Chaebol bashers should take note
Today’s hottest global brands are Apple and Uniqlo. Around the world this weekend, Japan’s most famous casual clothing brand stores were packed with shoppers. The company was having a sale on its best-selling winter Heattech undergarments, more than 300 million pieces of which have been sold. In Korea, they were going for 9,900 won ($9) each. The heat-trapping fabric has become a must-have during winter, and consumers sometimes have to comb through shops in order to find their size.
Despite a lot of sniping and fierce competition both in the market and the courts with our own Samsung Electronics, Apple also remains at the top of its game. Its stellar operating profit, over 30 percent, in the third quarter is proof positive. Yoo Jang-hee, chairman of the National Commission for Corporate Partnership, recently lauded Apple as an exemplary case of corporate behavior. He referred to Korea’s conglomerates - Samsung Electronics, Hyundai and Kia Motor - as zoos compared with Apple.
Is that accusation fair?
Taiwan-based Foxconn’s production lines in Shenzhen, China, that assemble iPhones and iPads are notorious for killer-long working hours and low wages. After helping make Apple the success that it is, Foxconn is making profits of about 1 percent. It’s said to have demanded higher prices from Apple. The Japanese industrial community is enraged over the so-called “i-Factory curse.” Beware if Apple gives you a contract. You may not make anything on it.
The Japanese business weekly Shukan Daiyamondo warned of enslavement of Japanese companies by Apple. It cited a case of a Kanagawa-based supplier that won an order from Apple to deliver camera motors for iPhones. The company expanded its production lines only to learn that the deal was off. Apple switched to another Japanese company. Afterward, the company went bankrupt.
Blue chip corporate names from Japan such as Sony, Sharp, Toshiba and Elpida are hanging on through alliances with Apple. The U.S. technology giant makes orders daily with the warning that the deal remains confidential and bullies its suppliers on prices. It easily switches its business when it finds a better bargain.
The Japanese weekly claimed Apple’s staggering profits come from such unfair business practices. The so-called i-Factories in Japan are slave farms for Apple. In contrast, Samsung Electronics sources 80 percent of its Galaxy S3 smartphone parts from home.
Uniqlo is also not exactly all that honorable, either. Toray has an exclusive contract with Uniqlo to supply the fabric for its Heattech lines. Uniqlo’s 40 suppliers in China make the fabric into clothing. The fast-fashion retailer tightly controls production and distribution to deliver new products within two weeks whenever it wishes.
In the book “The Glory and Disgrace of the Uniqlo Empire,” freelance journalist Masuo Yokota claimed that 85 percent of Uniqlo’s 500 million pieces of clothes are produced at Chinese factories that operate long hours and pay low wages. The book said Uniqlo managers prefer hiring young girls who are fresh from villages because they do whatever they’re told without complaining. There was a time when this kind of business practice was called imperialist exploitation.
Hyundai Motor, in contrast, is a babe in the woods. It has 28 subcontractors in nine countries, including the United States, China and Brazil. Its technology research center in Namyang, Gyeonggi, runs a guest engineering program that invites hundreds of engineers from contract suppliers to include them in the development of a new model from the very beginning. The headquarters dispatches a team of helpers if parts development slows down. It runs an intricate partnership system. American and Japanese automakers like General Motors and Toyota, however, purchase parts through online bidding.
The parts in Hyundai Motor cars are 97 percent made in Korea. Exports of automotive parts now exceed those of completed cars. About 450 of Hyundai Motor’s immediate suppliers supply 50 percent of their products to its primary automaker while selling the other half to foreign carmakers.
Market capitalization of their listed companies over the last 10 years grew 10-fold thanks partly to Hyundai Motor’s incubating and grooming efforts.
If politicians want to target large companies as scapegoats ahead of the presidential election, they should at least do a little bit of investigating of the facts. Political demagoguery based on prejudice is immature and just plan stupid. We have better companies than Apple and Uniqlo to be proud of at home. One more thing: Korea is the world’s fastest in turning out new models of smartphones and cars. Who gets the credit for that?
*The author is an editorial writer of the JoongAng Ilbo.
by Lee Chul-ho