China rising

Products such as mobile phones are stripped down by specialist companies to reveal the costs of various products. Results for the Apple iPhone, according to a 'teardown report' compiled by iSuppli, a US market research firm, show that labour costs represent just 7 per cent of manufacturing costs. However, suppliers to the assembly plant and in Apple's supply chain — the chip makers and battery suppliers, and those making plastic mouldings and printed circuit boards — depend on Chinese factories to hold down prices; those factories are expected to pass on their cost increases, reports the New York Times. Foxconn Technology, a major supplier to Apple and the centre of attention recently following a number of worker suicides, has said the company plans to reduce costs by moving hundreds of thousands of workers to other parts of China, including the impoverished Henan Province, adds the report. The company is currently based in Shenzen, which borders Hong Kong. Labour unrest has been seen at a number of places recently. In late May, at the Honda Auto Parts plant in the southern city of Foshan, Guangdong province, the region at the heart of China's manufacturing boom over the past 30 years, a two-week strike paralysed car production in China and resulted in a 25 per cent pay rise for workers. Strikes also hit another Honda supplier in Foshan, a Hyundai plant in Beijing, a Toyota factory in Guangdong, a rubber plant in the northern city of Tianjin, and a large cotton mill in central China's Pindingshan city. More recently, hundreds of staff stopped work at the Mitsumi Electric plant in Tianjin, demanding a big pay increase. These strikes followed news of the 13 separate suicide attempts this year at the 300,000-employee Foxconn Technology plant. A total of 10 of the young Foxconn workers died, provoking a debate about how much the regimented conditions at the Taiwanese-owned plant were to blame. China has become one of the most unequal societies, in terms of income distribution. The country is being pressured to increase its own consumption, but higher disposable incomes will be required to support that and will necessarily spell an end to a low-cost China, built on low wages (and an undervalued currency). And that's something the whole world has benefited from over the last decade by driving manufacturing goods' prices ever lower, allowing us to throw away our perfectly good iPhone 3 for the next model. First published in Machinery, August 2010