Minor price increases could be used to keep up profits

The Chinese city of Shenzhen is set to raise its minimum wage by 13.3 percent in 2013, according to DigiTimes. Even though the city already has one of the highest minimum wages in China, the change is thought to be a way for officials to defuse possible civil unrest, since in recent years rising living costs have triggered a number of protests across the country. The pay increase will move Shenzhen's minimum from $236 US to $268.

It could potentially have a significant impact on corporations like Apple, Samsung, and HP, which are just a fraction of the Western tech businesses which rely on suppliers and manufacturers in Shenzhen, such as Foxconn. Faced with smaller profit margins, vendors and suppliers alike could decide to raise the price of electronics, or even move out of Shenzhen, although the cost of labor is said to be growing all over China.

Because the better wages will affect a number of vendors equally, many of them could be forced to accept smaller profits; raising prices might only lead to a competitive disadvantage. Apple in particular is very resistant to changing prices, which it typically sets at the launch of a product category. A 16GB Wi-Fi iPad, for instance, has cost $499 since the first generation was introduced in 2010.

by MacNN Staff