Apple and Foxconn Reconsider Labor Conditions

Apple and its main contract manufacturer 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 in China.

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 US 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, and Foxconn, which supplies 50 % of the world’s consumer electronics, to have far-reaching effects.

Auret said”Apple and Foxconn are obviously the two biggest players in this sector,” he added “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, Hewlett-Packard, Amazon.com, Motorola Mobility Holdings, Nokia and Sony, as Reuters stated.

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 labour 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.

Under the agreement, Foxconn said it will reduce working hours to 49 per week, including overtime, while keeping total compensation for workers at its current level. The FLA audit found workers in the three factories put in more than 60 hours per week on average during peak production periods.

To keep up with demand, Foxconn will hire tens of thousands of additional workers and build more housing and canteens.

Apple CEO Tim Cook, who took over from the late co-founder Steve Jobs last year, has shown a willingness to tackle the criticism head-on.

“We fully support their recommendations,” an Apple spokesman said. “We share the FLA’s goal of improving lives and raising the bar for manufacturing companies everywhere.”

But New York-based labour advocacy group China Labour Watch said the report failed to address the workers’ primary concerns.

“Until Apple shares a larger proportion of its profits with its supplier factories, workers will receive the same pittance for a salary while working around the clock,” Li Qiang, the director of China Labor Watch, said.

The agreement has not gone down well with some Foxconn workers, either.

Hon Hai shares fell yesterday around 1.3 %, underperforming a rising market. Apple shares, which hit a record high on Wednesday, dropped 1.3 % on Thursday. The report marks the first phase of a probe into Apple’s contract manufacturers across the world’s most populous nation.

To be mentioned that, foreign firms have long grappled with working conditions in China, dubbed the world’s factory because of its low wages and efficient coastal transport and shipping infrastructure.

Global protests against Apple swelled after reports spread in 2010 of a string of suicides at Foxconn’s plants in southern China, blamed on inhumane working conditions and the alienation that migrant laborers, often from impoverished provinces, face in a bustling metropolis like Shenzhen, where two of the three factories the FLA inspected are located.

The FLA in its report sought measures that will reduce working hours while ensuring that migrant laborers, who are often willing to pile up the overtime to make ends meet back home and do not forego much-needed income.

Foxconn committed to building new housing to ease situations where multiple workers were squeezed into dorm rooms that seemed inhumane by Western standards. It also agreed to improve accident reporting and help workers enroll for social welfare.

The FLA will conduct onsite verification visits to make sure the agreement is implemented, Van Heerden said.

Last month, Foxconn said it was raising salaries by 16 to 25 %, and was advertising a basic monthly wage, not including overtime, of 1,800 yuan in the southern city of Shenzhen, Guangdong province — where the monthly minimum wage is 1,500 yuan.

Future forays by the FLA over coming months will encompass Apple contractors Quanta Computer, Pegatron, Wintek and other suppliers, all notoriously tight-lipped about their operations.