Foxconn plant operating normally after strike ends

Taiwan device manufacturer Foxconn Technology Co's plant in Chongqing is back to normal operations after the company reached an agreement with workers who went on strike last week, according to a statement the company sent to the Global Times Monday via e-mail.

Due to shrinking laptop orders, especially orders from Hewlett-Packard Co (HP), Foxconn reduced its PC production line and laid off or transferred staff to other departments, Shanghai-based newspaper China Business News reported Monday.

However, some employees were unsatisfied that low-level employees could not get severance pay so about 800 employees started a strike that lasted from June 16 to Thursday, news portal techweb.com.cn reported Monday.

The report said the two sides reached a final agreement that the employees could receive severance pay equal to their salary of N+1 months, with N referring to the number of years worked at the company, the report said.

Foxconn set up its plant in Chongqing Xiyong Micro-electronics Industrial Park in 2009 for laptop manufacturing, and in the same year, HP also established a laptop base in the park, China Business News reported.

The two companies' $3 billion investment was regarded as a combination of laptop manufacturing's upstream and downstream, producing laptops exported to the whole world, the report said.

The laptop market has been on the decline in recent years and HP announced it would lay off more than 10,000 employees on May 22 after it said last December it would cut 34,000 jobs, media reports said.

Due to the popularity of smartphones and tablets, the laptop business faced a sluggish increase in recent years so OEM factories such as Foxconn cannot be immune to the influence, Liang Zhenbo, an independent IT industry analyst, told the Global Times Monday.

Moreover, HP has not performed well in the Chinese laptop market and has been criticized many times by media for laptop quality problems, Liang said.

Not only Foxconn, the OEM enterprises in Chinese mainland all faced a difficult situation due to the rising labor cost and labor rights awareness although they have moved from coastal areas to inland regions, he said.

OEM enterprises in Southeast Asian countries, including Vietnam and the Philippines, which provide cheaper labor than China, also bring more pressure on counterparts in China, Liang noted.

The OEM industry is a labor-intensive but low-profit industry, therefore there are always disputes between the employers and employees when the business hits a recession or encounters increasing labor costs, according to Liang.

OEM enterprises should try to develop products under their own brands and gain profits from the brand premium, Liang suggested.

Foxconn has tried this but it has not accomplished any major achievement up until the present time, Hong Shibin, deputy director of sales service department at China Household Electrical Appliances Association, told the Global Times Monday.

"Foxconn launched its Ruixia TV in 2013 and off-line home appliance stores in 2010 but now you almost cannot find any trace of them," Hong said.

Brand development and retailing are quite different from manufacturing, however, executives of OEM enterprises, who usually started the business from nothing, lack expertise in these different fields and also refuse to give much freedom to talents from outside, Hong said.

"So it is rare to see OEM enterprises develop their own brand successfully," he noted.

Taiwan media recently reported that Foxconn had received about 70 percent of orders for iPhone 6 and may hire 100,000 new employees in the Chinese mainland for the new iPhone production, news portal sohu.com reported Monday.

Foxconn declined to comment on the news when contacted Monday.