Analysis: Low cost era over for China's workshops to the world

Tue Apr 3, 2012 10:09pm EDT
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By Clare Jim and Jonathan Standing

TAIPEI (Reuters) - Foxconn Technology's agreement to improve the lot of its 1.2 million workers in China who make Apple Inc's iPads and iPhones is a signal that China is losing its title as the world's lowest-cost producer of everything.

It is not a pure economic argument, but an ethical one too that is gaining momentum following Apple's unprecedented decision to allow the largest investigation ever into a U.S. company's operations abroad.

And after years of squeezing the profit margins of contract manufacturers making the gadgets beloved by consumers worldwide, the time is drawing nearer when big brand names may have to forego some of their profits to overcome criticism their products are built off the back of mistreated Chinese workers.

"The time of low costs and cheap labor in China has come to an end," said Jay Huang, chief financial officer of Taiwan's Wintek, a maker of touch panels for Apple and other brands with annual revenues last year of some $3 billion.

"People think the market should offer cheap products; in the past they came at the cost of cheap labor in China and workers' rest time and welfare. But now we all agree that things have to improve, and as an ethical manufacturer we must improve the welfare of employees."


Worker Survey Graphic:

Reuters Insider TV:   Continued...

Employees work inside a Foxconn factory in the township of Longhua in the southern Guangdong province in this May 26, 2010 file photo. REUTERS/Bobby Yip/Files