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Foxconn gives China workers dramatic wage hike

Foxconn gives China workers dramatic wage hike
AFP
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First Published: Mon, Jun 07 2010. 03 53 PM IST
Updated: Mon, Jun 07 2010. 03 53 PM IST
Taipei: Taiwanese IT giant Foxconn, hit by a series of suicides, said Monday it would hike wages at its plants in the southern Chinese city of Shenzhen, a move observers said could trigger industry-wide pay rises.
Foxconn, which assembles products for US-based Apple, will increase the monthly salary for its assembly line workers in Shenzhen by nearly 70% to 2,000 yuan ($290 dollars) from 1 October, a spokeswoman said.
“The wage increase will reduce overtime work as a personal necessity for some employees and make it a personal choice for many workers,” Foxconn said in a statement.
The announcement came after a series of suspected suicides at the firm’s Shenzhen plants, which led to reports of long work hours under sweatshop-style conditions, setting off protests in Hong Kong and Taiwan.
Ten workers at the giant Foxconn facilities in Shenzhen have fallen to their deaths this year while an 11th worker died at another factory in northern China. Another worker died last month, with labour activists alleging that he had succumbed to exhaustion.
Foxconn, the world’s biggest computer components maker and which also makes products for Dell and Nokia, only last week hiked pay for its Chinese assembly line workers by 30% with immediate effect.
This followed criticism that its salaries were too low in Shenzhen, giving its staff no choice but to work overtime.
Mars Hsu, a Taipei-based analyst with Grand Cathay Securities, estimated the pay raise may boost monthly production costs by two billion Taiwan dollars ($60 million US) for Hon Hai, Foxconn’s mother company in Taiwan.
That would account for nearly one third of Hon Hai’s profits, which totalled 17.9 billion Taiwan dollars in the three months to March.
“The pay raise will put pressure on other companies that are currently cashing in on the cheap labour of China. The era of cheap Chinese labour is over,” Hsu said.
A strike at a south Chinese Honda plant ended last week after the Japanese automaker offered a 24% pay rise.
Taiwan’s economic minister Shih Yen-hsiang was quoted Monday as encouraging local companies to reduce their presence in China, as higher salaries on the mainland make business harder.
Taiwanese firms should move high-end production back to Taiwan from China, while placing low-end activities in Southeast Asia, Shih said according to the state-run Central News Agency. Ministry officials could not confirm the report.
Hon Hai Precision Industry Co plunged on the Taiwan Stock Exchange on news of the wage hike, ending down 5.62% at 117.5 Taiwan dollars.
At one point in morning trade, the company’s shares fell by the seven-percent daily limit.
Its Hong Kong-listed shares were suspended ahead of the announcement and had fallen 5.5% to 5.66 Hong Kong dollars in the morning.
Foxconn’s 59-year-old founder Terry Gou, one of Taiwan’s best-known entrepreneurs, said the wage rise was meant to “safeguard the dignity of workers”.
“We recognise our responsibility as a global leader in electronics manufacturing, and take this responsibility very seriously,” he said in the statement.
Foxconn said salaries at plants in other parts of China would be calculated based on local prices and social security requirements.
Labour activists welcomed the rise but said it was still not enough.
“The basic salary the company offers to its workers remains short of the minimum needed,” said Chu Wei-li, head of Taiwan’s National Federation of Independent Trade Unions.
A worker living in Shenzhen and sending part of his money back to his family elsewhere in China needs to earn 2,293 yuan a month, a survey by Hong Kong-based Students and Scholars Against Corporate Misbehaviour showed.
Allen Lin, an analyst at Taipei’s Concord Securities, said Apple might help Foxconn get over difficulties caused by the wage hike by passing some of the extra costs on to consumers.
“As part of such efforts, Apple is likely to alter its pricing strategy. Apple has so far tended to lower prices after its products have been on sale.
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First Published: Mon, Jun 07 2010. 03 53 PM IST
More Topics: Foxconn | Apple | China | Taiwan | Technology |