Stress on the changes at Foxconn from both domestic and foreign pressures

by ddenglk231 on 2012-02-21 14:16:31

Social scientists say that young people here are also less willing to accept long-term factory work. Meanwhile, changes in the demographic structure mean that China has fewer young people entering the workforce. "This is how capitalism should work," said MIT economist David Autor. "As the country develops, wages rise and life theoretically gets better for everyone." "China can no longer guarantee the low wages and costs they once did," said Ron Tu of L3 Battery Enterprises, a consulting firm in the battery industry. "Like Foxconn, which has developed an international profile, they worry about how people living in very different standards places see them." And with the old model dying, Foxconn has announced plans to invest millions in robots and automation for production. This month, over one million migrant workers returned to their rural hometowns to celebrate the Chinese New Year. Traditionally, factories had no problem attracting those workers back. However, many cities in China are still facing a severe labor shortage even as the holiday week comes to an end. A recent report from the Chinese government stated that this year's labor shortage is more pronounced than in previous years.

Foxconn, with 1.2 million employees in China, is one of the largest employers in the country. It assembles approximately 40% of the smartphones, computers, and other electronics sold worldwide. Foxconn's decisions set the standard for other manufacturers competing in the market. The real transformation in the system involves Foxconn, its competitors, and their clients - including Apple, HP, Dell, and other major global electronic companies - who must convince American consumers and others that improving factory conditions benefits workers and justifies higher-priced goods.

Responding to these demands, Foxconn has acknowledged that both employees and consumers have been influenced by Chinese bureaucrats and executives of global electronic firms that use Foxconn to manufacture their own products. If workers won't move to the coast, then coastal factories should move to where the workers live. Large manufacturers like Foxconn have responded to these challenges by relocating plants inland.

Just as Chinese exporters struggle with labor shortages in coastal areas, they also face higher raw material costs and a strengthening Chinese currency, making Chinese goods more expensive in other countries. "But in China, this change is permanent, and consumers must be willing to bear the consequences. When people read reports about bad conditions in Chinese factories, they may feel angry for a moment. But later, they go to Amazon and pay the lowest price as usual," analysts remarked.

The essence of Foxconn's reform, analysts believe, will depend partly on how effectively the company can transform an economic system that has largely relied on attracting migrants to work long hours at cheap rates in vast factories producing smartphones, computers, and other electronics over the past decade. Some of its campuses are considered small cities with up to 200,000 workers. Many are housed in dormitories near assembly lines and are expected to be ready to rush into work when new orders come in.

Foxconn's statements also reflect how quickly China's economy is changing. Many employers in the country are facing labor shortages, which also put pressure on wages due to inflation and government requirements to raise the minimum wage. Although Foxconn's model is under pressure, while most companies operate similar dormitory systems, wage structures, and work schedules, staffing large Foxconn sites has become increasingly difficult. The younger generation in China is less willing to migrate to coastal cities, live in factory dormitories, and work long hours. Many prefer to stay closer to home because of new opportunities in inland provinces, creating a labor shortage issue along the coast.

Plants rely on workers assembling production lines six or seven days a week, often for 14 hours per day, allowing equipment to run almost as soon as desired. Workers welcomed announcements of wage increases and overtime restrictions but some were skeptical about how much actual change would occur. "When I was at Foxconn, there were rumors of raises every now and then, but I never saw it happen until I left," said Gan Lunqun, 23, a former Foxconn worker. "This time, it sounds more credible."

After announcing it would raise salaries by up to 25%, around 400 yuan per month, Foxconn faced criticism over working conditions. In recent weeks, labor rights groups in various countries coordinated protests following reports of poor, abusive, and dangerous conditions at some of Apple's Chinese suppliers. To stop the criticism, Apple hired a nonprofit labor group to inspect the plants it uses.

No other company in the world has the same production scale as Foxconn. Almost every global electronics company has ties to this manufacturing giant, and its operations can do a lot with inexpensive low-skilled labor, producing vast quantities of goods that make China the single largest exporting country.