 2010). The recycling rate of its products sold is increasing every year, while Apple reached 66.4% in 2009 (Greenpeace 2010). Apples effort is appreciated. However, still, greenhouse gases, which is destroying our planet, is being produced during the process of recycling.

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The True Costs of an iPhone

[Type text]

So Yung Yung 405223

5. Conclusion
In conclusion, consumers paid the explicit cost of an iPhone. However, the implicit costs are way more than the explicit cost. Problems such as exploitation of workers and pollutants are produced in the life cycle of an iPhone. These problems are caused by the global overconsumption led by the sales strategy, planned and perceived obsolescence. Overconsumption results in heavy workload of workers and increasing trash whereas the environment is paying by being destroyed through the process of production and disposal. These problems have to be solved to avoid them getting more serious.

6. Suggest Solution
As this report has suggested, all the problems are caused by overconsumption of global consumers. Although Apple did well in its recycling of products, its encouragement of consumerism is not appreciated. Consumers should not be controlled by Apple through marketing strategies. Buying unecessities should be avoided. Consumers have to think twice before purchases. Moreover, they can buy mobile phones according to studies about green mobile phones company.

7. References
Goldman, D 2010, Most iPhone users love AT&T, CNNMoney, viewed 18 November 2010, <http://www.investorplace.com/13410/apple-inc-iphone-4-survey-att-verizon/> Bristow, M 2010, Foxconn gives workers second pay rise, BBC news, viewed 18 November 2010, < http://www.bbc.co.uk/news/10252344>

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The True Costs of an iPhone

[Type text]

So Yung Yung 405223

Bayus, B. and Gupta S. 1992, An Empirical Analysis of Consumer Durable Replacement Intentions, International Journal of Research in Marketing, vol. 9, pp. 257-267. Chan, J 2010, China: Report exposes Foxconns oppressive work regime, World Socialist Website, viewed 18 November 2010, < http://www.wsws.org/articles/2010/nov2010/foxn-n04.shtml>

Liu, Z 2010, The fate of a generation of workers: Foxconn undercover fully translated (update: videos added), trans. R Lai, viewed 18 November 2010, < http://www.engadget.com/2010/05/19/the-fate-of-a-generation-of-workers-foxconn-undercover-f ully-tr/> The Greater China College Research Group 2010, Foxconn Report (in Chinese), viewed 18 November 2010, <http://down.tech.sina.com.cn/page/49003.html>

Bulow, J 1986, An Economic Theory of Planned Obsolescence, The Quarterly Journals of Economics, vol.101, no. 4, pp.729-749.

Snell, J 2007, The truth about iPhone battery lifespan, viewed 18 November 2010, <http://www.macworld.com/article/58916/2007/07/iphonebattery.html>

Apple 2010, iPhone Battery Replacement Service: Frequently Asked Questions, viewed 18 November 2010, <http://www.apple.com/support/iphone/service/battery/> Optus 2010, Handset Details, viewed 18 November 2010, <http://personal.optus.com.au/web/ocaportal.portal?_nfpb=true&_pageLabel=Templa te_woRHS&FP=/personal/mobile/mobilephones/handset_details&site=personal&mt= handset_details&sort=d3e72a394f6196ccf6addc933bea2cdd213041e9f|24&sid=HAFe at1:XMAS:OSC:MPOST:OCA:iPhone16GB:22112010>

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The True Costs of an iPhone

[Type text]

So Yung Yung 405223

GLG Expert Contributor 2010, ChangeWave Research: Wireless Service Provider Trends - Major Industry Shakeup on the Horizon, viewed 18 November 2010, <http://www.glgroup.com/Store/ChangeWave-Research--Wireless-Service-Provider-Tren ds---Major-Industry-Shakeup-on-the-Horizon-703.html> Greenpeace Research Laboratories 2007, iPhone's hazardous chemicals, viewed 18 November 2010, <http://www.greenpeace.org/raw/content/international/press/reports/iPhones-hazardo us-chemicals.pdf> Greenpeace 2010, GUIDE TO GREENER ELECTRONICS, viewed 18 November 2010, <http://www.greenpeace.org/international/Global/international/publications/toxics/20 10/version16/Ranking%20tables%20Oct%202010-Apple.pdf>

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