Turmoil In The Land Where Your Consoles Are Made

This year, a rash of suicides at the factories of manufacturing giant Foxconn has focused attention on working conditions. Improvements were apparently made, but a recent report suggests otherwise.

Foxconn assembles the Xbox 360, the PS3, the Nintendo Wii and the iPhone, among many other electronic devices.

A recent report features interviews with over 1700 workers and was carried out by 20 universities in Hong Kong, China and Taiwan. The report criticised Foxconn's Taiwanese parent company Hon Hai Precision Industry for its work environment. Some of the issues include the claim that half of the workers have been "abused" in some form or another, while 16.4 per cent have experienced violence.

Another issue brought to light was that Foxconn apparently does not have to cover medical expenses - even for workers who come in contact with hazardous materials.

After an outbreak of suicides earlier this year, Foxconn installed suicide nets, nixed suicide compensation, raised wages and even considered increasing automation on the assembly line.

However, one report from rights group Students & Scholars Against Corporate Misbehavior (SACOM) stated that many workers have not yet had their salaries raised.

"Foxconn Technology Group strongly and categorically rejects reports in the Chinese and international media that are attributed to research by academics and students alleging worker abuse, illegal labour practices, and unsafe working conditions at our operations in China," the company responded. Read the full statement here.

The number of suicides at Foxconn's Shenzhen plant does fall below the national average; however, critics point to the incidents as indicative of a larger issue: poor treatment and working conditions. Not exactly what companies like Apple, Microsoft, Sony and Nintendo want to hear. Nintendo, however, has set up its own guidelines and carries out inspections. (Something that Nintendo is not alone in, however.)

"In order to ensure the continued fulfilment of our social responsibility throughout our supply chain, we established the Nintendo CSR Procurement Guidelines in July 2008," Charlie Scibetta, Nintendo of America's senior director of corporate communications, told Kotaku. "We require that all production partners, including Foxconn, comply with these Guidelines, which are based on relevant laws, international standards and guidelines." Nintendo says it carries out "on-site" inspections so that it can understand the actual working conditions.

"We provide all production partners with the results of these inspections, which include specific suggestions for improvement as appropriate," Scibetta added. "If we were to find that any of our production partners did not meet our guidelines, we would require them to modify their practices according to Nintendo's policy."

Reports of poor working conditions as well as the suicides put companies like Apple, Microsoft, Sony and Nintendo in an awkward position. They cannot directly control how Foxconn runs its factories, but are impacted by how it does.

"Foxconn has been an important partner of ours and remains an important partner," Microsoft's Phil Spencer told Kotaku last month. "I trust them as a responsible company to continue to evolve their process and work relationships. That is something we remain committed to — the safe and ethical treatment of people who build our products. That's a core value of our company."

According to Microsoft, the reason why it decided to make its game consoles in China was due to things like chip developers and component makers already being located in the region. For the manufacturing supply chain, Microsoft says it makes sense for it to have its assembled in China. It's a natural epicentre.

"The end manufacture is just one part of a long process of putting a console together," said Spencer. The Xbox 360 cannot be sold in China, however, since video game consoles are banned.

Microsoft has always manufactured its Xbox 360 in China. Rival Sony is a relative newcomer. When the PS3 launched in 2006, the console was made in Japan. However, the slimmer model has been produced in China by Foxconn.

"In general, the cost of manufacturing is cheaper in China," Sony's Shuhei Yoshida told Kotaku. Something items, however, might be "too complex" to do outside of Japan, said Yoshida. "But if it's not so complex, it can be made in China at a lower cost."

Over time, components become cheaper and the manufacturing process becomes simplified. The current PS3 has fewer components than the launch console. "That means it requires less work to manufacture and fewer chances to make mistakes," Yoshida said. That doesn't mean the console isn't up to Sony scratch. "I think you need to look at the hardware's defect rate. At the end of the day, what matters is the quality of the hardware."

It's more than quality of the hardware. It's also the cost. One market research firm has estimated that the iPhone 4G costs $US6.54 to make in China. Apple's profit margin on the phone is reportedly over 60 per cent.

The fear is that with so much money (and profit) at stake, conditions for those making the consoles has become an afterthought.

Confidential Foxconn Report Leaked With Stories of Abused Employees [Gizmodo]

iPhone maker faces new criticism over China labour practices [Reuters]

Images via BusinessWeek, International Business Times, Kotaku


    If your at all interested in reading more about Foxconn and it's founder Terry Gou here is a really interesting piece by Bloomsburg Business week:

    The pink tshirt photo is the most depressing thing I've seen all week.

    Consoles banned in China! The poor bastards dont even get to play the consoles they are making - commies...

    $6.54 to manufacture an iPhone that retails for $999AUD...wow.

    I realise they're also covering marketing, R&D etc with that money, but... wow.

    This Foxconn stuff is depressing. The more press it gets the better, that'll make them change their ways.

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