Pressures from both Chinese and foreign entities are driving changes at Foxconn.

by ddenglk168 on 2012-02-21 14:16:37

"China can no longer guarantee the low wages and costs they once offered," Ron said, a consultant in the battery industry for the 3 yuan battery company. "Companies like Foxconn have developed international profiles, so they worry about how people from places with very different standards of living will perceive them." However, analysts believe that the true essence of Foxconn's reforms will depend on how effectively the company can transform an economic system that has largely relied on attracting migrant workers to work long hours at cheap, large factories producing smartphones, computers, and other electronics over the past decade. If the logic is that workers won't move to the coast, then coastal factories should move to where the workers live. Large manufacturers like Foxconn are responding to these challenges by relocating inland. The real change in this system requires that Foxconn, its competitors, and their clients - including Apple, HP, Dell, and other major global electronics companies - convince American consumers and others that improving factory conditions for the benefit of workers is worth higher-priced goods. Workers welcomed announcements of pay raises and restrictions on overtime, but some were skeptical about how much actual change they would bring. "When I was at Foxconn, there were rumors of pay raises all the time, but I never saw it happen," said Gan Lunqun, 23, a former Foxconn worker. "This time, it sounds more credible." Foxconn's statement also reflects just how quickly China's economy is changing. Many employers nationwide are facing labor shortages, which also exert pressure on rising wages, inflation, and government demands to increase the minimum wage. Facilities that rely on workers for assembly lines operate six or seven days a week, usually for up to 14 hours a day. This allows people to almost immediately start working on equipment as soon as they arrive at these facilities. Although Foxconn’s model is under pressure, most companies operate similar dormitories, wage structures, and work schedules. However, staffing large Foxconn sites has become increasingly difficult. A new generation of young people in China is less willing to migrate to coastal cities, live in factory dormitories, and endure long hours. Many prefer to stay closer to home due to new opportunities in inland provinces, creating a labor shortage in coastal areas. This month, over a million migrant workers returned to their villages to celebrate the Chinese Spring Festival, otherwise known as the New Year. Traditionally, factories had no problem luring those workers back. However, many cities in China still face severe labor shortages even weeks after the holiday ended. Recent reports from the Chinese government indicate that this year's labor shortage is more pronounced than in previous years. "This is how capitalism should work," said David Autor, an economist at MIT in the United States. "As a country develops, wages rise and life theoretically improves for everyone." Social scientists say that young people here are also less willing to accept long hours of factory work. Meanwhile, demographic changes mean that China has fewer young people entering the workforce. After announcing that it would raise salaries by up to 25%, around 400 yuan per month, Foxconn drew attention away from criticisms of working conditions in its factories. In recent weeks, labor rights groups staged coordinated protests in various countries following reports of poor, abusive, and dangerous facilities at some of Apple's Chinese suppliers. To stop the criticism, Apple hired a nonprofit labor group to inspect the plants it uses. Concerned about the dying old model, Foxconn has announced plans to invest millions in robotics and automation for production. There is no other company in the world with as much 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, making China the single largest exporting nation. 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 jump into work urgently as new orders flow in. With 1.2 million employees in China, Foxconn is one of the largest employers in the country. It assembles about 40% of the smartphones, computers, and other electronics sold worldwide. Foxconn's decisions set standards that other manufacturers compete with. "But in China, this change is permanent, and consumers must be willing to bear the consequences. When people read about bad conditions in Chinese factories, they may feel angry for a moment. But then they go to Amazon and pay the lowest price just as ruthlessly as before." Bowing to this demand, Foxconn has acknowledged that both employees and consumers have gained influence over Chinese bureaucrats and executives of global electronics firms who once wielded unchecked power. Just as Chinese exporters struggle with labor shortages in coastal areas, they also face higher raw material costs and a strengthening Chinese currency, which makes Chinese goods more expensive in other countries.