Foxconn wage hike impacts Taiwan-funded companies in the mainland
2010-06-17 14:02:46Source:People′s Daily OnlineAuthor:
A recent announcement by Foxconn Technology Group, producer of the iPhone and iPad, that it will increase salaries at its Shenzhen factory by more than double has shocked the whole industry.
Foxconn, the world's largest contract manufacturer of electronics, announced on June 2 a wage increase of more than 30 percent for first-line workers in its Shenzhen plant, explaining that the decision was based on the rising cost of living as well as the whole group's operation status.
Four days later, Foxconn said it will boost monthly pay for most first-line workers, line managers and supervisors to 2,000 yuan (around 292 U.S. dollars) from 1,200 yuan.
More than 10 Foxconn employees committed suicide since the beginning of this year. Some media reports pointed out that the wage hike was the company's means of "crisis management."
Terry Gou, founder and chairman of Hon Hai Group, Foxconn's parent company, said that he wants his company to be a leader which can pay employees high wages.
As a leading contract manufacturer, Foxconn's wage plan will no doubt add great pressure on the industry, which is labor-intensive and faces a very narrow profit margin.
"It is a second earthquake after the depreciation of the euro," said one Taiwan-based business owner.
AOC, the world's largest PC display producer, also disclosed a wage hike plan of 15 to 20 percent. In January, it raised wages for its employees in its factories in the Chinese mainland by 15 percent.
However, some enterprises that face inadequate cash flow are extremely nervous. The companies may be unable to stand a wage hike, but they are also afraid of a possible labor shortage if they do not raise wages.
Kuo Shan-hui, head of the Association of Taiwan Investment Enterprises on the Mainland, recently pointed out that with economic development and rising human resource costs in the Chinese mainland, Taiwan-funded enterprises should follow the trend, but it should not go too fast nor too far.
"The scale should be within 10 percent," he said.
The media also commented that although the adjustment of minimum wage standards will be a burden for labor-intensive enterprises, it will also help them to lure more workers and "press" them for technology and management innovation as well as industrial upgrades.
On June 8, Terry Gou said at the shareholder conference of Hon Hai Group that Foxconn would accelerate automation and move some of the plants to China's mid-western regions.
Chen Ming-zhang, chief of the Management Institute in Taipei, said to the press that Taiwan-funded companies on the Chinese mainland cannot avoid industrial restructuring and upgrades.
"The population effect sparked by the wage hike in Foxconn will speed up the transformation of China's major industries from labor-intensive to capital and technology-intensive," said Zhu Lei, a researcher with Chinese Academy of Social Science.
Foxconn, the world's largest contract manufacturer of electronics, announced on June 2 a wage increase of more than 30 percent for first-line workers in its Shenzhen plant, explaining that the decision was based on the rising cost of living as well as the whole group's operation status.
Four days later, Foxconn said it will boost monthly pay for most first-line workers, line managers and supervisors to 2,000 yuan (around 292 U.S. dollars) from 1,200 yuan.
More than 10 Foxconn employees committed suicide since the beginning of this year. Some media reports pointed out that the wage hike was the company's means of "crisis management."
Terry Gou, founder and chairman of Hon Hai Group, Foxconn's parent company, said that he wants his company to be a leader which can pay employees high wages.
As a leading contract manufacturer, Foxconn's wage plan will no doubt add great pressure on the industry, which is labor-intensive and faces a very narrow profit margin.
"It is a second earthquake after the depreciation of the euro," said one Taiwan-based business owner.
AOC, the world's largest PC display producer, also disclosed a wage hike plan of 15 to 20 percent. In January, it raised wages for its employees in its factories in the Chinese mainland by 15 percent.
However, some enterprises that face inadequate cash flow are extremely nervous. The companies may be unable to stand a wage hike, but they are also afraid of a possible labor shortage if they do not raise wages.
Kuo Shan-hui, head of the Association of Taiwan Investment Enterprises on the Mainland, recently pointed out that with economic development and rising human resource costs in the Chinese mainland, Taiwan-funded enterprises should follow the trend, but it should not go too fast nor too far.
"The scale should be within 10 percent," he said.
The media also commented that although the adjustment of minimum wage standards will be a burden for labor-intensive enterprises, it will also help them to lure more workers and "press" them for technology and management innovation as well as industrial upgrades.
On June 8, Terry Gou said at the shareholder conference of Hon Hai Group that Foxconn would accelerate automation and move some of the plants to China's mid-western regions.
Chen Ming-zhang, chief of the Management Institute in Taipei, said to the press that Taiwan-funded companies on the Chinese mainland cannot avoid industrial restructuring and upgrades.
"The population effect sparked by the wage hike in Foxconn will speed up the transformation of China's major industries from labor-intensive to capital and technology-intensive," said Zhu Lei, a researcher with Chinese Academy of Social Science.
