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HP: Foxconn clampdown could push up prices

HP

By Nicole Kobie

Posted on 24 Feb 2012 at 13:37

HP has said increased labour costs in China could drive up prices in the tech industry.

Apple sent in the Fair Labor Association to investigate conditions at Foxconn, following a spate of worker suicides and complaints.

The Chinese manufacturer is also used by other tech firms, including Dell and HP - both of which posted quarterly losses this week.

"If Foxconn's labour cost go up, their product cost to us will go up," HP's CEO Meg Whitman told Reuters.

If Foxconn's labour cost go up, their product cost to us will go up

"But that will be an industry-wide phenomenon and then we have to decide how much do we pass on to our customers versus how much cost do we absorb," she added.

However, Dell's chief financial officer told the newswire that labour costs are a "very, very small piece".

"It's not clear to us how that will play out in terms of our costs," Brian Gladden said. "It remains to be seen how that flows through the overall supply chain. We will continue to watch that."

Both firms have much smaller profit margins than Apple, making it more likely they will be forced to pass on even a small increase in costs.

So far, FLA investigators have praised Foxconn's facilities as "first class", but the industry-funded group has been criticised by other workers rights organisations, who have reported that under-age staff were "hidden" during the audit.

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User comments

and if Chinese labour costs go up...

that gives other parts of the world a chance to compete. So China starts building factories in (pick a country or several) and becomes a colonial power. Plus ca change.

John

By JohnHo1 on 24 Feb 2012

About time

I think it is good that they are finally doing something about the appalling labour wages and conditions in the Far East. If it means that prices will go up in the West then sobeit! For far too long the West has thought they could get away with low price electronic good and the time has come when such working practices will be abolished! I do hope though that in the future some parts of computer manufacturing will return to the West as we are more than capable of producing items here!

By KurtCobain on 24 Feb 2012

Fairs fair...

The price of electronic goods is only so cheap, because of "slave" labour.

We used to have to pay "real" money for electrical goods, and we expected them to last a reasonable amount of time.

If the prices go back up, maybe this crazy consumerism will also bring itself back under control and product lifecycles will stabilise again...

It would also mean less waste as people hold onto things for longer.

By big_D on 24 Feb 2012

@KurtCobain

Either that or they just move to another location where there's cheap labour.

I remember reading that Apple started making the iphone in China because they were willing to create a new screen at the last minute and reach capacities which the western factories couldn't do.

Or other things like import taxes, the Pi is being made in China thanks to bigger manufacturing capabilities AND a tax loophole which allows fully assembled computers to be tax free but not components.

I personally think that a change at foxconn alone may not improve things.

I also wonder what the public will think of higher costs? Lets say Sony released two TVs, one produced using Foxconn ethics and another produced using fairer ethics but at a higher cost....guess which will sell more?

By tech3475 on 24 Feb 2012

So then it becomes viable to manufacture at home?

Fat chance!

Nope. They are passing the cost on to the customers, not dropping their profits.
It's not just £40 trainers that cost 11p to make.

Apple make a huge profit on the difference between the cost and price of their iDevices.

They could make them at home in the USA or even here in the UK and still make a profit on the price they currently charge. But hey, getting rich exploiting the Chinese is okay, because they're bailing out US debt.... Sheesh! What a world.

By cheysuli on 24 Feb 2012

That'll be the New Feudalism there folks

What you need to understand about the Steve Jobses and similar in this world is that they really DON'T give a 4X about\for anybody else, except themselves, their 'friends' and families.

Like William's Normans these guys are 'Robber Barons' whose sole objective is posses money and power. To them the rest of us are merely easily disposable components in their money-making machine.

The only time these people even notice us insect-people is when we interfere with their plans, otherwise no matter who we are: individuals, Governments etc. we are just cannon-fodder.
Anyone who expects Apple, or HP, or any of these other corporations to behave decently unless forced to is going to be sadly disappointed.

Here endeth the first lesson.

By wittgenfrog on 24 Feb 2012

Nicole Kobie graduates!

Hey, great article Nicole. Balanced, informative, lots of links, well written.A huge improvement on many of your past stories. Keep this standard up and you'll go far.

By SwissMac on 24 Feb 2012

Good.

Maybe this will highlight a pet annoyance of mine.

'Trendies' with a kitchen full of Fair Trade coffee and a pocket full of iPhone.

Make your mind up.

By synaptic_fire on 24 Feb 2012

@swissmac

Patronising expletive deleted!

By wittgenfrog on 24 Feb 2012

@synaptic_fire

I think you might have missed the point (or is it more 'postmodern irony'?).

We (trendies that is) buy Fair Trade coffee precisely because it allows the growers a fair price, or wage.

This is quite unlike Apple, HP, Dell etc and Foxcon....

By wittgenfrog on 24 Feb 2012

@synaptic_fire

My home is, of course, i-toys-less

By wittgenfrog on 24 Feb 2012

Who cares?

So, we stop exploiting deprived and abused people for our own greed. It might not be the PC thing to say, but it is greety people in the UK and the US that causes poverty throughout the world. Like most people give a F about the chinese anyways, just saying.

By mbassoc on 24 Feb 2012

"Foxconn clampdown could push up prices"

oh no. let's go back to suicid-inducing borderline-slave labour then, as long as prices stay down. Dear HP, please cease to exist.

By gavmeister on 25 Feb 2012

I wonder why..

Apple doesn't dip into its huge cash pile and build a facility to produce its lines in the USA. Then it wouldn't have to debase itself by using the unwashed masses from the east, and the "Made in the iUSA" sticker would allow it to double its prices and still shift more product - especially to the multiplying hordes of ultra conservative/nationalist US rednecks and the billions of East-asians, who still seem to believe that everything we manufacture in the West is going to be of a higher quality.

I suppose we just need to teach them that it’s not a defect, it’s a simply a “characteristic” when we build a product that falls over.

By TheHonestTruth on 27 Feb 2012

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