June 3 (Bloomberg) -- Ah Wei has an explanation for Foxconn Technology Group Chairman Terry Gou as to why some of his workers are committing suicide at the company’s factory near the southern Chinese city of Shenzhen.
“Life is meaningless,” said Ah Wei, his fingernails stained black with the dust from the hundreds of mobile phones he has burnished over the course of a 12-hour overnight shift. “Everyday, I repeat the same thing I did yesterday. We get yelled at all the time. It’s very tough around here.”
Conversation on the production line is forbidden, bathroom breaks are kept to 10 minutes every two hours and constant noise from the factory washes past his ear plugs, damaging his hearing, Ah Wei said. The company has rejected three requests for a transfer and his monthly salary of 900 yuan ($132) is too meager to send home to his family, said the 21-year-old, who asked that his real name not be used because he is afraid of his managers.
At least 10 employees at Taipei-based Foxconn have taken their lives this year, half of them in May, according to the company, also known as Hon Hai Group. The deaths have forced billionaire founder Gou to open his factories to outside scrutiny and apologize for not being able to stop the suicides. Gou built his company into the world’s largest contract electronics manufacturer and now clients from Apple Inc. to Hewlett-Packard Co. are probing the company’s working conditions.
Steve Jobs, Apple’s billionaire chief executive officer, who depends on Foxconn to make the iPhone and iPad, said the suicides are “very troubling.”
‘All Over This’
“We’re all over this,” said Jobs, speaking this week at a technology conference in Rancho Palos Verdes, California. His company does one of the best jobs inspecting suppliers, he said, adding the company is “not a sweatshop.”
Foxconn’s Longhua complex outside Shenzhen spans three square kilometers (1.16 square miles) and is criss-crossed by tree-lined streets with a water fountain at the center of the facility. Workers wearing polo shirts emblazoned with “Foxconn” in Chinese characters over their hearts walk along the streets. Men wear blue, women wear red. Security personnel wear white. The complex boasts its own hospital, a collection of restaurants and a swimming pool surrounded by palm trees.
The workers, 86 percent of whom are under 25 years old, live in white dormitories with eight to 10 people sleeping in a room. The living quarters have stairs running up the outside walls and the company has begun covering them with nets to prevent people from jumping.
Inside the compound, at a factory devoted to computer motherboards, rows of young men and women stand at assembly lines, their feet shod in blue slippers and white caps on their heads. The smell of solvent hangs in the air. About 80 percent of the front-line production employees work standing up, some for 12 hours a day for six days a week, according to Liu Bin, a 24-year-old employee.
“It’s hard to make friends because you aren’t allowed to chat with your colleagues during work,” Liu said at Shenzhen Kang Ning Hospital where he was seeking help for insomnia. “Most of us have little education and have no skills so we have no choice but to do this kind of job. I feel no sense of achievement and I’ve become a machine.”
The company provides counseling for workers such as Liu, according to supervisor Geng Yubin. Geng, who has worked six years at Foxconn, says between 30 and 50 workers come to him daily for advice on their personal lives. Common problems are homesickness, financial woes, lovers’ quarrels and spats with co-workers, Geng said.
“For many of the young people who are here, this is the first time they’ve been away from home,” Geng said. “Without their families, they’re left without direction. We try to provide them with direction and help.”
Tian Yu fit Geng’s description. Tian, 18, left her parents and a life of growing sweet corn and rice in Hubei province, central China, to find a job in Shenzhen after graduating from high school, her father, Tian Jiandang, said. She was isolated and without friends at work, the elder Tian said. She worked at Foxconn for about a year.
On March 17, she jumped from the fourth story of her dormitory in the Longhua complex. She survived and was in a coma for almost two months. Her father still doesn’t know why she jumped and is afraid to ask because he thinks it will upset her, he said in an interview by her hospital bed. Foxconn is paying for her medical care.
The suicides and how to stop them mystify Gou.
“Are we going to have this happen again?” said Gou, speaking on May 27 when he opened the factory to the largest media gathering in company history. “From a logical, scientific standpoint, I don’t have a grasp on that. No matter how you force me, I don’t know.”
Less than a day after Gou made the remarks, a 23-year-old Foxconn worker jumped to his death, according to the Shenzhen police. Another worker slit his wrist and was hospitalized.
Born October 8, 1950, in Taipei to parents who emigrated from China’s Shanxi Province, Gou formed his company in 1974 with $7,500. Over 36 years, he transformed the supplier of plastic television knobs to the maker of iPhones and Sony Corp. PlayStations. Hon Hai Precision Industry generates more revenue each year than Microsoft Corp., Apple or Dell Inc.
