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Foxconn's woes haven't hurt the bottom line

Despite abuses and an apparent riot, the electronics supplier is minting money for its founder. Activists blame key client: Apple.

China foxconn apple 2012 09 25Enlarge
A Students and Scholars Against Corporate Misbehavior demonstration outside the Foxconn annual general meeting in Hong Kong on May 18, 2011. (Mike Clarke/AFP/Getty Images)

TAIPEI, Taiwan — Mammoth Taiwanese contract electronics maker Foxconn is at it again. This time, over 2,000 workers rioted in one of its town-sized plants in Taiyuan, the capital of northern pollution-soaked Shanxi province.

Chinese media reported the riot occurred Sunday evening after Foxconn security guards savagely beat one of the factory’s workers. The beating sparked an angry response from a section of the 79,000-plus employees the Taipei-based company hires to churn out parts for Apple’s new iPhone 5, along with other products for Dell, Nintendo and Nokia.

These protests add to Foxconn's already dubious reputation for running its plants with military-style discipline, shoddy working conditions, forced overtime and low wages. The company is also accused of using student interns to produce products for the world’s biggest electronics brands.

But that reputation hasn't seemed to dent the gains of those who profit most. Foxconn founder Terry Guo is one of Taiwan's richest men, and Apple is already the world's most valuable company.

Labor activists say that while Foxconn takes most of the PR flak when problems erupt in China, it’s actually Apple that has more ability to raise wages at factories.

China’s breakneck industrialization has left average wages in factories lagging behind the productivity of the workers, activists say. The problem is compounded by even lower wages in the country’s agriculture sector. It’s a situation that creates a gold rush for factory owners, but is also spurning instances of labor unrest.

“Apple is making a killing on its products, and is consciously choosing to not to raise wages," said Kevin Slaten, a spokesman for China Labor Watch.

"It makes $442 in profit per iPhone, while each worker gets no more than 30 cents. They make over $2 billion in profit per month. Apple has the power to revolutionize labor treatment in the electronics industry. But it chooses not to do so.” 

Recent riots being investigated

By the time the estimated 5,000 riot police quelled the unrest on Sunday, 40 workers had been injured and 100 had been arrested. Foxconn denied its security personnel were involved in the furor, pinning the blame on differing groups of migrant workers.

In a statement to GlobalPost through its Hong Kong-based public relations firm, Foxconn wrote: “A personal dispute between several employees escalated into an incident involving some 2,000 workers. The cause of this dispute is under investigation by local authorities and we are working closely with them in this process, but it appears not to have been work-related.” 

More from GlobalPost: Foxconn riots, good news for the US middle class?

Workers rioted at the same plant in March, claiming heavy-handed treatment at the hands of security, long hours and strict personal and work regulations imposed on them by management. Photos posted on social media sites showed broken factory windows and overturned guard stations and police cars.

Foxconn announced the plant would be closed while the incident is being investigated, though the facility was reported to be open again Tuesday. Officials told media that the cause of the dispute was still under investigation.

“Workers repeatedly report conflicts with security staff in different plants because the company has never taken seriously the need to change its military style management,” said Yi-yi Cheng of Hong Kong-based labor rights group Students and Scholars Against Corporate Misbehavior.

“It’s Foxconn’s usual practice to put the blame on the workers, especially when violence occurs. By doing this it implies they are non-educated and like to fight among themselves, which legitimizes the use of military force against them. Second, it shifts the focus of discontent from the company to the workers themselves, so as to save Foxconn from publicly looking like a sweatshop,” Cheng added.

More from GlobalPost: With the iPhone 5 come new accusations of Foxconn abuse

Critics claim that Foxconn founder Terry Guo — who lists Genghis Khan as a personal hero and owns a $30 million castle in the Czech Republic — has built his vast fortune solely on the backs of exploited workers.

On paper, Chinese workers certainly have been good to the man, who infamously told a gala charity dinner for a Taiwanese zoo that he could empathize with a “management that houses animals.”

Hon Hai Precision Industry Co Ltd, Foxconn’s parent company, posted a first half net profit of about $919 million. But that was after the company brought an $857 million stake in Japanese electronics Sharp and spent heavily on acquiring LCD patents from Tokyo-based NEC Corp.

Its most famous partner, Apple, has been forecast by some analysts to pass the $1 trillion cap mark by 2014; it's already bigger than the combined GDP of Greece, Portugal and Ireland.

“Apple should take the majority of responsibility for these incidents because Foxconn is manufacturing its products based on Apple’s demanding orders. When Apple wants to produce large numbers of a new product — iPhone 5's in this case — it puts in orders without concern for production capacity or the rights of workers,” said the China Labor Watch spokesman Slaten.

More from GlobalPost: Silicon Sweatshops

“Apple isn't concerned with the consequences of bringing in thousands of workers on short notice from around China to work day and night on a new product. It's only concerned about revenue. It took home $26 billion dollars in profit in 2011, but Chinese workers assembling their iPhone 5's make an average of 30 cents per iPhone 5. That's about 0.07 percent of the profit on each phone.”

Slaten says tensions boil over in many Foxconn plants when shipping contract dates are due, and management, fearing lost revenue, demands longer working days without rests.

“The police [were there] because they’re an arm of the government. Foxconn's factories and the local governments in each district have very close relationships — they are essentially on the same side. The police will always support the company rather than workers who have migrated from different parts of the country,” he said.

http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/120925/foxconn-riots-apple-iphone-5