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Foxconn said to be producing Apple TV set, raising wages

updated 01:31 pm EDT, Mon May 28, 2012

China publications report test run underway

Quoting a Chinese publication source in two otherwise-unrelated stories, two prominent business sites have both reported new stories about Foxconn, Apple's primary manufacturing partner for its various products, particularly iOS devices. Forbes says that its sister publication in China is reporting that Foxconn will double workers' wages soon (again), while BusinessInsider claims a test run of an Apple TV set is underway.

The story on the Apple TV set, which has been rumored for years, says Foxconn is in the "very early stages" of producing the TV, calling it a "trial production run." The manufacturer has received orders from Apple, with the set appearing sometime early next year. Foxconn has previously denied building a television for Apple even after its CEO, Terry Gou, was reported to have confirmed the project.

The report can be viewed with some skepticism, however, as the timeline established by the claim would have the TV being announced just as this years' Christmas buying season is winding down, and shipping in the early part of next year -- an odd time to be bringing out an expensive bit of consumer electronics. The report appears to be based in part on a prediction by Piper Jaffray technology analyst Gene Munster, but also claims unnamed "insider sources."

WantChinaTimes is also cited as the source for the Forbes report that Foxconn plans to nearly double salaries, quoting an announcement by Gou that his company's salaries in China will surpass the minimum wage in Taiwan (which traditionally pays much more) by the end of the year. If true, Gou's promise means salaries would be increased to at least 4,000 yuan (US $630) per month, an increase of 82 percent.

If the raise comes to pass, workers at Foxconn will have seen a jump of almost 500 percent since 2010 in wages. Foxconn workers have been making about 50 percent more than the national Chinese average for production workers for almost two years, one of the reasons why jobs with the company are so sought-after. Despite China's large population, the market there has seen a serious labor shortage for the level of skilled workers needed for Foxconn manufacturing.

Ironically, the announcement of ever-increasing wages has led many Taiwanese workers who are underpaid in Taiwan to move to the mainland, hoping to get a job with Foxconn. The migration has caused a depression in wages in Taiwan, which -- while still more than twice times higher than corresponding Chinese averages on average -- have fallen dramatically in recent years. China's wages are on average lower, but rising significantly on a yearly basis.

Analysts believe the move would hurt Foxconn's bottom line on at least a temporary basis, though it may help boost the company's image in the near-term. For the first fiscal quarter of the year, the company's profits were down a half-percent from the year-ago quarter, in part due to the higher salaries.

Foxconn may also be planning to automate more of its production, slowly reducing the need for so many employees but requiring more higher-skilled workers who are thus better-paid. Research has shown that paying higher wages often results in savings from employee turnover as well as reducing training and supplemental costs. The move would also eliminate the most repetitive and tedious of the presently hand-assembled aspects of the devices Foxconn makes for Apple and most other brand-name electronics companies.

In short, says Forbes, China is going through a 21st-century version of the Industrial Revolution.

by MacNN Staff



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