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What Foxconn should learn from its experience in China to win in India

Most women workers at Foxconn’s Sriperumbudur facility are migrants from other districts in Tamil Nadu and are paid by external contractors. (Photo: Bloomberg)Premium
Most women workers at Foxconn’s Sriperumbudur facility are migrants from other districts in Tamil Nadu and are paid by external contractors. (Photo: Bloomberg)

  • Apple’s sub-contractors would do well to heed lessons from the labour disputes they faced in China
  • India is a democracy. Workers are more vocal and have a long history of asserting themselves. MNCs need to tread cautiously here, given that labour unrest can easily turn violent

Continuous shifts, extended overtime, poor work safety, overcrowded was a toxic labour cocktail set to explode, and it did. Workers rose up en masse in protest, demanding that their employers and the multinational company they were contracted to take action to end their misery. This is not something that happened in India recently, but in China, at a plant assembling Apple devices, over a decade ago. In the years that followed, this sequence of events would play out again and again in factories across that country, forcing the Taiwanese, Korean, Japanese, American and other multinationals operating there to take action.

Echoes of those protests have been heard in India twice already at two plants assembling Apple devices. The same themes have been playing out here as well, particularly with regard to wages and living conditions. A little over a year ago, workers ran riot at Taiwanese contract manufacturer Wistron’s plant near Bengaluru, and just last month a case of food poisoning sparked protests by employees of another Apple subcontractor, Foxconn, on the outskirts of Chennai, opening a can of worms.

Scores of workers at the Chennai plant, mostly women, fell ill from the food poisoning and 159 were hospitalized. Worried about the well-being of the sick staffers, their colleagues—the facility has 17,000 workers—launched a strike, descending on the busy Chennai-Bengaluru highway in droves on December 18 and blocking it.

The protest forced the Tamil Nadu government to seek action. “When the basic rights of workers are violated or denied, the government has to step in," said the top bureaucrat in one of the Tamil Nadu government’s key economic departments. Echoing this viewpoint last week in the state assembly, chief minister MK Stalin said: “Our government will always support industries aiding the growth of the state’s economy while protecting the legal rights of the workers."

The Hon Hai Technology Group (better known as Foxconn) apologized, asserted that it would restructure the local team and shut the facility. The temporary closure has made the authorities breathe a little easier. The government wanted to ensure things did not spiral out of control as had happened a few years earlier during a protest at the Sterlite plant in Thoothukudi, which ended in tragedy.

On its part, Apple carried out an audit and placed the Foxconn unit on probation. “Following recent concerns about food safety and accommodation conditions at Foxconn Sriperumbudur (Chennai), we dispatched independent auditors to undertake additional detailed assessments," an Apple spokesman said in a statement, noting that the facilities were found wanting and would be allowed to reopen only after strict standards are met.

Dismal dormitories

Most of the women workers at Foxconn’s Sriperumbudur facility are migrants from Tamil Nadu. They aren’t on Foxconn’s rolls and are paid by external contractors, say sources. Women workers are preferred at such units, partly because they are less likely to organize into a union and partly because they have the nimble fingers needed to do the job.

Most of the women are housed in 17 dormitories operated by various local contractors. The dorms are now empty and inaccessible. However, footage shot in one of the buildings a few days earlier by a news channel paints a dismal picture of life within its walls. The rooms are tiny, and each is believed to accommodate six-seven women. There are no beds, no attached bathrooms or toilets, and no kitchen.

Kannan, a local leader affiliated with the Centre of Indian Trade Unions (CITU), suggested that the women faced a curfew within the dormitories and it was almost as if they were being used as “bonded labour". “How can women workers be held in a hostel without freedom to move around," he wonders.

Apple admitted that the conditions at the dormitories are less than satisfactory. “We found that some of the remote dormitory accommodations and dining rooms being used for employees do not meet our requirements and we are working with the supplier to ensure a comprehensive set of corrective actions are rapidly implemented," the company said in its statement.

Foxconn itself admitted in a release that some of the offsite dormitories did not meet minimum standards. Responding to a query from this paper, a spokesperson for the Hon Hai Technology group said: “We have been working on a series of improvements to fix issues we found at the offsite dormitory facilities at Sriperumbudur...we have implemented a range of corrective actions to ensure this cannot happen again and a rigorous monitoring system to ensure workers can raise any concerns they may have, including anonymously. We will gradually begin to welcome back team members as each offsite dormitory becomes ready and is approved."

Thanks perhaps to an inventory pile-up in China and this being a lean quarter, Apple appears to be in no hurry to get the Chennai plant up and running till fixes are in place. “Foxconn’s Sriperumbudur facility has been placed on probation and we will ensure our strict standards are met before the facility reopens," the Apple statement said.

In a sense, corrective action is the only option available before Apple, as ending its relationship with Foxconn would be a time-consuming, costly affair. The Taiwanese company is one of the world’s largest electronics contract manufacturers and the sheer scale that it offers Apple will be hard to match.

However, there are some who believe the American company also needs to take responsibility for what happens at such plants. “Apple, which sells phones priced at 1 lakh, cannot absolve itself from letting sloppy shops sprout. The principal responsibility for good and bad must be borne by Apple and Foxconn," said the former managing director of a leading handset maker.

