November 21, 2013 12:00 am JST

Challenges follow Foxconn to inland China

KATHLEEN E. McLAUGHLIN, Contributing writer

ZHENGZHOU, China -- Liu Lin's contribution at the massive Foxconn assembly plant in Zhengzhou, the capital of Henan Province, is testing cameras on Apple iPad  tablet computers, ensuring the photos meet quality standards. It is a job for which Liu, 24, received three days of training when he was hired earlier this year by the Taiwanese company also known as Hon Hai Precision Industry.

"I would like to stay here and move up, maybe eventually become a team leader," mused Liu, smoking a cigarette while sitting atop a thin mattress in the room he shares with eight other Foxconn factory workers. At Foxconn's starting base pay of 1,800 yuan ($295) a month, he makes almost two-thirds more than the minimum wage he previously collected as a prison guard.

Inside this factory dorm room, Liu stands out as a young man who sees his future within the confines of the huge complex Foxconn opened here three years ago.

Across the room, Dong Guilin said he is ready to leave after less than a year at Foxconn. His home town is only 60 km away.  Given the long hours, the pay doesn't compensate for the separation from his wife and two young children.

 "This is a job for young people," said Dong, 35, who is planning to open a business back home. "I'm too old now. Once you have a family, factory work is no good."

With the rapid aging of its populace due to the policy of restricting most families to a single child, China is running low on workers like Liu who are willing to put in long hours of factory overtime and hungry for cash and potential opportunity.  Workers like Dong are increasingly abundant, their voices adding to a growing chorus of calls to change the model that made China the world's dominant manufacturing power and its world's second-largest economy.

Companies like Foxconn are having to adjust their pitch to potential workers. Critical reports by labor activists homing in on the company's role as a leading Apple contractor and a highly publicized spate of suicides at the company's complex in Shenzhen, previously home around the clock for 700,000 workers, have led to higher wages, cuts in overtime and other reforms over the past three years.

The starting wages are now 1,800 yuan at all Chinese Foxconn plants regardless of the local minimum wage, with the base rate rising to 2,000-2,500 yuan after three months. To reduce homesickness, the company set up plants in provinces like Henan that were previously home to many of the workers who had migrated to Shenzhen, which abuts Hong Kong on China's southeast coast.


Where the workers are

"One of the key reasons we expanded our operations inland is to tap the large workforce that is available in places such as Zhengzhou and provide job opportunities to workers in those regions so that they can be closer to home and not have to travel thousands of miles to find work," Foxconn said in a statement to Nikkei Asian Review.  "It is also enabling us to be located closer to the target consumer markets of our customers, thereby contributing to an enhanced distribution and logistics process, as the consumption power of second-tier cities continues to rise."

Foxconn's workforce in Shenzhen is down to half its previous level. But a plan to automate production has made little headway. Some 200,000 employees now work in Zhengzhou assembling iPads and iPhones. The company has about 1.2 million staff in China in total.

Suicide remains a problem. China Labour Bulletin, a labor rights group, reported three attempts in just 20 days last spring at the Zhengzhou factory.

Foxconn's biggest challenge is the same that faces China's economy: Moving to a sustainable, long-term platform that accommodates the dreams of both Liu and Dong. Both types of worker will play integral roles in China's economic development, but the government and companies like Foxconn are struggling to figure out how to make room for them.

"I think the Foxconn model was appropriate for its time and place and has a value, but that value is diminishing as China tries to shift its economy to the next level," said technology analyst Alberto Moel of Sanford Bernstein.  "I wouldn't call it obsolete, but old school and not fit for China's aspirational post-industrial future."