By John Ruwitch
SHANGHAI (Reuters) - Apple Inc and its key supplier Foxconn Technology Group will share the initial costs of improving labor conditions at the Chinese factories that assemble iPhones and iPads, Foxconn's top executive said on Thursday.
Foxconn chief Terry Gou did not give a figure for the costs, but the group has been spending heavily to fight a perception its vast plants in China are sweatshops with poor conditions for its million-strong labor force. It regards the criticism as unfair.
"We've discovered that this (improving factory conditions) is not a cost. It is a competitive strength," Gou told reporters on Thursday after the ground-breaking ceremony for a new China headquarters in Shanghai.
"I believe Apple sees this as a competitive strength along with us, and so we will split the initial costs."
It was unclear if the split would be 50/50 or in some other ratio.
Foxconn announced in mid-February it had raised wages for workers by 16 to 25 percent, and in late March it reached an agreement with Apple to hire tens of thousands of new workers to reduce overtime work.
Analysts have attributed weaker-than-expected first-quarter results at Foxconn's flagship listed unit Hon Hai Precision Industry Co Ltd mainly to rising salary costs.
Hon Hai has been trying to cut rising Chinese labor costs in the past two or three years, and has been relocating plants to areas of China where wages are lower.
FOCUS ON DOMESTIC CONSUMERS
Foxconn's manufacturing in China will focus on domestic consumers in the country of 1.3 billion people, as well as research and development in technology, sales and services, Gou said.
Foxconn Technology Group's other listed units include Foxconn International Holdings, the world's top contract mobile phone maker, and Foxconn Technology Co which makes casings.
Over the past two years, there has been a spate of suicides at Foxconn's sprawling plants which make the Apple products as well as gadgets for the likes of Microsoft and Nintendo.
Apple and Foxconn agreed earlier this year to improve conditions for workers assembling Apple products.
Despite Hon Hai's weak first-quarter showing, Gou said he expected the group to be able to reach its revenue growth target of 10 percent this year.
(Additional reporting by David Lin; Editing by Muralikumar Anantharaman)
On February 21, <a href="http://www.huffingtonpost.com/2012/02/22/nightline-apple-supplier-foxconn_n_1293393.html?ref=technology" target="_hplink">ABC aired a "Nightline" segment featuring Bill Weir's visit to a Chinese Foxconn factory</a> responsible for making some of Apple's popular devices. During a tour of the factory, Weir says he "expected more robots" but in fact most of the gadgets at Foxconn are made the old-fashioned way: The high tech parts are put together by hand. For example, iPhones are assembled by hand in 141 steps. One iPad takes five days to assemble and passes through 325 sets of hands.
Two shifts of workers toiling in 12 hour shifts can make 300,000 iPad camera modules in one day, not to mention shape sleek iPads out of "raw hunk[s] of aluminum" at a rate of 10,000 per hour. <a href="http://abcnews.go.com/watch/nightline/SH5584743/VD55173552/nightline-221-apples-chinese-factories-exclusive" target="_hplink">Image via Nightline</a>
7 To A Room
Many workers live at the factory, where they pay $17.50 per month to live 7 to a room in Foxconn dormitories. <a href="http://www.forbes.com/sites/connieguglielmo/2012/02/22/nightline-goes-inside-apple-factories-in-china/" target="_hplink">The average starting salary is $285 per month,</a> and workers must pay for their food. <a href="http://abcnews.go.com/watch/nightline/SH5584743/VD55173552/nightline-221-apples-chinese-factories-exclusive" target="_hplink">Image via Nightline</a>
No Free Lunch
Workers get two hour-long meal breaks during each 12-hour shift. They eat together in a cafeteria where they pay $.70 a meal. This is about a quarter of their hourly wage. <a href="http://abcnews.go.com/watch/nightline/SH5584743/VD55173552/nightline-221-apples-chinese-factories-exclusive" target="_hplink">Image via Nightline</a>
Tim Cook Investigated Suicides
In 2010, after a spate of suicides at Foxconn's Shenzen plant, then COO Tim Cook flew to China to investigate the matter. <a href="http://abcnews.go.com/watch/nightline/SH5584743/VD55173552/nightline-221-apples-chinese-factories-exclusive" target="_hplink">According to Nightline,</a> Cook put together a team of psychiatric experts to examine the issue. It was at that team's suggestion that the infamous nets were installed between the buildings to prevent suicides. There have been 18 worker suicides at Foxconn since 2010. <a href="http://www.reuters.com/article/2012/02/15/us-china-apple-idUSTRE81E1FQ20120215" target="_hplink">According to Reuters' interview with Fair Labor Association president Auret van Heerden, the group's initial findings from its audit of Foxconn</a> suggested that the suicides could have been "a function of monotony, of boredom, of alienation perhaps."
Weir said he was surprised to see how young the workers were. He said many were in their late teens and no one looked like they could be over 30. Many had left their hometowns, oftentimes in the countryside, in order to get jobs at Foxconn. Weir also toured Chengdu and spoke with the relatives of workers who had left for jobs at Foxconn. According to Cult of Mac, <a href="http://www.cultofmac.com/147878/foxconn-employees-say-underage-workers-were-hidden-before-fla-inspection/" target="_hplink">Foxconn may have hidden underage employees</a> when the Fair Labor Association conducted its inspections. While Apple allows for workers as young as sixteen to assemble their products, those eighteen and under are afforded "special protections," <a href="http://www.appleinsider.com/articles/12/02/22/factory_workers_claim_foxconn_hid_under_age_employees_before_fla_inspection.html" target="_hplink">according to Apple Insider.</a> These include not being allowed to perform some tasks and working shorter hours than older workers.
Foxconn Exec Wants To Pay More
When asked how Foxconn would react if Apple suggested doubling workers' pay, Foxconn executive Louis Woo told Weir that the company would welcome a raise for employees. "Why not?" Woo said. "That would be good for the employees and also definitely good for China and good for us."
Workers have to wear static-proof jackets and take "air showers" to make sure the work area remains dust-free. Even one spec of dust could prove ruinous to the iGadgets' delicate innards. <a href="http://abcnews.go.com/watch/nightline/SH5584743/VD55173552/nightline-221-apples-chinese-factories-exclusive" target="_hplink">Image via Nightline</a>
WATCH A CLIP FROM THE NIGHTLINE SEGMENT