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Apple pledge likely to boost China factory wages

By Michael Liedtke

Associated Press

Published: Friday, March 30 2012 4:23 p.m. MDT

BEIJING — This week's pledge to trim work hours and effectively raise wages for the hardscrabble Chinese employees who assemble Apple's iPads and iPhones isn't likely to drive up the prices that consumers pay.

Labor expenses remain such a small portion of the total bill for most gadgets made in China, and wages have already been steadily growing. The cumulative wage increases, however, could crimp the profits of major technology companies unless they can save money on the parts that power the devices.

"The cost of assembly is going to go up for most electronics," IHS iSuppli analyst Thomas Dinges predicted.

The pledge involves Foxconn Technology, which assembles an estimated 40 percent of the world's electronics, including the hot-selling iPhone and iPad.

Foxconn, owned by Taiwan's Hon Hai Precision Industry Co., promised to limit hours while keeping total pay the same. That commitment will translate into higher hourly wages.

The pledge came after Apple Inc., the world's most valuable company, hired a labor auditor to review the practices and conditions in Chinese factories run by Foxconn. The audit resulted in a report released Thursday that evoked images of a sweatshop. Among other things, the report said Foxconn routinely violated overtime laws by assigning its assembly-line workers to toil for more than 60 hours per week.

Foxconn's concession is expected to have ripple effects not only because it involves Apple, one of the world's most scrutinized companies, but also a major Chinese employer that cuts a broad swath.

Foxconn has about 1.2 million workers and either currently or has assembled products for a long list of technology companies including Microsoft Corp., Hewlett-Packard Co. and Dell Inc. Those companies' smartphones, computers, video game consoles and other devices have become household staples around the world.

"I think whatever Foxconn did will have an impact, certainly, on all Chinese workers in all trades," said Willy Lin, managing director of Hong Kong-based Milo's Knitwear, which makes clothing in three factories in China for European clients

Japan's Toshiba Group, which employs 32,000 workers in China to make goods such as refrigerators and TVs, said it already is planning to adopt similar changes that will reduce overtime work and improve working conditions at its factories.

China has long been a low-cost manufacturing center for goods stamped with some of the world's best-known brands.

But wages have been steadily rising for years as companies compete for workers and China's communist leaders try to push the country up the technology ladder to make more profitable products.

Dinges believes the leadership also realizes the country's economic evolution requires raising the standards of living so more factory workers assembling the devices will eventually be able to buy them.

After the 2008 global financial crisis triggered a freeze in the minimum wage to help exporters compete, Chinese workers have received big pay increase over the past two years, though salaries remain paltry by Western standards.

Foxconn responded to a spate of suicides by employees in 2010 by more than doubling its basic monthly salary to 1,800 yuan ($290). That year, Toyota Motor Corp. and other Japanese automakers also granted pay hikes following a wave of strikes that had tacit government support.

Communist leaders have already promised to double the country's minimum wage from 2010 levels by 2015

The minimum wage in Shanghai, one of the world's most expensive cities, is about 1,200 yuan ($200) a month after an increase of more than 10 percent last year. The northern city of Tianjin raised its minimum wage to 1,070 yuan ($175).

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