Caveat Lector
Portrait photo of a smiling Mike Buetow
Branding Citizenship

onsumer pressure on corporate behavior is cyclical and typically short-lived. Consider “dieselgate.” Volkswagen for years rigged the emissions testing on certain vehicles to appear to meet state and national standards. Confronted with the discrepancies, VW management lied in what would be a futile attempt to cover up its wrongdoings. The transgressions cost the carmaker more than $30 billion in fines and penalties. At the time, it looked like a major hit to the company’s reputation.

We are in an era where focused consumer pressure has the potential for immediate worldwide impact. Primed by social media, buyers have never held so much broad sway. Will this newfound power to drive electronics industry decision-making?

The nongovernmental organization China Labor Watch routinely pummels Chinese-based manufacturers for mistreatment of workers and labor law violations. The leading media companies in the world pick up its investigations. Yet its efficacy in changing corporate behavior is murky.

As democracies and pseudo-democracies capitulate in places like India and Thailand, there will be pressure on multinationals to steer clear, lest they be seen as supportive of pariah regimes. But even if China’s 20-year dominance over the electronics supply chain wanes, the next home for the industry will likely be equally complex. Thailand routinely jails citizens, including minors, for speaking out. Defaming the monarchy is punishable by up to 15 years in prison per incident. Under prime minister Narendra Modi, India’s crackdowns on speech and the criminal justice system, not to mention minorities, is drawing increasingly vocal criticism in many foreign policy quarters.

Yet the odds this will stop factory migration are minimal, at best. The rush for new revenue is too important, and the consequences, if any, easily mitigated.

One thing many electronics multinationals have in common is membership in an official-sounding organization called the Responsible Business Alliance (RBA). Formerly the Electronics Industry Citizenship Coalition (EICC), RBA is a group of companies that “share a commitment to ensure working conditions in the electronics supply chain are safe, that workers are treated with respect and dignity, and that business operations are environmentally responsible.”

Fancy words aside, the RBA is a crock. The companies that make up its membership include Apple, Amazon, Foxconn, Pegatron, Wistron and other OEMs and ODMs that are routinely singled out by NGOs in social media and the mainstream media for disregarding worker health and local labor laws. In my view, the RBA is used as a shield: listen to what we say; don’t look at what we do.

I can’t argue with the decision to locate factories where the labor is skilled and generally cheap. But, while I can’t rationalize how any company with lofty corporate citizenship goals aligns itself with nations that routinely practice state-sponsored oppression, I fully recognize there’s no stopping those decisions.

The heads of our industry are smart, analytical people. I have no doubt they are studying the impact of their decisions on their brand, much in the way US companies have contemplated, then stuck with China, despite sanctions intended to get them to reconsider.

And who can argue? At the time of dieselgate, VW was the world’s second-largest automaker. Five years later, it was number one.

Foxconn’s biggest threat. Next month we will roll out this year’s CIRCUITS ASSEMBLY Top 50 list of the largest EMS companies. Expect few surprises. Instead, the real mystery is guessing how big Foxconn can get.

The answer, according to Foxconn, is really big. As it gets into electric vehicles, 5G markets and components, there’s almost no ceiling to the potential. As it stands, Foxconn is approaching $200 billion in annual revenues. Not long ago – one generation, actually – the entire EMS industry was smaller than that.

Of course, Foxconn won’t get there simply by making solder joints. So, if the question is can anything or anyone knock Foxconn from the top spot, the answer is yes: Foxconn. Some estimates have it reaching $300 billion in the next decade. To hit that mark it will increasingly make the jump from EMS to ODM to OEM. It is setting up a consortium to develop a common hardware and software platform for the electric vehicle industry. (Isn’t that what Apple wants to do?) And what that means for Apple, HP, Dell and the many other blue-chip companies that rely on Foxconn to make those solder joints remains to be seen. Who will they turn to then? Because that company or companies will likely duke it out for the new number one.

Mike Buetow