Why Is Building A Fair Smartphone So Hard?

We are probably all aware by now that our electronics are made overseas, primarily in China. We have heard the reports of the Foxconn suicides and the terrible working conditions in other factories. Apple has been the poster child for working conditions and taken the brunt of the impact in the news for poor working conditions despite all flagship smartphones being made in similar conditions.

As John Oliver’s recent rant on the fashion industry astutely points out, it’s easy for a company to claim they care about working conditions and to write reports that reflect such concerns. It’s also very easy to claim they were unaware of working conditions when things go wrong.

The reality is the supply chain and production of a modern smartphone is extremely complex. Aside from designing the best new features, electronic companies must source dozens of important minerals from all around the world. They need the timely, reliable raw materials to arrive all at a central place where production can pump out millions of devices on a strict schedule.

Electronics companies such as Apple are several levels removed from the actual raw materials. They hire Company A to produce widgets for their smartphone. Company A hires Company B to produce certain parts needed for their widget. Company B hires Company C to produce other parts. Company C purchases raw materials from Company D. It’s difficult to control without an incredible amount of costly and slow oversight.

Source: consultantsmind.com. 2013.

The working conditions while assembling the phone are not the only concern either. Smartphones utilize around 40 minerals from around the world. The minerals are often mined in areas where the competition for these resources spur wars, similar to the now infamous blood diamonds, especially areas such as the Democratic Republic of Congo.

Anyway, let’s not start an ethical debate on whether we should feel guilty for carrying a smartphone. Instead, let’s take a look at a slightly more straightforward question. If I wanted an ethically created, fair smartphone, could you even find one?

A Gesture In The Right Direction

When looking at working conditions alone, Motorola came somewhat close to the mark… for almost a year. Motorola made a valiant, albeit short-lived, attempt for the final production of their Moto X phones to be produced in a Fort Worth, Texas factory that previously housed the now deceased Nokia.

In the summer of 2013, they released a huge campaign emphasizing the necessity for assembling the phone in the US. Motorola wanted be the leaders in bringing electronic production back to US soil. They anticipated this would become the norm and other companies would be soon following their blazed trail. Motorola even had grandiose plans to eventually produce cameras, sensors and other pieces of their smartphone in the US.

Motorola’s factory in late 2013 employed 3,800 employees. As of May 2014, it employed less than 900. There is no further mention of the plant’s operational status since so it can only be assumed it is now completely shutdown. Even with their valiant aspirations, only the final production was ever performed on US soil. The processor, RAM, storage and basically everything except customizing the color with the Moto Maker was conducted overseas.

Why did their efforts fail? In short, it was a recipe for failure:

Poor US sales due mostly to producing a perceived mid-range device for a flagship price

Not offering their Moto Maker outside of the US

High labor costs

The last point is a hard pill to swallow. Producing anything in the US is inherently more expensive. Estimates of Foxconn wages sit at about $1.78/hr including their many hours of overtime. It takes about 24 man hours to produce one iPhone, thus labor costs about $42.72 per phone. In the US (assuming we were as efficient) it would cost $7.25 x 24 = $174. Right off the bat, the consumer would need to fork over $132 or nearly 20% more for the average flagship device. This is not even considering the inevitable additional costs of wages above minimum wage, overtime, overhead, unions, or that pesky OSHA.

The market has already set the bar for how much a smartphone “should” cost. Consumers expect the best and expect to pay the least. It will be an uphill battle to convince consumers they should spend more because it’s the right thing to do.

One smartphone sits on the shelf and costs $700. The exact smartphone sits next to it and costs $840 but was produced in the US. Would you buy it?

A Little Bit Closer Now

So it doesn’t look good for building a fair smartphone in the USA. Are there any major smartphone companies that at least ensure good working conditions and living wages? Almost.

A 2014 report created by Baptist World Aid in Australia and Not for Sale in the US stated that, out of all the major smartphone producers, only Nokia was able to substantiate their claims of fair wages and work conditions. From the report:

Disturbingly, 97% of the companies we evaluated could not demonstrate they were paying workers a ‘living wage’, i.e. enough to live off. Nokia was the only exception.

Unfortunately, Nokia has recently decided to no longer pursue the production of any smartphones.

This was one of the only reports available that even attempts to categorize companies by how they treat workers. As mentioned earlier, it’s an incredibly complex process to even attempt to sort out.

The Closest Thing To A Fair Smartphone

If you’re coveting that elusive fair smartphone, there is hope. The Dutch company Fairphone is well on its way to creating the second generation of their ethically minded, fair smartphone. They have already released about 60,000 smartphones and hope to release 200,000 more smartphones sometime during the summer of 2015.

The Fairphone is completely transparent about their process even down to their material costs (see below for the cost breakdown of their first Fairphone). Their fact sheet mentions five main areas of impact: mining, design, manufacturing, life cycle, and social entrepreneurship. Each of their many blog articles are actually tagged with one of these areas of impact. It’s fascinating to read about the challenges in creating the phone. It also proves their efforts are much more than show or lip service.

Reading through their blog, you will quickly realize the difficulties and level of dedication it takes to create the Fairphone. Just take a look at their journey for responsibly sourced gold or working with Hi-P, their production partner.

No specifications or pricing is currently available for the next generation of the Fairphone. If the first Fairphone is any tell (see picture above), it will likely be a mid-range device. It will probably be priced around 300 euros or about $350 which is completely reasonable considering the amount of work that goes into building the phone. Unfortunately, it might be tricky to get your hands on one in the US. It’s also unfortunate that in order to use a fair smartphone you will also, in all likelihood, have to sacrifice having the best hardware or even “very good” hardware.

Nevertheless, what’s really refreshing about the Fairphone is their transparency. On their fact sheet, they answer the question, “Is this the first fair smartphone?” with a simple answer:

In short, the answer is no. Our aim as a social enterprise is to use commercial strategies to create social impact. The Fairphone is still far from “fair”, but it’s a starting point for our step-by-step journey. There are literally thousands of social and ecological standards that can be improved in the production of smartphones, and we have defined interventions to gradually address some of them. But they can’t be overcome all at once, and some things are simply impossible to achieve right now.

Thus, if you want an as-fair-smartphone-as-possible, the Fairphone is the only clear winner. However, the question remains whether the Fairphone will ever be able to compete against those with an unfair advantage.