The New York Times today quoted friends of the dead worker, Sun Danyong, saying the logistics staffer and recent college graduate reported being "beaten and humiliated by the factory's security team" over his loss of an iPhone prototype, just before he committed suicide.

Foxconn denied this; then its staff joined a goon who threatened the Times itself with a beating:

A security guard, who was joined by two men wearing Foxconn shirts, threatened to "beat up" a journalist's translator if she persisted in asking the family questions. Foxconn officials later said the guard was not on their staff and might have been with the police bureau.

Foxconn says the worst that happened was that Sun's right shoulder was grabbed during an interrogation. But the company also told the Times it would improve factory management, and that it had paid Sun's loved ones:

The company paid compensation to Mr. Sun's family. It declined to say how much, but Mr. Sun's brother cited a figure of 300,000 renminbi, or more than $44,000, and said Mr. Sun's girlfriend was also given an Apple laptop computer.

Finally, a Foxconn manager told the Times that Sun "several times" had lost products, only to return them.

If Foxconn seems like it's flip flopping, maybe that's because Apple has put the company in an impossible situation: Running labor-camp factories with working conditions Apple itself could never get away with, without tarnishing Apple's sterling brand image. Apple hired Foxconn precisely so it didn't have to get its hands dirty in China. But that's a fantasy, as the fallout from Sun's suicide highlights.

(Pic: Foxconn Apple factory worker — not Sun Danyong — via)

Danyong was likely vulnerable because he was a recent college graduate, with little experience in China's high-pressure workforce, according to a Chinese blogger quoted by Venture Beat. But the case, which has been covered widely in the Chinese press, inevitably underlines Apple's drive to keep new products under wraps; public unveilings bring the company oodles of free press.

There's also a downside of being a press obsession: Scrutiny of Apple's suppliers, including high-security dormitory factories in China, which Apple has "investigated" in response to press accounts. Another investigation, into Sun's case, is in order.

I realize this news is going to traumatize a lot of gadget nerds, especially Gizmodo editor Brian Lam, with whom I've had a running back-and-forth on the Googlephone. I'll save Lam the trouble of writing one of his "Yes, but ..." retorts. Let me nutshell it for you: It's not about the hardware, it's about the operating system and customization and integration with Google's apps. Nonsense.

Here's what it's really about: Fear. Google cofounders Larry Page and Sergey Brin got spooked in early 2006 when they heard that Microsoft was putting its Windows Mobile operating system on 90-plus smartphones that year. So they threw a rumored $100 million in Google shareholders' hard-earned cash on a crash Googlephone project.

Cooler heads have prevailed, though. Yes, it's smart for Google to optimize its services for cell phones. But they don't need hardware or software to do that. Nor do they need exclusive deals with carriers, though those might help a bit with distribution.

The Googlephone, however, has worked like a charm in two ways: First a threat. The Googlephone was a useful fiction, a way to scare carriers and phonemakers into cooperating with Google, and spook Microsoft into cutting its licensing fees for Windows Mobile. To perpetuate that fiction, Google apparently went as far as ordering up some prototypes from HTC — an elaborate Potemkin village of gadgets.

Second, the Googlephone functioned as a fantasy. A very useful fantasy. Like the Apple rumor mill, the cottage industry in Googlephone speculation served as free, crowdsourced market research. Gizmodo, Engadget, and the rest spun countless feature wishlists out of Larry and Sergey's phone folly.

Too bad it was all for naught. There is no Googlephone, folks. Move along.

And for those gadget-heads who were taken in by all of this, and are now disappointed, here's a thought: If you think you feel crushed, how do you think Microsoft and the wireless industry will feel once they figure out that Google has played them for the fool?