Suicidal Xbox Makers

First appeared in the Boston Globe

Dozens of workers assembling Xbox video game consoles climbed to a factory dormitory roof, and some threatened to jump to their deaths, in a dispute over job transfers that was defused but highlights growing labor unrest as China’s economy slows.

The dispute was set off after contract manufacturer Foxconn Technology Group announced it would close the assembly line for Microsoft Corp.’s Xbox 360 models at its plant in the central city of Wuhan and transfer the workers to other jobs, workers and Foxconn said Thursday.

Workers reached by telephone said Foxconn initially offered severance pay for those who wanted to leave rather than be transferred, but then reneged, angering the workers; Foxconn, in a statement, disputed that account, saying only transfers were offered, not severance.

The workers climbed to the top of the six-story dormitory on Jan. 3 and threatened to jump before Wuhan city officials persuaded them to desist and return to work, according to the workers and accounts online. The workers gave varying estimates of the numbers involved in the strike, from 80 to 200, and photos posted online showed dozens of people crowding the roof of the boxy concrete building.

“Actually none of them were going to jump. They were there for the compensation. But the government and the company officials were just as afraid, because if even one of them jumped, the consequences would be hard to imagine,’’ said Wang Jungang, an equipment engineer in the Xbox production line, who left the plant earlier this month.

The fracas is the latest labor trouble to hit Foxconn, a unit of Taiwan’s Hon Hai Precision Industry Co. that makes iPads and iPhones for Apple Inc. as well as Xboxes and other gadgets, helping consumer electronics brands hold down costs. Its massive China plants are run with military-like discipline, which labor rights activists say contributed to spate of suicides in 2010.

Foxconn said that all workers on the Xbox line were offered transfers at their current pay but that 150 demanded severance and not all of them participated in the rooftop protest. “It is our understanding that certain individuals threatened to jump from the building if their demands were not met,’’ the statement said.

Strikes and other job actions have risen in recent months across China as factories cope with rising costs, scarce credit and declining orders from Europe, the United States and domestic companies. Complicating matters is the approaching Lunar New Year, a time when many of the migrant workers who man factories quit jobs to return home temporarily before looking for better paying employment.

Foxconn’s Wuhan plant employs 32,000 people. The site previously had a couple of suicides or attempted ones a couple years back, prompting the government to take over the operations of the dormitories, said Wang, the equipment engineer.

After the rooftop protest, Microsoft said in a statement that it investigated, finding that the dispute centered on Foxconn’s staffing and transfer policies, not working conditions. “After the protest, the majority of workers chose to return to work. A smaller portion of those employees elected to resign, the statement said.

Ultimately, Foxconn said, 45 of the employees resigned from the company while the rest chose to stay. It did not say whether the resigning workers were given compensation. Wang, the engineer, said he received $4,700 (30,000 yuan) in compensation but that was because he planned his departure early, telling his supervisor six months ago he would leave.ionals, our award-winning solutions include custom displays, exhibit rentals, trade show graphics, shipping, installation and exhibit storage.

Foxconn Chairman Gou Cuts Target 50% as Slump in PCs Outweighs Apple Sales‏

Bloomberg

 

Foxconn Technology Group Chairman Terry Gou cut his long-term growth target for the world’s largest contract manufacturer of electronics by 50 percent as demand for Apple Inc. iPhones and iPads fails to offset slowing computer sales.

Gou, who founded the Taiwanese company in 1974, will tell managers that he’s lowering Foxconn’s annual sales growth target to 15 percent from the 30 percent fixture set for more than a decade, Taiwan’s richest billionaire said.

“How many companies have grown this big and still grow 30 percent?” Gou, 59, said in an interview at his office in Shenzhen, China on Sept. 4 for Bloomberg Businessweek’s next edition. “Fifteen percent is also big.”

Foxconn’s flagship unit, Hon Hai Precision Industry Co., fell in Taipei trading and JPMorgan Chase & Co. cut its rating on the stock, citing concerns over growth. The reduced target, like the spate of suicides that’s kept him in Shenzhen since May, may underscore the challenges of managing a $60 billion business that generates more sales than Apple or Dell Inc., and employs almost 1 million workers.

“I don’t think investors are ready to hear news of such a big cut in the growth target,” said Vincent Chen, who rates shares of Hon Hai “hold” at Yuanta Securities Co. in Taipei. “These problems, including lower market growth, are giving Gou the biggest challenge he’s ever faced.”

Underperforming Stock

Hon Hai dropped 2.7 percent to NT$108.50 as of 9:03 a.m. in Taipei. The stock’s fallen 20 percent this year, underperforming the island’s Taiex Index, after the deaths of at least 10 workers led Gou to raise wages and accelerate factory relocation plans in China. The stock’s tripled this decade, giving Hon Hai a larger market value than electronics companies such as Sony Corp. or Panasonic Corp.

Worldwide growth in shipments of computers, Foxconn’s main business, will slow to 12 percent in 2011 from 18 percent this year, according to estimates at Taipei-based Capital Securities Corp.

Gou, who’s run Foxconn since its founding, said he has a succession plan that may be announced in three years. He plans to keep his job until his 1-year-old daughter gets married, the chairman said.

Gou founded Hon Hai as a maker of plastic television knobs with $7,500. By March, his wealth had soared to $5.9 billion, making him Taiwan’s richest man, according to Forbes Magazine.

Bigger Than Apple, Dell

Gou said he expects sales to meet the 30 percent growth target this year as customers recover from the global recession. Revenue at Hon Hai Precision Industry Co., Taipei-based Foxconn’s flagship unit, will increase 39 percent to NT$2.72 trillion ($85 billion), according to the average of 18 analyst estimates compiled by Bloomberg.

