Apple, Foxconn set new standard for China work conditions

(Reuters) – Apple Inc and its main contract manufacturing Foxconn agreed to tackle violations of conditions among the 1.2 million workers assembling iPhones and iPads in a landmark decision that could change the way Western companies do business inChina.

Taiwan’s Foxconn Technology Group, whose subsidiary Hon Hai Precision Industry assembles Apple devices in factories in China, will hire tens of thousands of new workers, eliminate illegal overtime, improve safety protocols and upgrade workers’ housing and
other amenities.

It is a response to one of the largest investigations ever conducted of a U.S. company’s operations outside of America. Apple had agreed to the probe by the independent Fair Labor Association (FLA) to stem a crescendo of criticism that its products were
built on the backs of mistreated Chinese workers.

The association, in disclosing its findings from a survey of three Foxconn plants and over 35,000 workers, said it had unearthed multiple violations of labor law, including extreme hours and unpaid overtime.

FLA President Auret van Heerden expects the agreement between Apple, the world’s most valuable listed company, and Foxconn, which supplies 50 percent of the world’s consumer electronics, to have far reaching affects.

"Apple and Foxconn are obviously the two biggest players in this sector," he said in an interview. "Since they’re teaming up to drive this change, I really do think they set the bar for the rest of the sector."

That could affect brand names that have contracts with the Taiwanese company, including Dell Inc, Hewlett-Packard, Amazon.com Inc, Motorola Mobility Holdings, Nokia Oyj and Sony Corp.

The agreement is a sign of the increasing power of Chinese workers to command higher wages given increasing prices in China, and an ageing workforce that has led to labor shortages.

"Foxconn is proposing this better deal," said van Heerden. "Their competitors will be obliged to offer a similar package just in order to get enough workers."

Working conditions at many Chinese factories supplying Western brands are considerably inferior to those at Foxconn, experts say.

Still, labor costs are a fraction of the total cost of most high-tech devices, so consumers might not see higher prices.

"If Foxconn’s labor cost goes up … that will be an industry-wide phenomenon and then we have to decide how much do we pass on to our customers versus how much cost do we absorb," HP Chief Executive Meg Whitman told Reuters in February.

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Posted by Awais Khan on Mar 30 2012. Filed under Sci-Tech. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry