Foxconn

       Foxconn was founded by Terry Guo and his brother in 1974 in Taipei, Taiwan (Cai, 2012).  Initially making plastic television switches, Foxconn has now grown to include manufacturing and assembly, though it also partakes in joint-design and joint-development work, as well as after-sales services for many of the electronics products it produces (Cai, 2012).  Foxconn is a transnational corporation with operations in over forty locations throughout North and South America, Europe, and Asia (Cai, 2012). Foxconn’s well-known clients have included Apple, Nokia, HP, Dell, Sony, Sony Ericsson (SACOM, 2010). In 1988,  Foxconn opened its first operation in China, locating in the Special Economic Zone of Shenzhen (Cai, 2012). As of 2011, Foxconn had over 400,000 employees in its Shenzhen factory, with just over a million employees in all its operations in China (Cai, 2012).

       The government of China welcomes foreign companies like Foxconn, as they stimulate the local economies in which their factories locate and help to build industry around them (Cai, 2012). In exchange for Foxconn’s factories locating in their country, local authorities had turned a blind eye to the labour code violations that take place, while also curbing local media from bringing to light the plethora of infractions these firms had been committing before the media attention of 2010 began to unfold (Cai, 2012).

       Contract manufacturers like Foxconn have always been in a disadvantageous position in the Global Value Chain (GVC) as they are subordinate to the lead firms that hire them to manufacture their products (Kawakami & Sturgeon, 2010).  Despite the massive orders of electronic components contract manufactures procure, little profit can be made from such buying power. Pricing for generic components is known by lead firms, and pricing for higher end electronic components, such as DRAM and microprocessors, are settled upon between lead firms and the manufacturers of such goods (Kawakami & Sturgeon, 2010). Contract manufacturers like Foxconn are also thought to be highly replaceable as competition abounds in this industry (Kawakami & Sturgeon, 2010), which can be witnessed by Apple, Foxconn’s largest customer, switching to Pegasus in 2011 for some of its manufacturing, which has increased further as even larger orders were awarded to them by Apple in 2013 (DOU, 2013).  All of these factors have forced contract manufactures to obtain only a very small portion of profit, which is apparent in Foxconn’s reported profit margins being 1.7% in 2012 (DOU, 2013). Key lead firms such as Apple have showed their dominant position in the GVC as profits margins from Foxconn had been much higher in the past – 3.7% in 2007 (Culpan, 2012) – and clearly have been forced down over time from their highly vulnerable position as contract manufacturers. However, competition from Pegatron to beat out Foxconn for contracts has resulted in the former offering even lower prices, settling for just 0.8% profit margins (DOU, 2013).

Working conditions inside Foxconn

       In 2010, a string of Foxconn employee suicides brought the attention of Western media and details about the harsh working conditions began to surface. The workers who had jumped to their deaths were characterized as having mental health issues, depression, large debt burdens, as well as personal/family problems (Ngai, Yuan, Yuhua, Huilin, Chan, & Seldon, 2014). What follows is a brief look at what exactly these working conditions entail that may have led to workers to take their own lives.

       One point of contention that is often discussed is the extreme hours clocked in by Foxconn employees. Overtime work at many of China’s Foxconn factories has reached as high as 120 hours per month, far above the legal limit of 36 (SACOM, 2010). To reach these extremes, workers will work from 10 to 12 hours a day, often with little more than a day or two off during a period of two weeks (SACOM, 2010). Many workers need the overtime pay, as wages are so low that workers find great difficulty making ends meet each month (SACOM, 2010). However, studies show that Foxconn has had employees sign Voluntary Overtime Pledge documents, which makes refusal of overtime near impossible for those who do not seek it (SACOM, 2010). 

       Overtime work is also conducted in another fashion. Foxconn has been reported as establishing a quota system where if workers do not complete the out of reach targets set by management, they must stay and work overtime without pay to complete their production targets (Cai, 2012).  Even if employees manage to make their quotas, following shifts will have adjusted quotas to consistently out-pace employees to ensure unpaid overtime is kept in place, netting Foxconn increased production at zero cost (Cai, 2012).

