Apple – the number 1 hit.

apple

Apple’s quarterly returns $18 billion (around £12 billion) in three months from October to December 2014, selling 34 000 iPhones an hour, is pretty impressive especially when factoring in I don’t even have one. Nor do I have an iPad, AppleMac or neither will I purchase the much hyped Apple watch. So what took Apple to the top of the tree without me?

Quite simply they make beautiful toys, but that is not enough. They market them as the must-have gadget. And they blur the distinction between work and leisure. iPhones are not phones they are sophisticated computers with a growing number of appliance all of which can be bought and sold via Apple stores online or in an increasing number of towns.

With almost half the world’s population having access to a mobile phone it makes sense to target the place with more than half of the world’s population. iPhone sales to China – up 70% on last year. Apple plan to double the number of stores.

China also makes Apple what it is. It manufactures these toys, puts them in containers and ships them around the world. The typical factory worker is male, aged 27, a migrant from the provinces. He makes around £180 a month and works around 56 to 61 hours a week, but perhaps longer, when required. I like that idea of when required. It always makes things so reasonable. When required means when we tell you. In the same way 15-minute breaks every two hours sounds good when factory inspectors visit, or the working week is fourteen days on and one day off. The worker can return to rest in the luxury of hostel accommodation – money automatically taken from his wages. The strain does drive some workers to suicide, but that does not appear in balance sheets.

Apple employs a massive 170 000 workers in these plants. These are the hands that assemble and test and polish and seal and send you your toys. The brains, of course, is a different matter. To sell the next generation watches Apple have recruited Angela Ahrendets from Burberry as head of retail on a $73 million pay package.  Let’s make some simplifying assumptions. Multiply $73 million by around 1.6 to convert dollars to sterling. Divide that sum by 365 to determine what she makes in one day. Divide that by the pay of the average migrant worker in a year (£130 x 52). This will give you some idea of the order of magnitude and difference between head and hands.

Apple also employ around 4000 people in the Republic of Ireland. Like Communist China the Irish government is quite happy to subsidise building costs in return for much needed jobs. Steve Jobs greatest innovation arguably might have been technological, but Apple’s continued success rests on the double Irish. Quite simply when other US companies were paying corporation tax of around 26%, Apple as a Cork registered company was paying less than 2%. The European commission found the tax deal that ran 1991 to 2007 to be (illegal) state aid. More recently Apple paid 3.7% in tax of non-US profits of $31 billion in 2013. Apple is a global player.

Apples 2014 revenues of $200 billion and a cash pile build-up of $178 billion ($23 billion in the last quarter) banked overseas gives it high liquidity and more money that it knows what to do with. A standard ploy is to buy back shares and increase the dividend to their shareholders. But they found it cheaper to borrow money to do that than dip into their surplus. Their main competitors Google, whose revenue derives from the most lucrative algorithm in history, use many of the same methods. Somehow I don’t feel any richer for knowing that.  The old certainties of what was good for corporate America was good for the world are unravelling. We’re all second-class citizens in the same world, but the many hands are increasing.

http://unbound.co.uk/books/lily-poole

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