China Factory Suicides Signal End of Cheap Labor

Ten workers (mostly young women) have committed suicide at Foxconn factories in China – the same places that make iPhones and iPads. At least 13 have tried, and some reports are of 11 suicides out of over 20 attempts. Foxconn may not be running sweatshops as Upton Sinclair exposed in The Jungle, but the impact may be similar: the Chinese government is demanding changes.

This may signal the end of the cheap labor era. A recent strike at a Honda plant shows workers resisting exploitation. The inflationary forces surging inside China is also putting pressure for increased wages.

Honda workers on strike in China factory (LA Times photo)

The Beijing Youth Daily dissects the problem and finds conditions are a modern version of hellish: long hours, trapped at night in dull dormitories, severed from the social constructs of the farm villages, precluded from overtime pay, and regimented to minute details in the tasks they perform. They call themselves “pubic hairs”, an exemplar of their low self-esteem.

Foxconn workers (Bloomberg photo)

Bloomberg adds additional color. Perhaps most striking are these factoids:

  • 80% of assembly line workers work standing up, sometimes 12 hours a day, 6 days a week
  • 86% of workers live in dormitories with 8-10 per room
  • Making friends is hard since they are not allowed to chat on the line

Apple is caught up in this mess and will add to the pressure put on these factories for change. Apple’s initial response was to say they were not “sweatshops“, but this missed the forest for the trees:

The word “factory” is something of a misnomer: It would be more accurate to describe Foxconn’s facility as a manufacturing city, according to the AP. Large-scale industrial production is booming in China on a mind-boggling scale. Imagine a gated industrial complex that sprawls across five square miles and employs hundreds of thousands of people on assembly lines running 24 hours per day. The workers live there, eat there and shop there. And they make your iPhones and other electronic devices.

Steve Jobs comments at D8 conference still seem an effort in spin not resolution:

On the matter of the recent spate of suicides at Foxconn, the Chinese company that manufactures electronic devices for Apple and several other major consumer electronics brands, Jobs said the company was very concerned about the issue. “We are on top of this. We look at everything at these companies. I can tell you a few things that we know. Foxconn is not a sweatshop. It’s a factory — but my gosh, they have restaurants and movie theaters. But they’ve had some suicides and attempted suicides, and they have 400,000 people there. The rate is under what the U.S. rate is, but it’s still troubling. We’re trying to understand right now before we try to go in with a solution.”

This all may be a blessing in disguise. The US went through this at around the time of The Jungle, and greatly improved working conditions – plus found it came with improved productivity. At the time the US had two huge advantages over China: innovation (think: Edison) and efficiency (think: Carnegie in steel, Rockefeller in oil, Ford in manufacturing). When Japan went through this, they innovated in process (think: the Toyota manufacturing system). China now needs to step up their game, and move beyond cheap labor in virtual slave camps to push for innovation in products and process.

The Chinese story sounds an awful lot like the immigration story that has been replayed across the world: off the farms, into the cities, exploited ruthlessly, struggle in sweatshops, and slowly pull themselves out of the bottom and into the middle class. The Chinese government has been acting like a modern-day Midas, hoarding the gold (foreign reserves) and keeping their citizens relatively impoverished as they chase the mercantilist dream. Their citizens are now clamoring that the powers-that-be spread the wealth around, and let them in on a little bit of it. It is time.

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About Duncan Davidson 228 Articles

Affiliation: NetService Ventures

Duncan is an advisor to NetService Ventures, where he focuses on digital media and the mobile Internet.

Previously he was at four start-ups: Xumii, a mobile social service based on a Social Addressbook; SkyPilot Networks, the performance leader of wireless mesh systems for last-mile access, where he was the founding CEO; Covad Communications (Amex: DVW, $9B market cap at the peak), the leading independent DSL access provider, where he was the founding Chairman; InterTrust Technologies ($9B market cap at the peak), the pioneer in digital rights management technologies, now owned by Sony and Philips, where he was SVP Business Development and the pitchman for the IPO.

Before these ventures, Duncan was a partner at Cambridge Venture Partners, an early-stage venture firm, and managing partner of Gemini McKenna, a joint venture between Regis McKenna's marketing firm and Gemini Consulting, the global management consulting arm of Cap Gemini.

He serves on the board or is an adviser to Aggregate Knowledge (content discovery), Livescribe (digital pen), AllVoices (citizen journalism), Xumii (mobile social addressbook), Verismo (Internet settop box), and Widevine (DRM for IPTV).

Visit: Duncan Davidson's Blogs

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