After a spate of worker suicides, questions must surely be asked about labour conditions at the Longhua complex in southern China operated by the Hon Hai Precision Industry Company (also known as Foxconn), the world’s largest contract manufacturer by revenue.
Most importantly: should Apple, Dell, HP and others move their business elsewhere?
I don’t think so – at least not at this stage.
Background
According to the UK Telegraph, at least sixteen workers have attempted suicide this year at the plant.
Sadly, twelve of these have resulted in deaths.
The number of suicides is not statistically exceptional. According to the Wall Street Journal, the overall suicide rate in China is around fourteen per 100,000 people. At that rate, given the plant’s workforce of around 400,000, you would expect around fifty or sixty deaths in any given year.
Nevertheless, the sudden spate of these tragic events – most of which have occurred over the past two months – has raised alarm bells. Hon Hai’s customers, which include Apple, Dell, HP, Nokia, Motorola and Nintendo, are facing intense scrutiny with regard to there involvement with the firm.
Don’t take business elsewhere – yet
Still, western electronics firms are not likely to abandon such an important supplier.
Nor should they at this stage – neither business case considerations nor ethical considerations support this.
Let’s look at each of these in turn:
• Business case.
As the world’s largest contract manufacturer, Han Hoi has made itself integral to the manufacturing process of many of its customers. Extracting them from the supply chain, according to the Wall Street Journal, would be possible but difficult.
From a business case perspective, these operational concerns no doubt far outweigh PR considerations associated with the recent publicity surrounding these events.
• Ethical considerations.
Nor do ethical considerations themselves make a strong case for taking business elsewhere.
Reports about working conditions at the plant vary. On a BBC forum, for example, Bruce Blanche, a Canadian consultant in Shenzhen, describes prison like conditions and cites reports of workers being doing more than 100 hours per month. On that same forum however, workers at the plant, whilst agreeing that work conditions are intense, describe the factory as ‘top notch’ and ‘very good.’ And labour rights activists, according to the Wall Street Journal, say that whilst conditions are not good, they are improving and compare favourably with those of many other factories in China.
Given the mixed nature of these reports, it is far from certain that working conditions would be better with alternative suppliers – at least within China anyway.
A better way – send in the inspectors
But that is not to say that Apple and others should do nothing.
Apple, HP, Nokia and Dell, Motorola and Nintendo all say they have been in contact with Foxconn management and are investigating practices with regard to these incidents. Steve Jobs, for example, says that Apple is “All over this.”
Good. That is exactly what should happen. Foxconn should not be dumped, but it does need a wake up call. The arrival of workplace inspectors from Apple and others on their doorstep should get the message across.
Contract suppliers should only be dumped where work conditions are downright atrocious.
In contrast, in cases like Foxconn, where work conditions are tough but not atrocious (by Chinese standards), the factory shows signs of improvement, and extraction from the supply chain would have significant operational implications, suppliers should not be dumped but instead be worked with.
Foxconn should be cajoled, worked with and woken up.
They should not be dumped at this stage.
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