How Will Foxconn's Pay Impact Apple's Prices?

The new global balance that's taking shape will be far-reaching among consumers, investors, and voters.

The shakeup in workplace conditions -- and especially pay levels -- at Apple Chinese partner Foxconn Technology is occurring far faster than most observers expected. It was just over a week ago, after all, that Apple said it was asking the Fair Labor Association, a global worker rights group, to audit working conditions at plants operated by its largest suppliers, including Foxconn.

That began igniting controversy right away about the potential impact. And within days, the CEO of the FLA said that it had identified "tons of issues" at Foxconn operations, and expected to be making announcements soon.

This weekend, Foxconn announced that pay at the electronics manufacturing company, with 1.2 million employees, will be rising by 16% to 25%. That is raising eyebrows around the world. Also, of course, it will be raising prices -- as the Apples, Hewlett-Packards, Dells and other consumer-products makers that use Foxconn components begin paying those bills, and including them in the sticker prices of consumer items. It is estimated that four of every 10 smartphones, computers, or other electronic products contain Foxconn-built ingredients.

As it turns out, the new Foxconn pay levels took effect on Feb. 1, even before Apple joined the FLA. Further, of course, the pressure will be on other suppliers in Asia to improve worker conditions and hike pay, as well.

On President's Day in the U.S., perhaps it's a good time to ponder some of the huge short-term and long-term consequences of this shake-up in the compensation side of the U.S.-Asia labor balance --- and what it means for consumers and, potentially, for Apple, H-P, Dell, and other electronics producers. This New York Times analysis, suggesting that the higher wages are "the way capitalism is supposed to work" in developing countries, represents one more step in that newspaper's progression of stories looking especially at conditions at manufacturing operations connected with Apple.

It's a topic, far beyond Apple and the price of an iPhone, that's sure to be open to corporate debate all year, and definitely to stump speeches as the November election approaches.

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Roy Harris

IDG News Service
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