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Foxconn axes suicide compensation, relocating some production to Vietnam or Taiwan
At yesterday's annual shareholder meeting, Foxconn revealed that it'll no longer be compensating families of dead employees as a move to discourage further suicides. CEO Terry Gou reasoned by exhibiting evidence that showed the money -- an amount almost equivalent to ten years' worth of salary -- was a major motivation for the suicides. One such exhibit was a man's suicide letter that contained the following message for his parents: "...now I'm going to jump off Foxconn, really leaving now, but you don't have to be sad, because Foxconn will pay a bit of money, this is all your son can repay you now." Gou also blamed a possible "Werther Effect" created by the news coverage, which might have led to six of the twelve suicides all taking place in May. Consequently, the company will be handing over its welfare management work to the local Chinese government, as it's unable to deal with too many social responsibilities. In the same meeting, the company made an unsurprising announcement that it's looking to relocate some manufacturing work, amid a worsened earnings forecast due to increased wages -- basic salary has gone up from ¥900 ($132) to ¥1,200 ($176), rising to as much as ¥2,000 ($293) for those who meet new performance criteria. This will involve setting up a fully automated facility in either Taiwan or Vietnam, while the existing Vietnamese plant will be receiving more orders. Chairman Samuel Chen also said that Foxconn will be working with its clients to share the load -- no further details on this, but we suspect Apple's rumored direct subsidies are part of the plan.
Rising labor costs in China may lead to pricier electronics, manufacturing relocation
You might recall that Foxconn, faced with the searing spotlight of the world's attention on its working conditions, recently announced not one but two wage increases for its employees, which is now looking like part of a larger trend in China toward higher pay. The city of Beijing has said it'll be raising its minimum wage by 20 percent, to 960 Yuan ($140) a month, and is expected to be followed by others. The New York Times pins this on numerous factors, including growing competition for workers, state authorities insisting on higher standards, and a national policy effort to ease the gap between rich and poor. All good news, you might think, but these worker-friendly measures are taking their toll on manufacturing costs, and now there's talk of companies relocating production to cheaper locales. Vietnam, India and Indonesia are the prime suspects for taking production duties away from China, with some companies also apparently contemplating shifting to poorer regions within the nation. These changes are unlikely to perturb high-end electronics manufacturing in the short term, due to its more sophisticated infrastructure and supply chain, but the end consumer might still feel their effect in the form of higher prices. Inflation within China and a projected increase in its currency value are likely to drive up the cost of exports, so we'd advise buying what you need sooner rather than later. [Thanks, Daniel]