       Foxconn’s factories have shown many similarities to that of total institutions, such as prisons (Lucas, Kang & Li, 2013). These similarities are as follows:

       Near total encapsulation of workers’ lives: Foxconn employees often work for weeks with little more than a day or two off (Lucas et al., 2013). Employees eat, sleep and recreate on company grounds, and are subject to strict rules whether working or not (Lucas et al., 2013). Meals are served at specified times, curfews are set by the company, washing is done during scheduled times (Lucas et al., 2013). Those who do not obey are disciplined by the company (Lucas et al., 2013).

       Subservience through verbal and physical abuse: Foxconn employees are often singled out then berated for their mistakes in front of coworkers, insulted on the spot with derogatory language, or sent to corners to humiliate them (Lucas et al., 2013). Employees are even made to denounce their own mistakes in front of assemblies of coworkers (Lucas et al., 2013). Security guards have often been cited to detain and physically abuse many of the employees all over company grounds (Lucas et al., 2013).

       Creating barriers to relationships: While at work all employees are forbidden to speak with one another, disciplining or humiliating those who disobey (Lucas et al., 2013). Masks are worn for all work on assembly lines, helping to remove the identities of those around them and causing isolation for all (Lucas et al., 2013). Despite as dorms housing as many as 10 employees, the roommates are often assigned different shifts, work in different departments, and those from the same hometown are not assigned to the same dorm (Lucas et al., 2013). Along with the already mentioned curfews, the lights are shut off as well, limiting whatever scarce time employees might have to socialize (Lucas et al., 2013). 

       Around the clock surveillance: over 1000 guards are stationed throughout Shenzhen’s Foxconn factory, with employees being monitored whether at work or not (Lucas et al., 2013). Checkpoints are setup throughout both factory and living quarters, with security screenings and body searches performed at each one (Lucas et al., 2013). A worker cannot go to eat or to the washroom without passing through security screenings (Lucas et al., 2013).

       Forced internalization of institution: Employees of Foxconn. after the suicides were made to attend company functions that promoted anti-suicide rhetoric with employees marching in parades wearing t-shirts with slogans such as “Treasure your life” and carrying banners with CEO Terry Guo’s image and the words “Love you, love me, Love Terry” adorning them (Lucas et al., 2013). Before starting each shift workers are expected to show joy in their responses when supervisors ask them how they are doing that day, demanding an exuberant “‘Good! Very good! Very, very good!’” (Lucas et al., 2013, p. 100).

       By abusing and controlling their workforce, Foxconn has removed whatever dignity workers typically gain from their employment. This loss of dignity can have dramatic effects on employees’ self-esteem and greatly contribute to the deterioration of one’s mental stability (Lucas et al., 2013).

       With such harsh working conditions it comes as little surprise that Foxconn’s turnover rate is exceedingly high. In Shenzhen’s Foxconn plant in 2010, only a little over 5% had remained after five years, and a full 50% of employees were new recruits of less than 6 months (SACOM, 2010).

Student workers

       Foxconn has made arrangements with technical schools throughout China to have students work at its factories as interns. Tens of thousands of students spend from two months up to one year in these internships (Cai, 2012). Often students have little choice but to work at Foxconn, with threats of prevention from graduation (Cai, 2012) or outright dismissal from the schools (SACOM, 2012). These interns have been reported as not receiving the same benefits as regular employees, as they are not considered full-time, despite the fact that they work the same amount of hours, doing the same tasks. Often hired during peak production season, these student workers have become an indispensible part of the factory workforce (Cai, 2012). 

The urban/rural divide

       While the harsh working conditions of Foxconn clearly deserve attention, to understand the surrounding circumstances that have created a workforce that would endure such labour practices, we need to explore the underlying Chinese class system known as hukuo. The hukou household registration system, divided into rural and urban registration, was created in the 1950s and initiated in part as a means to impede the flow of rural residents migrating into the cities (Zhang, 2012). Beginning in the 1980s, Shenzhen became the first city to offer rural migrants temporary household registration to live in the city; as long as rural migrants could find work, they would be allowed to apply for temporary registration, but once migrants were out of work they would be required to leave the city and return home (Ngai, 2004). Under temporary registration status migrants cannot obtain social services or welfare benefits such as schooling or medical care, despite having to pay into such programs (Zhang, 2012).

