Foxconn's Troubles

Great editorial piece in the Taipei Times on the possible effects that Foxconn's pay raises may have on manufacturing plants and on labor in general in China.

When a market leader such as Hon Hai offers such massive salary increases, it puts great pressure on other electronics companies and might even force competitors out of the market. In addition, the increased expenditure can be passed on to US, EU and Japanese companies so that it does not affect Hon Hai’s profits. The move could even turn out to be a crucial first step toward the transformation of China’s labor-intensive industries.

Another side effect of the big raise could be that some Taiwanese companies see more clearly the uncertainties of the Chinese market and decide to return to Taiwan to invest in automated plants. If that is the case, then Taiwan should thank Terry Gou (郭台銘) for such an unexpected gift.

It indeed will be interesting to see what the effects of this are, not only to the companies down the line from Foxconn (most notably Apple and their iProducts), but also the impact on "cheap Chinese labor" that has governed the way we think of labor in China. Optimistically speaking, this could serve as a reminder to those in Taiwan that doing business with China in China comes with a lot of baggage, especially concerning labor laws and the inability for companies to control their workforce in China (i.e. Honda's manufacturing plant in China).

More on this issue @ Michael Turton's blog, where he also covers some quote-un-quote conspiracy theories on what is actually happening in China between Foxconn and the government.