Where Does Your Console Come From? - Supply Chains - Extra Credits

we talk a lot about how games are arising medium one that's changing culture and becoming a major economic Force but there's another side to that too you can't become big on the scale that games have without also facing new bigger problems and taking on new responsibilities many of these have to do with how we make consoles both what goes into them and who puts them together so today we're looking at Supply chains basically how consoles get made it's worth pay pay attention to for a couple reasons first of all it's just fascinating and it makes you appreciate all the work that goes into the machines we love but secondly it's important because it exposes a darker side to the industry and the creation of electronics in general that we rarely discuss Yep this is going to be one of those how the sausag is made episodes hey sometimes you have to look at how the sausage is made the food we eat the clothes we wear and the consoles we play on all take some pretty complicated Journeys to get to us Dan I love what you're doing here it's important that we look at where our stuff comes from even if that look isn't pretty oh hey Morgan folks this is

Morgan Spurlock he's actually started a YouTube show of his own recently that's all about exploring this sort of thing yeah we call it consider the source we talk about how everyday things like cheese and denim get made I mean did you know that each pair of jeans requires around 2,000 gallons of water to be manufactured wow I did not know that that is really cool have you considered making documentaries I bet you'd be good at it I'm I'm going to go now okay bye Morgan you guys go check out his show after this okay I'm going to put a link in the outro anyway you're probably aware that your console starts its life as minerals in the ground which are mined out then sold to an exporter who then sells them to a smelter who turns them into the usable materials like wires and bars and powders which it then sells to a components manufacturer which turns those wires and bars into things like capacitors which then get turned over to the assembly line that puts together your console and while this whole progression from raw materials in the ground to the gaming box that sits next to your TV is amazing and illustrates the power of the world economy you probably noticed that there are a lot of

middlemen involved and that means a lot of potential for shady stuff to happen along the way take manufacturing for example with console assembly taking place overseas console manufacturers have to ensure that overseas manufacturers treat their employees fairly which isn't always as easy as it sounds local laws may allow practices that are illegal in the US or Japan and sometimes the line can get blurry just as an example in 2012 reports emerged that a foxcon factory in China was using high school kids aged to 16 to manufacture Wii U now this in itself wasn't illegal as it was part of a government sanctioned job training program however what was illegal was that factory managers were threatening to fire or even expel the students if they didn't work 12-hour overnight shifts incidents like this are depressingly common and while that specific example involved Nintendo it could have easily been any one of the big three in fact the next year the same Factory got into a similar Scandal this time forcing college students to manufacture PS4s this stuff is endemic in manufactur uring it's gotten to the

point that inspecting factories is an industry in itself it's not an easy job either factories have been known to secretly Outsource to cheaper factories with worse conditions and it's not unusual for inspectors to insist on safety policies only to have the factory employees reject them getting employees to wear particle masks for example is a constant struggle and while it's easy to say just don't manufacture in China then that's not really a solution despite everything you hear China is still the best lowcost manufacturer out there not only is there safe record better than comparable cost countries but their Workforce is huge they can get a product ready for launch faster than anybody now this isn't an excuse of course just an explanation of why these problems persist even when we know they happen but dealing with bad labor conditions is nothing compared to the challenge of tracking conflict minerals okay so you know how at the beginning we talked about how your console is made from Minerals Well some of those minerals may have come from the volatile Eastern Democratic Republic of the Congo a region mired in a decade long Civil War that's killed 5.4 4 million people and

displac 2 million more many of the mines there are artisanal operations run by families or Villages whenever the Army is unable to control this territory militias move in and tax these mines or capture them and force workers to dig at gunpoint the profits from these operations fund armed groups known to enlist children as soldiers burn Villages and to use rape as a weapon of War it's a bad situation made worse by the fact that for years the electronics Industry either ignored or was completely unaware of the problem now now thankfully in the last few years more attention has been brought to the issue and us and EU laws started requiring companies to investigate their supply chains and disclose whether they use conflict minerals despite industry push back these regulations are having a positive effect on the region console makers have joined the effort as well and made an incredible amount of progress in the last few years Sony and Microsoft both audited their supply chains and published the data even naming their smelters to prove that they're Conflict Free they've also both been active in Industry organizations trying to fix the problem and Microsoft

contributed to a fund that pays for smelting Audits and Nintendo well back in 2012 the enough project ranked the largest 24 electronics manufacturers on their progress eliminating conflict minerals Nintendo placed last with a score of zero now they have improved since then auditing their suppliers with the industry standard template but they've refused to join any industry organizations or collaborate with other companies to clean up their supply chain they won't share information about suppliers help weed out bad smelters nothing Nintendo we know you like to keep to yourself but this is one of those times where you make an exception but still at least game companies are making progress in fact they're doing so faster than some other Industries and hopefully the game industry has learned a lesson about not dragging its feet for when the next supply chain issues come along and let's be honest it will after all Global console manufacturing isn't going away in some ways it's what has allowed games to conquer the world like they have companies just couldn't sell consoles internationally if they didn't Outsource manufacturing and Supply

they'd never keep up with demand worldwide product launches require worldwide manufacturing so what can the industry do well the biggest thing is to take responsibility and make supply chain audits a priority that's just good business anyway after all when these scandals come to light it's the console brand that takes damage and overall I think the big three are coming around to the wisdom of that stance more could be done of course blacklisting companies who have a record of bad practices for example or who don't meet auditing deadlines but we're on the right track companies can also stand up to the US Chamber of Commerce which is using legal challenges to blunt the new conflict mineral regulations Microsoft already did this back in 2012 when it vocally disagreed with the lawsuit and I got to say way to step up Microsoft that took guts next the industry just needs to be upfront about problems I mean this isn't just a games issue it affects all manufacturing the game industry's response to these problems was opaque for a long time if a journalist contacted PR about manufacturing they'd get pointed to a corporate

responsibility report if they're lucky more often PR would never write back at all and this kind of stonewalling helps nobody it makes the company look guilty it makes the journalist suspicious and it causes the public to assume the worst ironically it even makes it hard for the public to learn about the positive steps companies are taking another thing console makers can do is give overseas factories more lead time before a product launch that might mitigate the chances of factories falling behind and offloading to a shady operation unrealistic perhaps but it is something to think about by contrast we as consumers can help by cutting companies some slack about console Supply I know that we always want the new cool thing the moment it comes out but Sony doesn't create PS4s in a replicator somebody has to make each one and overloading those manufacturers increases the possibility that they'll engage in bad practices nobody wants to see somebody get hurt just so they can get a new console on launch day and speaking of that here's another thing that we buyers could do we can be willing to pay a little bit more for an ethical console now I know that consoles are already really expensive

but that extra amount wouldn't actually be that much one estimate suggested that producing conflict-free consoles would cost only a few cents more per unit imagine what a $5 price hike could achieve and of course these are just ideas I'm spitting out here but our globalized manufacturing scheme isn't changing anytime soon so we might just need some new ideas to help mitigate the problems in our supply chains both the problems we have today and the ones we'll see tomorrow see you next time [Music] n