When 150 workers at Foxconn climbed to the roof of one of its factories in the central Chinese city of Wuhan in a labor dispute earlier this month, it was a chilling reminder of the suicide series that shook the world’s largest contract electronics manufacturer less than two years ago.
There were no suicides in Wuhan on January 3, and workers who were present that day said no one was actually threatening to jump. But the drastic protest reflects new labor woes plaguing the company which makes the lion’s share of the world’s iPhones, iPads and other electronic gadgets.
Analysts say Foxconn’s move to transfer mass production of many gadgets from one mega-plant in Shenzhen, the export manufacturing hub next to Hong Kong, to new large plants in inland provinces has created a more complex wage structure and bottlenecks that trigger disputes.
“It seems the very changes they made to address some labor issues have spawned new problems with workers,” said a consultant who inspects contract manufacturing factories for consumer electronics brands.
Foxconn declined to comment on the employment issues at the company.
More than a dozen workers had jumped to their deaths in Foxconn factories in 2010, sending it scrambling to adjust the way the Taiwanese company manages production in its Chinese plants, which employ more than 1m workers.
That year, Foxconn raised wages sharply twice in its plants in Shenzhen, the export manufacturing hub next to Hong Kong where most suicides had taken place. The second raise applies only to staff who had successfully completed a trial period of at least six months – a move Foxconn says is meant as an incentive to lower the high turnover rates.
The group also stepped up its drive to expand production in inland provinces. The company has 27 manufacturing locations all over China, but over the past 16 months it has built and expanded two large factories in the provinces of Henan and Sichuan, where many of the migrant workers manning its older plants in coastal China come from.
One consideration was to control costs as, despite overall wage increases, they are lower in inland provinces. The company also hoped to address some of the social problems behind the suicides, such as loneliness and unhappy love affairs, which are often caused by housing hundreds of thousands of young men and women in dorms far from home.
The plants in Zhengzhou, the provincial capital of Henan, and the one in Chengdu, capital of Sichuan, employ at least 100,000 workers each already, according to local government officials. Both plants are hiring aggressively and the headcount at each of them is expected to reach 300,000 eventually.
While in the past most Apple products were made in Shenzhen, Chengdu is now Foxconn’s second-largest iPad production base and Zhengzhou its number-two location for iPhone production.
But as the new plants still lack engineers and workers with long experience in making high-end gadgets, the new structure has forced Foxconn to shuffle workers around.
“They do the pilot production in Shenzhen and the mass production in Zhengzhou and Chengdu. Once that starts, workers from there need to be sent to Shenzhen for training,” said Kirk Yang, an analyst with Barclays Capital. “But the money those workers get varies widely because the minimum wage differs a lot in the different locations. With the internet and family networks, these differences are all very transparent, and that creates trouble.”
A worker at Foxconn’s Shenzhen plant from Henan who signed up for a program to return to work in her home province complains of what she calls unfair wage and social security benefits. “It feels like Henan workers are second-class citizens at Foxconn,” she says, pointing to the fact that her base salary is lower than that on the Shenzhen contract and her Henan health insurance cannot be used in Shenzhen.
The problem is exacerbated by the strong demand for Apple products, which has blessed Foxconn with a full order book. Hon Hai, the group’s Taiwan-listed flagship, in December reported T$317 billion in sales, the third straight monthly record, due to strong iPhone shipments.
As a result, the company has cut New Year holidays for workers in some units and transferred groups of workers between production lines on short notice, a practice which has infuriated many.
The Wuhan protest was triggered by a move to transfer the workers from one unit to another. Last week, more than 100 workers at a Foxconn plant in the eastern Chinese city of Yantai got into a dispute with human resources managers. The workers protested over differences in base wages for groups of employees who entered the company at different times and in different locations and over the planned transfer of some workers to another plant at short notice.