Foxconn's sudden doubling of employee salaries was a move widely seen as having been prompted by a number of highly publicized worker suicides, as reported in the Wall Street Journal and elsewhere. The deaths of 10 apparently severely depressed people in the electronics plant have opened up a discussion about the human cost of breakneck global economic growth.
Some cogent analysis in EE Times by Bolaji Ojo suggests that the Foxconn salary hike will inevitably stress the OEM supply chain. As noted in the piece:
Foxconn might have been responding to the black eye it is receiving from the public over a spate of suicides at its facility but the decision to jack up salaries will have significant implications for the entire high-tech sector.
The contract manufacturer is widely used by Western, Japanese and Asian OEMs and has risen quickly to the top of the food chain by offering the lowest prices to customers coupled with the quickest production turnaround and manufacturing efficiency.
The salary increase announced by Foxconn has significant implications for the entire market. Companies like Foxconn and its EMS rivals have taken over a large chunk of manufacturing activities for the biggest global OEMs and reversing the outsourcing trend will be extremely difficult because OEMs have not only sold their facilities but in many cases have lost the manufacturing expertise needed to maintain a competitive edge.
Ojo goes on to conclude that:
The EMS business is a cutthroat business where companies work like elephants but eat like rodents, giving them awfully low single-digit margins and even smaller profits...although the focus so far has been on Foxconn’s operations, its EMS rivals are in more or less the same predicament and pressure will grow on them too to raise wages at not just their China facilities but at other low-cost centers worldwide.
Interesting times. What do you think?
The human reality suggests that the pricing model enjoyed in the past is simply not viable. Since all price increases ultimately end up being paid by the end consumer, regardless of the product, why wouldn't that be the case here?
ReplyDeleteFor anyone buying an electronic item and thinking "how can this be manufactured so cheaply" the answer is it can't without human cost.
ReplyDeleteWe all know that china pays very low wages and through government intervention keeps their currency artificially low.
This can be a turning point for us to say the current economic model is NOT sustainable. Surely we all know this.
So what now? Well the answer is to look at domestic manufacturing. With economies of scale we are not going to be over priced just more realistically priced.
If we all start to think about buying less but buying better quality surely this will enable domestic manufactures to build more which in turn benefits the wider economy by creating new local manufacturing jobs.
And remember, there is always a real price to be paid for cheap labour it is a human cost which is a question of morality. I am not saying it is right of wrong I am just saying how it is. It is for the collective to decide and then our children to judge us.