His net worth reached $5.9 billion this year, according to Forbes Magazine. He owns 10.8 percent of the company as its largest shareholder, according to Bloomberg data. Hon Hai Precision has dropped 21 percent so far this year.
The basis of his success is clear, according to Pam Gordon, founder of Technology Forecasters, a market research firm specializing in contract manufacturers and supply chain.
“It’s the prices,” said Gordon. “Their prices are lower for high-quality work.”
Gou says he’s proud of what he’s accomplished at Longhua.
“I came here more than 10 years ago to this piece of fallow ground, this mountain,” Gou said. “We brought some colleagues and step by step we built it up.”
Gou’s ambition and discipline come through in his interactions with subordinates, according to people who have worked with him. He can talk for hours without notes and remembers product plans in minute details, according to six people who’ve attended meetings with him.
In a session Gou held in the second quarter of last year with about 200 managers and engineers to discuss the future of the company’s mobile-phone business, the chairman peppered division vice presidents with questions on progress reports, said three people who attended the gatherings and declined to be named because the event was not public.
At the same meeting, Gou ordered a senior vice president who could not respond in enough detail to stand before the group for 10 minutes as punishment, three of the people said.
Foxconn won Apple’s order to make the iPhone after Gou ordered the business units that make components to sell parts at zero profit, according to two people familiar with the plans who declined to be named because the details are not public.
Foxconn’s labor policies and practices are in line with industry standards and are regularly reviewed by government authorities and customers, it said in an e-mailed response to questions. Foxconn declined to comment on Gou’s management style.
Because Gou is willing to forego margins to win orders, clients like Apple and HP are able to boost their own profits, said Daniel Chang, who rates Hon Hai Precision “outperform” at Macquarie Group Ltd. in Taipei. Hon Hai Precision had an operating margin of 4.3 percent last year, compared with 27 percent for Apple and 9.6 percent for HP, Bloomberg data shows. The company’s net income jumped 37 percent to NT$75.7 billion ($2.3 billion) in 2009, its second-best year on record.
“The fundamental problem for Foxconn and other Chinese factories is that their business model relies on a low-cost workforce sourced from rural areas of China,” said Pun Ngai, a professor of applied social sciences at the Hong Kong Polytechnic University. “Due to its size, Foxconn has to be that much tougher than other factories, and has to become more emotionally detached from its employees than others.”
In addition to Apple, Hewlett-Packard and Dell, the world’s largest and third-largest personal-computer makers, have begun investigations of Foxconn. Dell spokesman Jess Blackburn and Hewlett-Packard spokeswoman Shelby Watts declined to comment on the status of the investigations.
Apple and other computer makers should emulate American toy makers, who faced a similar predicament, according Gene Grabowski, who chairs the crisis and litigation practice at Washington-based Levick Strategic Communications, a public relations firm in Washington.
After Chinese suppliers for Mattel Inc. were found to be allowing lead paint into products sold in the U.S. in 2007, the company sent inspectors to watch over the plants and invited the media to monitor improvements.
“Apple is especially vulnerable because Apple’s computer buyers tend to be more socially aware,” said Grabowski. “They care about computers, they care about the environment, they care about working conditions.”
For the group’s more than 800,000 employees in China, Foxconn’s success also provides a livelihood. One of them, 30-year-old Chen Zhonglei, said the suicides are due to the immaturity of the workers and not the company’s policies.
“These young workers coming in now are not as ready to take on hardship as much as I was when I arrived,” Chen said. “Psychologically they’re more fragile. These new workers need to come in with an idea about what they want to get out of working here.”
Foxconn’s working conditions are among the best in China, said Huang Ping-der, an associate professor of Business Administration at Taipei’s National Chengchi University. The recent suicides in China have highlighted weaknesses in the company’s management structure, he said.
China had a suicide rate of 16.9 people out of 100,000 taking their own lives in 2004, according to estimates from the World Health Organization.
Foxconn raised pay for workers by 30 percent to 1,200 yuan from 900 yuan a month, spokesman Edmund Ding said yesterday. The additional money may not be enough to stem the suicides, according to Xiao Qi, a college graduate who works at Foxconn in product development. He earns 2,000 yuan a month, yet gets no joy from his job, he said.
“I do the same thing every day; I feel empty inside,” said Xiao, who said he has considered suicide. “I have no future.”
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