beyondbrics

Is a 30 per cent wage increase a lot? For most people in the workforce, the answer would be an unequivocal ‘yes’. For large, hi-tech manufacturing companies, however, the answer is very different indeed, according to Joseph Hsu, chairman and chief executive of Taiwan’s Micro-Star International, or MSI.

Hsu, who heads one of the fastest growing netbook and PC companies, told the Financial Times that the average wage component in a notebook or a desktop PC was only between 3 to 5 per cent. “So even if you raise wages by 20 or 30 per cent, the increase to your total cost is less than 1 per cent . . . it’s not so big a portion,” he said.
MSI is unique among PC makers in that it actually makes its own products rather than outsourcing them to contract manufacturers, who are often reluctant to reveal their cost structure. MSI’s factories in Kunshan, near Shanghai, employs 30,000 people.

Hsu’s comment puts into perspective the seemingly large pay rise that Hon Hai, also known as Foxconn, announced this week for its China factory workers. Hon Hai’s move came after a series of suicides at their factory in Southern China highlighted the increasing demand for better working conditions in China’s export manufacturing industries.

Hsu said such wage increases would likely become the norm especially as living costs in China continues to rise, but that China will continue to be the the preferred manufacturing base for electronics manufacturing because wages play such a minor role in those products.