The senior bureaucrat appears to concur with that assessment. “Everything should not be viewed through the prism of cost," he says, referring to MNCs’ need to keep a tight lid on costs to protect margins, noting that these are companies that make billions of dollars every year. Indeed, on the first Monday of 2022, Apple became the first company in the world to cross $3 trillion in market value.

Asked about Kannan’s allegation that workers at the Foxconn plant were treated like bonded labourers, the bureaucrat insists: “The China model will not work here."

In truth, the China model no longer works even in China.

Low pay, harsh workplaces

Facilities run by contract manufacturers in China have frequently been rocked by worker protests over the last decade. Multinationals had for decades been used to operating with absolute control over the labour force in China, with the Communist authorities turning a blind eye. However, things have begun to change over the last decade, as evident from frequent protests too numerous to mention.

The first signs of trouble at Foxconn’s Apple plants in China came in 2010, when there was a surge in worker suicides over poor pay and harsh conditions at two facilities in Shenzhen. Foxconn was quick to hike salaries sharply to defuse the crisis and founder Terry Gou even issued a public apology.

In 2012, a report released by a labour rights organization based in Hong Kong noted that Foxconn workers in Shenzhen and Zhengzhou were paid poorly, worked long hours, and suffered humiliation at the workplace. That same year, another report by the Fair Labor Association, commissioned by Apple, flagged a raft of safety issues at Foxconn’s factories.

In 2014, Reuters reported that more than 1,000 workers at a Foxconn factory in Chongqing, China, had gone on strike demanding higher wages and better benefits. In 2018, the South China Morning Post reported that hundreds of temporary workers had held a rally in Henan province asserting that they had been cheated out of additional payments to the tune of $870 by recruitment agencies subcontracted by Foxconn.

In November 2020, Apple said it would stop new business with Pegatron, a Taiwanese contract manufacturer, after finding out that it had used student workers on night shifts and overtime, in violation of its rules. The next month, over 100 workers at a plant operated in Shanghai by Pegatron demonstrated demanding unpaid bonuses worth up to $1,530 each, according to a report in the Financial Times.

Despite all the protests, however, things settle down when corrective action is taken, after Apple draws a line in the sand. And the lessons learnt from those actions will serve the manufacturers well as they feel their way in India, which has a different culture and an industrial history littered with stories of labour unrest, which sometimes turns violent.

Companies of all hues, Indian and foreign, have faced agitations over the years. In 2009, enraged workers bludgeoned an HR manager to death at automotive parts manufacturer Pricol in Coimbatore over a series of layoffs. In 2012, a section of the workers at Maruti’s Manesar plant attacked the management and torched a senior employee to death. In 2018, automakers in Chennai’s Oragadam industrial suburb faced labour strikes. And in 2020, Toyota Kirloskar Motors Private Ltd declared a lockout at its plant in Bidadi, near Bengaluru, citing hostility from union members.

Déjà vu

While the two incidents in India involving factories assembling Apple devices made global headlines, a good part of the blame for the disputes lies with local contractors.

In December 2020, workers ransacked Apple subcontractor Wistron’s plant in Bengaluru over delayed and underpaid wages, destroying equipment worth millions of dollars. Apple responded by saying it would suspend new business with Wistron after finding the company in breach of its supplier policies. It emerged that local contractors were partly to blame for the wage payment problems.

In the Sriperumbudur case, an official from the collector’s office confirmed that a local contractor had been managing the food and accommodation at the facility.

The good news is that the Wistron facility in Bengaluru resumed operations last March, and so far things appear to be going smoothly. The Chennai facility is also expected to be up and running soon, albeit in a phased manner.

Looking to regain mojo

The assurances from Apple and Foxconn that staff facilities would be improved have made the Tamil Nadu government breathe easier. They may disagree on most things, but the DMK and AIADMK, which have taken turns ruling the state for over half a century, have been single-minded in ensuring its economic progress. That focus has made Tamil Nadu one of India’s most industrialized states, with over 38,000 factories.

In recent years, however, a series of disputes has dented the perception of the state being an investor-friendly location. Two tax demands ensured a massive handset making plant in Sriperumbudur was left out of Microsoft’s $7.2 billion acquisition of Nokia. Japanese carmaker Nissan got entangled in a tax dispute with the state government in 2016 and it took years for the two sides to reach a settlement. The death of 13 people in police firing on a group protesting the environmental impact of a proposed expansion of Sterlite’s copper smelter in Thoothukudi was a new low.

And then, early last September, reeling from a $2 billion loss, American carmaker Ford announced that it was ceasing manufacturing operations at its Chennai facility and exiting India. The news stunned many in Tamil Nadu, where Ford had begun its journey in 1995, laying the ground to make Chennai one of the largest automotive hubs in the world.

Seen in this backdrop, the nervousness around the Foxconn fiasco is understandable. Having Chennai as a production centre for Apple devices was a big coup for the state.

The rebellions in Bengaluru and Chennai have given Apple’s journey in India an inauspicious start. Indeed, the Wistron riot and the Foxconn protest mirror the woes the company has faced in China over the last decade. That does not mean it will pull out—because Apple is looking to reduce its dependence on China, and so are its Taiwanese sub-contractors.

However, it would do them all a lot of good to brush up on a bit of history, revisit the reasons for the frequent labour flareups at their facilities in China, and work to prevent a repeat in India.

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