Foxconn developments to affect OEMs

April 3, 2012

Apple’s move to improve labour conditions expected to increase costs for other companies.

Following Apple’s announcement that the company has endorsed the US Fair Labor Association’s (FLA) agreements with production partner Foxconn “to reduce hours, protect pay, and improve staff representation” on 29 March 2012, the Chicago Tribune has speculated on the impact improved working conditions will have on other manufacturers.

Foxconn, an affiliate of Taiwan’s Hon Hai Precision Industry, is expected to reduce hours, substantially improve wages, and hire tens of thousands to compensate for the lowered hours.

Auret van Heerden, head of the FLA, commented: “Apple and Foxconn are obviously the two biggest players in this sector and since they’re teaming up to drive this change, I really do think they set the bar for the rest of the sector.”

Reuter’s Noel Randewich, writing for the Tribune, shared the sentiment, stating that “the Apple-Foxconn agreement could affect costs for other manufacturers who contract with the Taiwanese company, including Dell [and] Hewlett Packard.”

Although noting that labour currently accounts “for only a fraction of those companies’ costs”, Randewich asserts that “after decades of aggressive expansion in China, cheap labour no longer looks limitless and steadily rising wages have become a major concern of US-based companies heavily dependent on Chinese labour.”

John Brownlee, Cult of Mac news editor, was more vehement with the impact on the industry, remarking: “Apple’s move today could cause labour-intensive manufacturers all over Asia to spend more on wages and accept lower products. In other words, workers at other factories might soon expect to be treated as well as at Foxconn. And that might cause lower margins across the whole tech industry.”

Printer manufacturer Dell has responded to the Chicago Tribune, noting that although the company was pleased that Foxconn is improving its labour practises, “we won’t speculate how the reduced overtime and higher wages will affect Foxconn’s costs”.

Foxconn and associated companies have faced severe criticism in recent months over labour conditions, with 300 members of staff at a Microsoft Xbox 360 manufacturing plant recently threatening to commit mass suicide following disruptions on wage demands.