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Foxconn to double salaries in China by end of 2013

  • Staff Reporter
  • 2012-05-27
  • 16:31 (GMT+8)
Foxconn chairman and president Terry Gou is keen to shed his factories' reputations as grueling sweatshops. (Photo/CNS)

Foxconn chairman and president Terry Gou is keen to shed his factories' reputations as grueling sweatshops. (Photo/CNS)

Taiwanese electronics manufacturing giant Foxconn will double the minimum monthly salary of its workers in mainland China by the end of next year, reports our Chinese-language sister paper Want Daily.

Earlier this month in Shanghai, Foxconn chairman and president Terry Gou announced that the company's salaries in China will exceed the minimum wage in Taiwan by the end of the year. Media commentators said this means that salaries will have to be increased from the current levels of 2,200 yuan (US$350) to 4,000 yuan (US$630), a rise of 82%.

Sources now claim that Gou declared at a function on May 16 that simply catching up to Taiwanese wages is not enough, and that monthly salaries for workers in China should be doubled to 4,400 yuan (US$690) by the end of 2013. If the claim proves to be true, this would be Foxconn's fourth announced salary hike in China in the last two years. It would also represent a near five-fold salary increase for the company's 1 million workers on the mainland since 2010.

Some analysts say Foxconn's bottom line will be hit hard by the salary increases. The company's first salary bump alone, which applied to 800,000 staff, represented a spike of around 200 million yuan (US$31.5 million) in additional monthly company expenditures. In the first quarter of 2012, the gross profit margin of Foxconn's parent company, Hon Hai Precision Industry, was down 0.5% from the same period last year.

Other experts believe Foxconn — the main contract manufacturer for Apple iPhones and iPads — will find a way to adjust. China's manufacturing standards have improved significantly in recent years, as has the value-added per worker. Higher salaries will therefore encourage workers to generate more value for money for the company, experts said.

News of rising salaries in China has seen many Taiwanese workers flood to the mainland. Average salaries in Taiwan have regressed to what they were 14 years ago, and studies suggest that raises are unlikely to be forthcoming in the near future, reported Want Daily.

Taiwan's statistics bureau announced that in the first quarter of 2012, the average domestic monthly salary was NT$37,160 (US$1,250) and had only increased by 1.87% over 12 months. After accounting for inflation, the real increase was just 0.58%.

A new study from Taiwanese job bank 1111 revealed that 54% of interviewees have not seen a salary increase in more than three years. Of those that have, the average increase over the three years — after accounting for inflation — was just 1.66%. Looking ahead, the job bank said Taiwanese companies will continue to be very conservative in recruitment policies. Given recent rises in oil and electricity prices, there is likely to be a new wave of salary freezes in the second half of the year, it said.

 

 

References:

Terry Gou  郭台銘

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