Those sales would trump those of Gou’s customers. Analysts forecast $63 billion for Apple, $62 billion for computer-maker Dell and the $54 billion for mobile-phone producer Nokia Oyj, according to average estimates compiled by Bloomberg.

Gou is considering biotechnology companies as acquisition targets, though he’ll slow Foxconn’s pace of purchases, he said, declining to identify any company names. Foxconn is also planning to expand in industries such as nanotechnology and media content, he said.

Still, Foxconn plans to drive growth mainly through internal expansion after overpaying for some acquisitions, he said.

More Conservative

“If I merge or acquire, I will be more conservative in what I need and what I really get from it,” Gou said. “On one company, I spent too much money to acquire it, then realized my internal knowledge is better than their internal knowledge.”

Hon Hai has spent $3.1 billion in the past decade on acquisitions, the biggest being its 2006 purchase of Taipei- based camera maker Premier Image Technology Corp. for $1.2 billion in stock, according to data compiled by Bloomberg. Innolux Display Corp., Foxconn’s liquid-crystal display unit, this year bought Chi Mei Optoelectronics Corp. and TPO Displays Corp. to form the world’s third-largest LCD maker.

“Without acquisitions, it will be hard for them to grow,” said Calvin Huang, who rates Hon Hai “underperform” at Daiwa Securities Group Inc. in Taipei. “They have new businesses, but their contributions are still too small to drive much growth.”

Coping with Suicides

Gou said he’s been spending most of his time over the past three months coping with the worker suicides, which prompted Foxconn to announce a doubling of wages at his largest facilities and relocate factories to inland China near the hometowns of his migrant workforce.

Foxconn said last month it may hire as many as 400,000 workers, more than triple the combined workforces of Microsoft Corp. and Apple, and boost its number of employees to as high as 1.3 million.

Gou said he’s considering building a fully-automated factory in the U.S. as part of plans to expand production in the country and reduce Foxconn’s reliance on labor. The company, which currently assembles computer servers in Houston, Texas, will probably make components and finished products at factories in the U.S. within five years, he said.

“If I can have automation in the U.S., then ship to China, the cost-price would still be competitive,” Gou said.

iPhone Maker Rallies Workers after China Suicides

Associated Press

 

Young workers who normally spend their days assembling iPhones and other high-tech gadgets packed a stadium at their massive campus Wednesday, waving pompoms and shouting slogans at a rally to raise morale following a string of suicides at the company's heavily regimented factories.

The outreach to workers shows how the normally secretive Foxconn Technology Group has been shaken by the suicides and the bad press they have attracted.

"For a long period of time I think we were kind of blinded by our success," said Louis Woo, special assistant to Terry Gou, the founder of Foxconn's parent company. "We were kind of caught by surprise."

The company has already raised wages, hired counselors and installed safety nets on buildings to catch would-be jumpers. Other changes include job rotation so workers can try different tasks and grouping dorm assignments by home province so workers don't feel so isolated.

However, Woo acknowledged there will be challenges in preventing such tragedies in a work force of 920,000 spread across 16 factories in China, all of which are to have morale boosting rallies. Woo said he expected the company will grow to 1.3 million workers sometime next year.

"No matter how hard we try, such things will continue to happen," he said.

The rally Wednesday took place at Foxconn's mammoth industrial park in Shenzhen, which employs 300,000 and where most of the suicides have taken place. The latest suicide - the 12th this year - occurred Aug. 4 when a 22-year-old woman jumped from her factory dormitory in eastern Jiangsu province.

Twenty thousand workers dressed in costumes ranging from cheerleader outfits to Victorian dresses filled the stadium at the factory complex, which was decorated with colorful flags bearing messages such as "Treasure your life, love your family." The workers chanted similar slogans and speakers described their career development at Foxconn.

As they filed toward the stadium for the rally, a flood of workers headed in the other direction to begin the night shift.

"In the past, from the time we started work until when we finished, we would not really have a break. But now we've been given time to rest," said 18-year-old worker Huang Jun. "If I can get off work early enough and have a little time for fun, then I feel a bit better and less stressed out."

Other workers said they wanted Foxconn to organize more recreational activities such as sports or karaoke.

Woo said it was common for workers to have 80 hours a month of overtime, but Foxconn was aiming to reduce the workload and become the first company in the industry to keep overtime to a maximum of 36 hours a month - as required by Chinese law.

Foxconn, part of Taiwan's Hon Hai Precision Industry Co., has built itself into the world's largest contract maker of electronics by delivering quality products on thin profit margins for customers including Apple Inc., Sony Corp., Dell Inc., Nokia Corp. and Hewlett-Packard Co.

Labor activists, however, say that success has come in part from driving workers hard by enforcing a rigid management style, operating a too-fast assembly line and requiring excessive overtime. The company denies that it treats employees inhumanely.

The troubles at Foxconn came to light amid broader labor unrest in China and highlighted Chinese workers' growing dissatisfaction with the low wages and pressure-cooker working conditions that helped turn the country into an international manufacturing powerhouse.

One activist said the rally Wednesday was unlikely to boost morale and does not replace the need for more thoroughgoing reforms.

"I don't think today's event is going to achieve anything except provide a bit of theater," said Geoffrey Crothall, spokesman for the China Labor Bulletin, a labor rights group based in Hong Kong. "Basically what Foxconn needs to do is treat its workers like decent human beings and pay them a decent wage. It's not rocket science."