OM in the News: Radical Changes for Foxconn and China’s Electronics Industry

When Pu Xiaolen was hired at the Foxconn plant in Chengdu, China a little over a year ago, she received a short, green plastic stool that left her unsupported back so sore that she could barely sleep at night. Eventually, she was promoted to a wooden chair, but the backrest was much too small to lean against. The managers of this 164,000-employee factory, she surmised, believed that comfort encouraged sloth, writes The New York Times (Dec.27, 2012) in its lead story. Then one day, halfway through a shift inspecting iPad cases, she received a beige wooden chair with white stripes and a comfortable high, sturdy back. She wondered if someone had made a mistake.

But in Spring of 2012, unbeknown to Ms. Pu, a critical meeting had occurred between Foxconn’s top executives and a high-ranking Apple official. “This is a disgrace!” shouted Terry Gou, founder of Foxconn, the world’s largest electronics manufacturer and Apple’s most important industrial partner. Gou — seen by activists as a longtime obstacle to improving conditions inside his factories (which we have blogged about in the past) — was finally committing to a series of wide-ranging reforms. Foxconn’s pledges, if fully carried out next year as planned, could create a ripple effect that benefits tens of millions of workers across the electronics industry.

The firm announced that by July 2013, no employee would be allowed to work more than an average of 49 hours a week — the limit set by Chinese law. Previously, some Foxconn employees worked 100 hours a week. Foxconn also promised to increase wages, so employees’ total pay would not decline despite fewer hours — the equivalent of a 50% raise for many workers. With 1.4 million employees in China, Foxconn is setting a bar that all manufacturers will be judged against.

Change is hard, say officials in several Chinese companies. Reforming labor conditions in China will probably take decades, and labor abuses are an ever-evolving problem without just one right answer. “The days of easy globalization are done,” said an Apple executive.

Discussion questions:

1. What is/should be Apple’s role in this reform?

2. What events caused Chairman Gou to make this major move?