Beijing Diary

Why Foxconn is a landmark in Modi's Make in India

The Taiwanese electronics giant has over the past few years established a global reputation as perhaps the most key supplier for Apple products.

 |  Beijing Diary  |  4-minute read |   10-08-2015
  • ---
    Total Shares

Taiwanese electronics giant Foxconn has committed to investing US$ 5 billion in manufacturing facilities and research and development units in Maharashtra, in what is not only set to be a landmark deal for the Narendra Modi government’s "Make in India" initiative but also among India’s biggest ever FDI announcements. Foxconn may not (yet) be a household name in India, but it has over the past few years established a global reputation as perhaps the most key supplier for Apple products, from iPhones to iPads. Here are five things you need to know about the company that is now set to make a mark on India’s manufacturing landscape.

1. Foxconn, also known as the Hon Hai Precision Industry Company to give it its proper name, is the world’s biggest contract manufacturer for electronics by some margin, according to industry estimates. Last year alone, the company’s revenues crossed $ 130 billion, while its profits rose by a record 22 per cent to $ 4 billion, according to its annual report. More than half of its revenues comes from Apple products. Despite the slowdown in the West, the growth in Foxconn’s earnings were the highest in five years, thought to be buoyed by growing Apple sales in China and other emerging countries, propelling the country to now spread its presence even wider and seek new markets such as India.

2. What’s most striking about Foxconn’s manufacturing facilities is their sheer size. The company employees more than one million people – most of whom are workers on the company’s famously efficient assembly lines in factories in mainland China. Foxconn’s biggest manufacturing facility in Shenzhen, in the southern manufacturing heartland of Guangdong province, is a city within a city: towering dormitories, cinema halls and gymnasiums. I visited one unit in Langfang, a small city in Hebei province in northern China, a few hours’ drive from Beijing, a year ago. I only got as far as the tight security outside the towering factory walls. The company has been famously secretive, although it has in the past year begun to open up to the media to assuage concerns about its work practices. The Langfang facility too, was a city within a city, so much so that locals told me that the Foxconn factory’s arrival in 2010 – which brought with it tens of thousands of workers – had been transformative for local businesses, and that local governments in China had been competing with one other to secure a deal with the Taiwanese company.

3. For a company that works in the high-tech domain, its production model has been strikingly labour intensive (hence the one million-plus workers). What’s made Foxconn so successful is its scale and efficiency. Foxconn’s "factory town" model has, above all else, enabled its success, dependent on the stream of migrant workers who have over the past two decades joined China’s workforce from the countryside. The success of this model has also been dependent on paying workers low wages, demanding long shifts and imposing what critics have described as an unforgiving work environment. Indeed, Foxconn has come under persistent criticism for its treatment of workers. More than a dozen suicides by workers two years ago brought global criticism and forced Foxconn to change its work environment. (The most damning evidence of its problems was the company’s decision to install sweeping "suicide nets" around some of its dormitories in China.) An audit by a labour rights association uncovered widespread violations of health and safety rules and working hours. Apple’s audits have also found similar violations, but the US company has also received its fair share of criticism for not exerting enough pressure on its biggest supplier to change its ways.

4. Defenders of the Foxconn model counter that despite the bad press, it has remained a much sought-after employer for young Chinese joining the work force. My interviews with newly hired workers in Langfang suggested that while workers found much that needed improving – strenuous shifts, mind-numbing, repetitive work, lack of empathy from supervisors, inadequate extracurricular activities, to list but a few – they said they still wouldn’t consider leaving their jobs. Life in a city was, for the few I spoke to, a far better alternative than finding a job in their smaller hometowns, and was, in some sense, empowering, despite all the difficulties. It remains to be seen if India’s workers will agree.

5. As much as the Modi government might like to look at the Foxconn deal as a vote of confidence for its "Make in India" initiative, Foxconn’s decision is likely motivated in equal measure by pressures in China that are necessitating a change in the Foxconn factory town model. In China, wages are rising by more than 20 and 30 per cent every year. Awareness of workers’ rights has also made it more difficult for companies to get away with giving short shrift to employees’ concerns as they had in the past. Foxconn appears to have settled on a two-pronged strategy: one, make its model less labour intensive and mechanise more of the assembly lines in its China units, and two, find newer markets where wages are lower.

Writer

Ananth Krishnan Ananth Krishnan @ananthkrishnan

The writer is China correspondent for India Today.

Like DailyO Facebook page to know what's trending.