       A stigma has since built up around the rural migrants, with the urban hukou populations holding strong prejudices against the migrants which contributes to their disregard for the plight of the factory workers (Peng, 2011). Police have been noted to monitor migrants’ activities and have been known to harass migrant workers, which has created an environment of fear for them (Peng, 2011). The only place migrants can feel at ease is within the factory compounds (Peng, 2011).

       Reform of the hukou system has been made in recent years, although even with the changes migrants have little chance of obtaining urban status; migrants must remain at one address and pay into the social insurance plan (that they cannot use) for seven years (Litao & Rong, 2010) or obtain points by owning property, achieving university level academic credentials, or donating a large amount of money to the city among other things (Zhang, 2012).

Change at Foxconn, but how much?

       After the spate of bad publicity for Foxconn when numerous suicides and riots attracted the media, Foxconn was pressured from both Apple and China to raise wage levels and improve working conditions in the factories (Froud, Johal, Leaver & Williams, 2014). The increased wages, reported to be 30% to 60%, were to be taken out of the profits of Foxconn as Apple appears to have held steady in its dominant position, which is evidenced in Foxconn’s reporting lower profits margins following these events, while Apple has continually posted increasing profit margins (Froud et al., 2014).

       Since 2010, Foxconn has shown some improvement in its working conditions for its workers, allowing unions a stronger role with elections taking place among workers for their representatives (Froud et al., 2014). As well, wages have increased for employees as previously mentioned, although not to the extent that the media puts forth. Despite the widely publicized wage increases of 30% or more for the supposed majority of employees, others claim that most did not see more than a 9% increase (SACOM, 2010). Even this 9% wage increase was made possible by removing year-end and special award bonuses (Cai, 2012).

       Even with the modest improvements shown by Foxconn, FLA inspections still report that 68% of employees work in excess of the laws regarding overtime work, though not reaching the same extremes found in earlier years (Stanley & Culpan, 2013). Workers still report that pay levels are still inadequate, and thus the overtime is still necessary. FLA did report that 99% of the changes mandated by the monitoring group had been met (Stanley & Culpan, 2013) although these inspections have been disputed as unreliable due to Foxconn’s alleged knowledge of the supposed unscheduled audits by the FLA, which have allowed it to prepare conditions accordingly by allowing workers more breaks than normal, hiding underage employees, or reducing the amount of overtime for employees among other things (Muncaster, 2012).

       With the increased costs of Shenzhen’s labour force, Foxconn has chosen to invest in factories in inner China where wages are lower (Cai, 2012). However, lower wages are not the only thing that persuades Foxconn to relocate. China’s central governing structure allows their cities’ administrations to compete with one another for FDI, and such is the case with Chengdu, Zhengzhou, and Wuhan, who have offered Foxconn generous tax breaks and land grants among other things, in their successful attempts to lure factory relocations to their inner-China locales (Cai, 2012).

Conclusion

       We now see that the harsh working environment of Foxconn is, while being no doubt largely the fault of Foxconn’s management structures and policies, also created by multiple forces at play. As we have seen China not only allows such firms to exist, but further creates a ‘race to the bottom’ as it pits its cities against one another, relaxing regulations as they seek out Foxconn’s factory locations. China’s hukuo dichotomy produces a rural workforce that is left vulnerable to exploitation by Foxconn.  Lastly, lead firms such as Apple have clearly played a role, as they force contractors such as Foxconn to seek out costs savings wherever possible, allowing only razor thin margins to exist while they capture the lion share of profits, which have mounted as high as 69% for its latest Iphone (Keizer, 2013).

       Theorists have argued that economic upgrading and social upgrading do not always go hand and hand (Barrientos, Gereffi & Rossi, 2011),  and it would appear that China proves this point with its consent to sacrifice its rural populations for the economic growth of its country. While China’s policies do appear to be changing for the better, they are no doubt still a long way off from providing equality for all their citizens.