Foxconn Technology Group
Essay by Sagar Venkata • June 21, 2017 • Term Paper • 1,292 Words (6 Pages) • 1,402 Views
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CASE Analysis: FOXCONN TECHNOLOGY GROUP (A)
Introduction:
Founded in 1974, Hon Hai Precision Industry Company Ltd is a major player in the electronics manufacturing services(EMS) industry. Foxconn is currently the largest contract electronics manufacturer in the world and commands a mammoth 26% market share at the global level. It grew silently in the technology industry becoming a main supplier to many other technology companies by manufacturing a wide range of electronics components and different types of consumer electronics such as flat-panel displays, game consoles, cell phones parts and even motherboards for its clients.
Foxconn and similar firms in the EMS are known for high operational efficiencies acting as strategic supply chain partners to global technology firms such as Apple, HP these firms functioned on an extremely competitive environment to win projects and deliver them at a significantly low cost. Price was the core differentiating factor to success in the EMS industry and it could only be altered through operational effectiveness as most of the processes and forces were identical across the industry.
Foxconn had established itself as a strong contender and leading manufacturer by concentrating on operational effectiveness, this is evident from the fact that the profit margins for Foxconn and were Though a supplier for well-known brands such as Apple, HP etc. the company is facing a backlash of late owing to multiple suicides at the workplace. Reasons have been ranging from overwork, work pressure to financial stress and psychiatric breakdown. These incidents particularly aggravated in 2010 and around 17 suicides were attempted, consequently leading to huge media attention not just on Foxconn but also original equipment manufacturers (OEM’s) such as Apple, HP and other major technological frontrunners.
Brief outline of the suicides in 2010
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Workers at Foxconn faced numerous problems at multiple levels, attributing their distress to a single factor would result in sheer ignorance. The overall socio-cultural setup was complementary and resulted in further exacerbating the plight of the labours. A few major issues faced by them are listed below, though not exhaustive these issues in congruence aggravated the situation and caused a ripple effect of extreme measures.
Work related factors | Social and government factors | Economic factors |
Low wages, long working hours and tough working conditions: This is evident from the fact that workers were working for no less than 10hrs a day also most of them opted for overtime as the normal worktime wages did not suffice to sustain themselves and their families in their respective place of origin. Bathroom breaks capped at 10 minutes also signifies the stringent work conditions. The state of dormitories with accommodation provided to as many as 24 people in a room, open showers, restriction on movement and interaction all these have led to immense pressure on workers and consequently into suicides, depression etc. | General state of distress among migrant population: Majority of the workers are migrants from inter and intra provinces, organizations prefer migrant workers due to lower operational costs in employing migrants as compared to local hukou eligible employees who were provided with specific privileges and benefits, through law such as pension, insurance, maternity benefits etc. This discrimination added to other labor laws and social obstacles made the life of migrants more miserable and painful. Lack of proper regulatory measures to effectively implement labor laws: Underdeveloped as well as poor enforcement of labor laws, also further exacerbated by the rising costs in urban areas and inflation which effectively nullified any increase in wages. | Low profit margins: Though the OEM’s enjoy a significant margin of 50-60% on their products the EMS providers are able to squeeze merely 3% of average margin owing to stringent competition, supply side costs and more importantly reluctance of OEM’s to pass on some benefits. Great depression: After 2008 there were huge job losses and workers preferred stability at the cost of benefits, wages and facilities this resulted in demand amongst working class to be employed in companies like Foxconn which were well established to provide constant source of income but had their own disadvantages. |
There are predominantly four different stakeholders involved in the process Foxconn, OEM’s, Chinese state and the society. All of them were responsible in varying degrees contributing passively and actively to these suicides.
[pic 3]Apart from these primary stakeholders, other factors and actors contributed inadvertently:
- Due to intense industry rivalry there was no collaboration amongst EMS’s to increase their bargaining power and consequently works towards a common solution
- World economy as a whole was going through recession resulting in layoffs
- Inflation killed any tangible benefits of increase in wages, and jobs only provided individual sustenance without any long term benefits.
- Lack of awareness combined with ignorance on part of buyers of end product, and even high demand for these products in a way perpetuated the exploitation.
All these stakeholders and the environment have collected resulted in alienating the workers and causing human rights violations at multiple levels.
Recommendations: To begin with, the most important thing that every stakeholder has to combat is the ignorance and accept the existence of a problem of grave magnitude. Rationalizing this to be a trivial issue and comparing it to a mere statistic reeks of insensitivity and lack of empathy. This needs to be further
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