Foxconn Goes West and North

As expected, Foxconn appears to be shifting production to its factories in western and northern China rather than pay the 66% wage increase it recently granted its Shenzhen employees in the wake of ten suicides this spring. The Taiwanese computer-industry trade paper Digitimes (and others) quotes the Chinese-language China Times. From the report:

The Foxconn Group, after announcing wage hikes for employees at two production bases in Shenzhen, southern China in early June, has been shifting a large portion of the production lines from Shenzhen to its production bases in Tianjin, northern China, and Wuhan and Chongqing, western China, according to a Chinese-language China Times report.

The two production bases in Shenzhen currently have 400,000 employees in total and will be combined into one, with only a few relatively profitable production lines to remain, the report pointed out.

As the minimum monthly wages in Tianjin and Wuhan are currently 920 yuan (US$135) and 900 yuan respectively, the moves are to reduce labor costs because Foxconn may not raise wages for workers in the two places, the report analyzed.

According to other China-based reports, Foxconn began to stop recruiting new employees in Shenzhen on May 29.

It’s important to keep in mind that Foxconn was already building or expanding factories in Chongqing and Wuhan ahead of expected wage inflation. The public outcry over the suicides isn’t the cause of the shift so much as the catalyst.