Two factories, two fates: Foxconn ascends on cheap labor, Sharp hangs on

The story of these two companies is told in your living room

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"I joined because I'm interested in solar panels," said a 26-year-old man who entered Sharp four years ago.

"I haven't had a chance to work on them yet, but eventually I hope to transfer to headquarters, and maybe that will be my chance."

In Zhengzhou, workers generally take a different view.

"This job is not something I want to do in the long term," said one 18-year-old high school student, employed at Foxconn's Zhengzhou factory as part of an internship organized by his teacher.

"It's summer, so we work for two months and then go back to our hometowns," he said, declining to give out his name for fear of punishment for speaking to a reporter.

While Foxconn is increasing wages and recruiting workers to Zhengzhou from across China as it expands, Sharp has cut salaries, asked for early retirement volunteers, and transferred hundreds of workers out of Yaita to factories in other parts of the country. The Japanese company said Wednesday its unions had agreed to an across-the-board seven percent wage cut from next month, along with a ten-percent reduction in salaries it has put in place for management.

The fortunes and failures of the two companies are felt keenly in the surrounding communities.

In Zhengzhou, Liu Zhanjun sells Chinese flat bread at a shop nestled among a long line of restaurants and convenience stores near a large, apartment-like Foxconn dorm complex that resembles a normal city block. The factory and its surrounding dorms have been a boon to the area, he said.

"Before there was not much here. It was very poor," said Liu, who opened his shop two months ago. "Now I'm making more money than before."

In Yaita, the outlook is darker. Yasumori Ogawa manages the ramen shop just outside the front gates of the Sharp factory. Many Sharp workers are regulars, as are employees at the dozens of supporting businesses that dot the area. The fate of the company is constantly on his mind.

"It's a major concern - the things I hear from customers, what I read in the papers," he said. "We just have to deal with the reality."

Yaita also faces problems that other fading manufacturing havens, like the Detroit auto belt, have had to deal with. Local citizens have protested strongly against government plans to build a new facility to hold toxic industrial waste that has built up over the decades. A sign just outside the town's main station warns children to stay away from drugs and paint thinner in bold lettering: "Fall to temptation and sacrifice the happiness of your family."

And Foxconn has had its growing pains. A spate of worker suicides in 2010 was covered closely in the international press, as were incidents like a riot that broke out last week at a separate complex in northern China. In Zhengzhou, some say that despite the business brought by Foxconn, most in the working class have yet to see any real benefit.

"For us, the area's economic rise hasn't mattered," said a 26-year-old worker named Wang, who also didn't want his full name published. Instead it's been the local government and real estate companies who have reaped the rewards. "The economic success is just a government statistic," he said.

Monthly salaries are higher than in other places, but still so low that workers have no choice but to put in extra hours, he added. Protective measures limiting overtime have had the unwanted side effect of reducing his salary.

"I'm grateful for Americans for paying attention to our working conditions, but this has affected our pay," he said. "My one-month salary can't even buy an iPhone. It's really ironic."

Foxconn is having no trouble drawing new recruits to Zhengzhou, however, and Sharp appears to see little alternative to negotiating with its deep-pocketed Taiwanese rival. The two companies have already completed a deal that saw Foxconn take part ownership in its flagship LCD panel factory in southern Japan, a once unthinkable move for the proud manufacturer.

In its favor, Sharp's in-house technology is highly advanced compared to Foxconn, with the ability to produce items like super-thin touch panels for phones and tablets, highly efficient solar panels, and giant-screen LCD TVs.

Still, the future of the Japanese manufacturer may be found in its past.

In 1952 the Japanese company licensed monochrome television patents from U.S. maker RCA, which possessed its own portfolio of advanced technologies at the time. Like Foxconn today, Sharp leveraged its cheaper labor and invested heavily in research efforts. Thirty years later RCA collapsed.

RCA's own manufacturing complex in Camden, New Jersey? Eventually it was converted to a luxury apartment building.

Sharp factory
Workers leave a Sharp TV factory in Yaita, Japan . (Photo by Jay Alabaster/IDG News Service)

Copyright © 2012 IDG Communications, Inc.

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