In a sign of the times, Foxconn to move inland

August 18, 2010 | Posted by Chris

Factory workers in China, above. Foxconn recently announced plans to hire 400,000 workers in inland China.

Foxconn Technology Group -- the giant computer manufacturer that makes well-known products for companies like Apple and Dell and has been in the news lately for a series of worker suicides -- has announced plans to hire some 400,000 workers in China over the next year.

This announcement is noteworthy for a number of reasons. First, the sheer size of the new workforce is staggering, and it will bring Foxconn's total number of employees in China to between 1.2 and 1.3 million. In contrast, Apple has 34,000 total employees, Microsoft 89,000, Bank of America 284,000, GE 304,000, Goldman Sachs 32, get the idea: it's a lot of people.

Second, with plans to open new factories in Henan and Sichuan Provinces, Foxconn is moving to inland China in a big way -- leaving behind the increasingly expensive labor on the coast. (For those unfamiliar, Foxconn announced plans to raise worker wages by 30% in the aftermath of strings of worker suicides.) With factory jobs heading inland, it seems central China is on the clock for its own labor wage increases in due time. Like the Economist published a few weeks ago, the rising power of the Chinese worker will reverberate globally.

Not only is Foxconn investing more in central China, but it also plans to drastically reduce the size of its production force in Shenzhen. This is truly a sign of the times, because Shenzhen was the original location for China's development and "opening up" to FDI back in the '70s. Now Foxconn will focus on research and development in its Shenzhen facilities, while reducing its workforce there by 170,000 over the next five years.

Moreover, according to BusinessWeek, there is an added rationale for Foxconn's plans to head inland: the new factories will be located in the home provinces of many of its workers. The migrant labor population in the Pearl River Delta region (which includes Shenzhen) totals in the hundreds of millions, and many come to coastal factories to work for a few years, save money, and move back home (especially female workers who take their dowry and get married in their hometown). Now, perhaps this is the beginning of the end for China's itinerant workers on the coast.

Lastly, with more of their workforce closer to their homes and family support networks, Foxconn may be relieving themselves of some of the burden of taking care of their workforce 24/7. The suicides at their factories were hugely negative for the company, and being closer to home, perhaps employees may not take such drastic action.

It will take years and even decades for the implications of announcements like this to clearly manifest, but make no mistake: they are a sign of the times in China.

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