Fewer hours, more pay for workers at iPhone factories

Foxconn, Apple's main contract manufacturer of iPhones and iPads, said yesterday that it will cut working hours and increase wages for Chinese workers who often have to work more than 60 hours a week.

It is also to hire tens of thousands of new workers, improve safety protocols and upgrade workers' housing and other amenities.

Foxconn's factories are the last step in the manufacturing process of iPhones and other Apple devices, most of which have hundreds of components. Research firm IHS iSuppli estimates that Apple pays US$8 for the assembly of a 16-gigabyte iPhone 4S and US$188 for its components, according to The Associated Press. It sells the phone wholesale for about US$600 to phone companies, which then subsidize it to be able to sell it for US$200 with a two-year service contract.

Multiple violations

The Foxconn announcement followed a survey of three of its plants by the United States-based independent Fair Labor Association which disclosed multiple violations of labor law, including excessive hours and unpaid overtime.

FLA auditors visited three Foxconn complexes in February and March: Guanlan and Longhua near the coastal manufacturing hub of Shenzhen, and Chengdu in the inland province of Sichuan. They employ a total of 178,000 workers, at an average age of 23.

Average monthly salaries at the factories ranged from US$360 to US$455. Foxconn recently raised salaries by up to 25 percent in the second major rise in under two years.

The auditors examined a year's worth of payroll and time records at each factory, conducted interviews with some workers and had 35,000 of them fill out anonymous surveys.

The FLA said it didn't find instances of child or forced labor.

Apple has kept a close watch on its suppliers for years, according to AP, and in January took the further step of joining the FLA. The organization has audited overseas suppliers for clothing manufacturers, but Apple was the first electronics company to join.

The FLA said Foxconn was committing to a reduction of weekly work time to 49 hours, the legal Chinese maximum.

Apple and Foxconn said wages would rise to compensate for reductions in hours, and tens of thousands of additional workers would be hired to keep up with demand, according to Reuters.

The FLA had found that many workers at the Foxconn factories wanted to work even more overtime, so they could make more money.

Auret van Heerden, CEO of the FLA, said it was common to find workers in developing countries looking for more overtime, rather than less.

"They're often single, they're young, and there's not much to do, so frankly they'd just rather work and save," he said.

Foxconn employs 1.2 million workers in China to assemble products not just for Apple, but for Microsoft, Hewlett-Packard and other pillars of US technology.

Foxconn's moves are likely to have an impact across the global technology industry. iSuppli's figures suggest that if Apple were to absorb a Foxconn wage increase that keeps salaries level while cutting average working hours from 60 to 49 per week, it would pay less than US$2 extra to have an iPhone made.

Other electronics companies, particularly PC makers such as Dell and HP, earn less profit on what they sell and could see a deeper impact.

Thomas Dinges, an analyst at iSuppli, told AP that Apple's competitors will probably have to accept the price increase too, since it's framed as a moral issue.

Ricardo Ernst, a professor at Georgetown University's McDonough School of Business, told AP that companies played a risky game when they raise manufacturing costs. US consumers have shown little inclination to pay more for products that are made in the US as opposed to China.

Apple's enormous profits -US$13 billion in October-to-December - have made it the world's most valuable company, worth more than US$570 billion. It's also put the spotlight on the way its products are made.