Just a few weeks ago, Foxconn was apologising profusely for poor performance as rival contract manufacturer Pegatron was riding high on reports that it had won out over Foxconn, Apple’s main manufacturer, for a contract to make Apple’s upcoming cheaper version of its iPhone.
Things have changed. Now it’s Pegatron’s shares that are falling, battered by local reports that it is will not get as many orders as initially forecast, with Foxconn getting them instead.
The stereotypical Foxconn worker is a low-paid Chinese labourer, coming from a rural Chinese province to work on one of the contract manufacturers’ assembly lines making iPhones.
But the Taiwanese company also employs thousands of mid-level and senior engineers and designers tasked with developing the processes needed to put together electronics. Competing for those workers, says founder and head Terry Gou, is increasingly difficult, as the US and, in particular, Chinese companies try to poach them.
Foxconn, the world’s largest contract electronics manufacturer, has imposed a recruitment freeze across almost all of its factories in China as it is cutting production of the iPhone 5.
The suspension in hiring by China’s largest private sector employer and the biggest assembler of Apple products is the first such countrywide move since the 2009 downturn induced by the financial crisis. It underscores the weakening demand for some Apple products, which has put pressure on the American company’s battered share price.
With the shock of the Apple-Samsung verdict still reverberating around the smartphone world, here comes a sharp reminder of the fact while these two giants may have their problems, life is much harder for their competitors.
Shares in Foxconn International Holdings (FIH) plunged on Tuesday after it reported a record first-half net loss. The company, the Hong Kong-listed subsidiary of Hon Hai Precision, is only one chunk of the Taiwanese parent group’s empire. It’s not the bit that works for Apple: FIH’s customers are Apple’s hard-pressed rivals, led by Nokia. Enough said.
Apple fans can sleep a bit easier while they’re waiting on line this autumn to upgrade to the iPhone5.
The independent auditor of Foxconn, the Apple supplier, says that the Chinese group that made headlines with a slew of worker suicides has cleaned up its act substantially, at least in some of its factories.
Foxconn, the Taiwanese company most famous for assembling Apple gadgets, has confirmed that it is looking to open a factory in Indonesia, although it has not yet decided what products will be made there.
Taiwanese have for many years been building factories and selling products in southeast Asia, and recent trade data show how the region has become increasingly important as exports to Europe and China begin to slow.
As wages continue to rise in China, is Foxconn, the huge Taiwanese contract manufacturer that makes iPads for Apple and laptops for Dell, looking to Indonesia as a cheaper alternative?
The Indonesian press, which has stories about Foxconn investing in Indonesia all over its front pages on Thursday, seems to think so. The reality is somewhat more prosaic.
Apple’s decision to back wide-ranging pay and labour reforms at the Chinese factories of Foxconn, its biggest contract supplier, will clearly raise costs at both companies.
But the Apple empire will not see a serious dent in its profitability, as its high-tech competitors will have to follow suit. And it’s a price worth paying to keep on the right side of consumers who don’t like the idea of buying iPhones made by slaves – and of the Chinese authorities who have backed pay rises for workers to help spread the benefits of economic growth.
Hon Hai has announced it is raising the base salary of its 1m-plus workers by between 16 to 25 per cent, the first major pay hike since it doubled pay for operators and line managers in 2010 following a tragic series of suicides at its plants.
With Hon Hai, the Foxconn parent, and other Apple suppliers’ plants currently undergoing an audit by the Fair Labour Association, that’s good news, isn’t it? Not so for investors, according to HSBC head of Taiwan research Jenny Lai.
Is the glass half full or half empty with Hon Hai? The world’s biggest contract electronics maker – and controlling shareholder in Foxconn – has faced a number of new challenges recently, but since the beginning of the year its share price has risen 27 per cent.
Hon Hai’s Terry Gou has had a lot on his plate lately, between fresh labour problems, having his operations detailed for the first time by Apple’s sustainability report, and campaigning hard for Taiwan president Ma Ying-jeou.
So with at least one of those three resolved when Ma was re-elected to a second term last Saturday, Gou on Sunday took a well-deserved break and hosted Hon Hai’s annual family day for staff in Taiwan, at the Taipei Zoo. What could possibly go wrong?
It’s a new year, but for Foxconn, the old problems seem to be coming back all over again. It turns out that early last week, at least 150 workers at the Taiwanese group’s factory in the Central Chinese city of Wuhan threatened collective suicide in a pay dispute gone wrong.
After a Chinese internet post with pictures was picked up by Taiwanese media and then by Western blogs this week, Foxconn hurried to say late Wednesday that the dispute had been settled “peacefully” the same day, and Microsoft, one of the companies whose products are manufactured at the Wuhan plant, said it was looking into working conditions there.
Ouch. First the suicides. Then the plant explosion. Now Foxconn International, the scandal-hit Taiwanese company that toils in the shadow of high-profile clients such as Apple, is being stripped of its blue-chip status after it was dropped on Tuesday from Hong Kong’s benchmark Hang Seng index.
When Foxconn was hit by a string of suicides among its workers earlier this year, the company’s first reaction was to try and wait for the trouble to just go away.
Not anymore. Wednesday afternoon, the once so media-shy company – which makes a major portion of the world’ s iPhones and other electronics gadgets – put itself in the limelight with a nationwide rally for its 800,000 workers.