Hon Hai to raise China wages after spate of suicides

TAIPEI Fri May 28, 2010 1:23am EDT

Policemen stand guard outside the Hong Hai headquarters during a protest by labour unions in Tucheng, Taipei, May 28, 2010. REUTERS/Nicky Loh

Policemen stand guard outside the Hong Hai headquarters during a protest by labour unions in Tucheng, Taipei, May 28, 2010.

Credit: Reuters/Nicky Loh

TAIPEI (Reuters) - Taiwan's Hon Hai Precision Industry plans to raise workers' salaries by about 20 percent at its Foxconn unit in China, as it struggles to stop a spate of worker suicides and quell rising public anger.

An employee of Foxconn, maker of Apple Inc's iPhone, jumped to his death late on Wednesday, bringing the total of such apparent suicides to 10 this year.

Another employee attempted to slit his wrists, but survived with medical attention, Xinhua news agency said late on Thursday.

A small worker protest formed in front of Hon Hai's head office in Taipei on Friday morning, with protesters setting out candles and white flowers as security guards watched.

Hon Hai spokesman Edmund Ding said the increase in the cash portion of pay packages for all its workers in China had been planned for some time. He did not say when the raises would be implemented.

"It may help the suicide situation, because we workers just need money and the financial pressure on us is great," said a Foxconn employee surnamed Wang, reached by telephone at the company's factory in Longhua, an industrial town north of Shenzhen. "Every little bit helps."

The spate of deaths has thrown a spotlight on the labour practices of Foxconn, whose clients include Dell Inc, Hewlett Packard Co and Sony Ericsson.

Apple and other clients have said they are investigating working conditions at Foxconn, which has about 420,000 employees at its base in Shenzhen and has come under fire for its secretive corporate culture.

FINANCIAL IMPACT

The planned pay rise could raise Hon Hai's quarterly labour costs by about T$2.7 billion (58 million pounds), which would erode its operating profit by around 10-12 percent, Citi said in a report.

Other analysts disagreed with Citi's assessment.

"I don't think this will impact Hon Hai's profitability," said Vincent Chen, an analyst at Yuanta Securities in Taipei. "Salaries for production workers are usually raised at around the third quarter, which is the peak season for most contract manufacturers as they gear up for the year-end holiday season."

Chen added that labour costs accounted for only around 2 percent of Hon Hai's operating costs and a salary increase of about 20 percent was not unusual.

"Hon Hai has raised salaries by up to 50 percent in the past, and it's still doing well," he said.

Hon Hai shares were down 1.2 percent on Friday morning, trailing the broader Taiwan market's 1 percent gain. Foxconn's Hong Kong-listed shares were up 0.8 percent, also trailing a rally that saw the main index up 1.8 percent.

Entry-level line workers at Foxconn's factory in Longhua earn just over 900 yuan (91 pounds) per month before overtime and bonuses, said Zhu Fuquan, a production supervisor for the company.

Foxconn was rumoured to be paying around 100,000 yuan to compensate families of suicide victims, said factory worker Wang, a sum he said was tempting some victims given their low base wages.

On Wednesday, workers said they had been asked to sign a letter from Foxconn, including a clause saying the company would pay no more than the legal minimum for injuries sustained outside the workplace.

Confronted with the letter, Gou apologised and said he was taking it back, calling the language inappropriate.

(Additional reporting by Doug Young, James Pomfret and Kelvin Soh in Hong Kong, and Roger Tung in Taipei)

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