Foxconn overtime reduction won't affect product prices, analysts say
Apple supplier Foxconn is reducing employee overtime to help improve working conditions at its Chinese factories
IDG News Service - Low labor costs and a growing reliance on automation will ensure Apple supplier Foxconn's newly announced efforts to reduce overtime for its employees and hire extra workers has no effect on product prices, according to analysts.
By July 2013, Foxconn will restrict workers' overtime to 36 hours a month, bringing it down from the allowed 80 hours per month, according to an audit released by the Fair Labor Association on Thursday. Foxconn, which manufactures Apple's iPad and iPhone, made the changes following growing criticism of working conditions at the company's factories in China.
But the policy change also means the electronics manufacturer will need to hire a significant number of extra workers to make up for the lost hours, the audit said. Foxconn already employs 1.2 million workers in China.
Labor costs in China, however, only a make up a small fraction of a product's total cost, said Helen Chiang, an analyst with research firm IDC. In the case of a PC, the labor cost will only amount to 3% to 4% of its price, she said.
Foxconn is also expanding its factory base into central and western China, where worker wages are lower. This is expected to bring down Foxconn's labor costs by 20% to 30%, Chiang said.
"I don't think the new policies will have much impact on product prices," she added. "Foxconn has already been working to resolve these labor costs."
Foxconn has also said it will build robots for use in its manufacturing processes, which will reduce labor costs over the long term, said Amy Teng, an analyst with research firm Gartner. Last July, Foxconn's CEO said the company planned on deploying 1 million robots over the next year three years at its factories.
The manufacturing giant is also working to increase its revenue by building more of the components used in Apple's iPhone and iPad products rather than source them from outside vendors, Teng said.
"I am now tearing down the iPad 3 and I've found more parts that used to be made by external vendors, but are now being made by Foxconn," she said. Apple can now shift more component orders to Foxconn, in order to help the supplier increase revenues and improve workers' salaries, she said.
The Fair Labor Association's audit found that during peak production periods workers at three Foxconn factories in China worked more than 60 hours a week. Nearly half of all employees reported working 11 consecutive days or more at some point.
Many employees, however, reported wanting to work more. A survey found that 33.8% stated they would like to work more hours to earn more money, while 48% said the working hours were reasonable.
- 15 Non-Certified IT Skills Growing in Demand
- How 19 Tech Titans Target Healthcare
- Twitter Suffering From Growing Pains (and Facebook Comparisons)
- Agile Comes to Data Integration
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
- The Critical Role of Support in Your Enterprise Mobility Management Strategy Most business leaders underestimate the importance of tech support when they choose an EMM solution. Here's what to put on your checklist.
- Separating Work and Personal at the Platform Level: How BlackBerry Balance Works BlackBerry® Balance™ separates work from personal on the same mobile device, right at a platform level. Find out how it can work for...
- Protection for Every Enterprise: How BlackBerry Security Works Get an IT-level review of BlackBerry® Security, addressing data leakage protection, certified encryption, containerization and much more.
- Future Focus: What's Coming in Enterprise Mobility Management (EMM) Find out why Enterprise Mobility Management (EMM) solutions that are truly future-ready must be designed to enable Machine-to-Machine (M2M) capabilities and much more.
- Live Webcast On-demand webinar: "Mobility Mayhem: Balancing BYOD with Enterprise Security" Check out this on-demand webinar to hear Sophos senior security expert John Shier deep dive into how BYOD impacts your enterprise security strategy...
- Live Webcast Unmasking the Differences between Consumer and Enterprise File Sync & Share The consumerization of IT combined with the rapid pace of the modern mobile workplace is forcing enterprise IT teams to evaluate file sync...
- Live Webcast Workforce Mobilization for Improved Productivity A mobility research director from Aberdeen discusses reasons for extending legacy applications to mobile devices, and an integration strategist from Attachmate shows how...
- Getting Ready for BlackBerry Enterprise Service 10.2 Find out how BlackBerry® Enterprise Service 10 helps organizations address the full spectrum of EMM challenges, while balancing the needs of both the...
- Containerization Options: How to Choose the Best DLP Solution for Your Organization This webcast outlines a framework for making the right choice when it comes to containerization approaches, along with the pros and cons of... All Mobile/Wireless White Papers | Webcasts