Apple – Foxconn supply chain showing strain
The strikes at Foxconn factories we saw in the first week of October are winding down. However, squeezed between workers' demands for higher wages and pressure from Apple CEO Tim Cook, Foxconn is still in a tight spot. The continued survival of the alliance, forged during Steve Jobs' time as CEO, is in doubt.
The strikes at Foxconn factories we saw in the first week of October are winding down. However, squeezed between workers' demands for higher wages and pressure from Apple CEO Tim Cook, Foxconn is still in a tight spot. The continued survival of the alliance, forged during Steve Jobs time as CEO, is in doubt.
Foxconn enacted wage increases in July in response to a Fair Labor Association audit which followed a string of worker suicides and a fatal explosion the year before. Foxconn also promised, by 2013, to bring worker overtime into line with the legal limit of 36 hours per month on top of 40 hour work weeks. In order to do that it will need to recruit tens of thousands more workers.
Last month, Appleinsider reported that Apple was likely sharing the costs of increased wages at Foxconn factories. More recently, however, Tencent Tech quotes Taiwanese media sources as saying that Foxconn has requested a price increase on original equipment manufacturers for Apple and that Apple has not yet responded.
The background for this is that while further increases in Chinese labor costs will shrink Apple's margin, as of 2010, labor costs in China made up only 1.8% of the cost of producing the iPhone and 2% of the cost of producing the iPad.
Much of the investigative reporting on the labor disputes at Foxconn factories has been conducted by China Labor Watch, a New York based NGO with a goal of improving working conditions for Chinese workers. Li Qiang, the founder of CLW, now reports that average hours for Foxconn workers have not gone down. Rather, the hours have actually increased from 170 to 300 hours per month since April. This increase occurred alongside the build-up to the launch of the iPhone 5.
(Young Chinese people seeking employment opportunities at Foxconn)
Another often overlooked contributor to the recent strikes and workers protests is a demographic shift and a shift in values among young Chinese. The current generations of young people in China have grown up with more opportunities and higher expectations. Fewer of them are satisfied shuffling back and forth between home and the factory every day, even for four hundred dollars a month. One of the interns Tencent Tech interviewed at a Foxconn factory said “there is no future working in a place like this.”
An industry source told Tencent Tech that Foxconn is preparing to have one million production robots in place within three years.