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Foxconn International Removed From Hang Seng Index 91

Posted by timothy from the see-fellas-there's-this-thing-called-goodwill dept.
Tasha26 writes "After the suicides and fatal explosion, the Taiwanese company Foxconn now faces losing its blue-chip status. Falling prices for smartphones, laptops, tablets and other gadgets and rising wages in China have undermined Foxconn's financial performance. The company lost $220m (£135m) in 2010. Foxconn International will be removed from Hong Kong's benchmark Hang Seng index and be replaced by insurer AIA and nappy maker Hengan. The two new entrants use China both as a source of cheap labour and as a market for their product, a switch which Foxconn is now considering."
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Foxconn International Removed From Hang Seng Index More

Foxconn International Removed From Hang Seng Index

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  • Great...? (Score:3)

    by Lunix Nutcase ( 1092239 ) on Tuesday June 07, 2011 @10:50AM (#36362388)

    The two new entrants use China both as a source of cheap labour and as a market for their product

    They sound like fine, upstanding companies! Oh wait... So basically they just replaced one exploitative company with two more!

    • Re:Great...? (Score:4, Interesting)

      by TheRaven64 ( 641858 ) on Tuesday June 07, 2011 @10:54AM (#36362420) Journal
      The second is the more important part. Foxconn uses China as a source for cheap labour, but focusses on exporting their products. The fact that this is a failing business model is interesting, since it shows that China needs the west a lot less than you might have thought - companies that make things in China and sell in the USA are failing relative to companies that make things in China and sell them in China.

      • Re: (Score:3)

        by eln ( 21727 )
        China's middle class is exploding, so there are markets there that didn't exist only a few years ago. Ironically, one of the hurdles for Chinese companies to overcome is that many middle class Chinese seek out American (or otherwise foreign) products because they believe Chinese products are largely shoddy knockoffs. This means that, at least for now, most Chinese manufacturers are only able to successfully sell to the wealthier parts of the Chinese market by doing outsourced manufacturing work for an Ame

        • This has been true for a long time.

          I once met someone who had been a manager at Bell Labs back in halcyon days. He had spent a good bit of his career in China, Japan, and Korea.

          He said that when working in China, the Chinese made no bones about copying what Ma Bell was doing. He said at one point the Chinese govt (or some corporate proxy) had rented a floor in the building where AT&T had offices, and were completely conspicuous about breaking in, stealing data, planting moles. He was baffled as to why A

          • Re: (Score:2)

            by Exitar ( 809068 )

            He said at one point the Chinese govt (or some corporate proxy) had rented a floor in the building where AT&T had offices, and were completely conspicuous about breaking in, stealing data, planting moles. He was baffled as to why AT&T continued to do business there...

            I'm more baffled by the fact they didn't hire some guards (non local, just to be sure) to prevent that.

            • I'm sure that the chinese government backed goons doing the break-ins could have bribed/intimidated the guards enough to let them in anyway, and probably help cover their tracks somewhat

          • Re: (Score:2)

            by tlhIngan ( 30335 )

            It baffles me to too... why so many American and European companies are so willing to quicken their demise for a few bucks today.

            Blame the short-term shareholder. The guy who wants results today, screw tomorrow. $1 today is worth much more than $2 tomorrow. Basically get-rich-quick investors who want to hold onto an investment just to make a buck and sell it after they have.

            Take a look at share prices around earning report time - the usually start rising just after the quarter ends then what happens after t

          • Maybe we'll see some offshoring back to the US with shipping costs being what they are.

            It's already happening. I unfortunately don't remember which company exactly, but quite a few US manufacturing companies are heading back to the US for their manufacturing facilities. Guess where they're relocating though? The South, which has few to no unions and state governments falling over each other to provide tax breaks.

            • I live in the south. It's not just internationals resourcing here, but internal economic refugees. In one of the cities adjacent to where I live, I think roughly 40% of the population is from New York and New Jersey. It's rare to find actual southerners around in a lot of city centers and towns in some places!

              The bad news is the refugees tend to bring their politics with them (though they do tend to be less extreme than those who chose to stay) and thus the cycles repeat.

          • the CEO and top executives get the bucks today, and they get golden parachutes tomorrow. it is not really any of their problem if the entire company goes down the toilet.

            it is very much what happened in the financial crisis - CEOs like Dick Fuld of Lehman brothers walked away with hundreds of millions of dollars. He lost a lot of money personally, but he is not wondering where his next meal will come from.

            There are thousands if not tens of thousands of lower level executives, hedge fund people, etc, who did

        • Re: (Score:2)

          by smelch ( 1988698 )
          Yeah, see, its almost like corporations are "outsourcing" and turning desolate pieces of country in to industrialized ones that can compete in the marketplace while democrats bitch and moan about exploiting people and greedy corporate elitists. Who is it that is really greedy?

      • Re: (Score:2)

        by jandrese ( 485 )
        I think the fact that their business model is failing has more to do with their extremely aggressive push to offer the lowest possible prices than anything else. Basically, they undercut themselves in an effort to get all of those big contracts we hear so much about. In other words, their problems stem more from their management practices than from socioeconomic factors.

      • "The fact that this is a failing business model is interesting, since it shows that China needs the west a lot less than you might have thought - companies that make things in China and sell in the USA are failing relative to companies that make things in China and sell them in China."

        Brrr... it's a good thing I have friends in Shanghai.

      • The second is the more important part. Foxconn uses China as a source for cheap labour, but focusses on exporting their products. The fact that this is a failing business model is interesting, since it shows that China needs the west a lot less than you might have thought - companies that make things in China and sell in the USA are failing relative to companies that make things in China and sell them in China.

        Or it could be because of a thousand other reasons, or more likely a combination of a lot of factors.

    • "h wait... So basically they just replaced one exploitative company with two more!"

      Do note that Chinese have NEVER been better off, and that this is a _perfectly_normal_transitional_stage for developing nations. You take casualties in economic competition just like any other war.

      I'd rather pull long hours at a Foxconn plant than go to an early grave working in a US textile plant or coal mine decades ago. China has come a LONG way since 1948. That's a very short time in economic development terms.

      • I'd rather pull long hours at a Foxconn plant than go to an early grave working in a US textile plant or coal mine decades ago.

        http://c2.com/cgi/wiki?FalseDichotomy [c2.com]

        • The original poster's sentence isn't a dichotomy. There's no implicit statement that working in any of the jobs listed are the only options; the poster is simply expressing a personal opinion via a comparison.

          http://www.wisegeek.com/what-is-a-dichotomy.htm [wisegeek.com]

          • Yes, it is. When you express a preference for one of two states, and completely fail to acknowledge that there are other possible states, you are implicitly presenting a dichotomy.

            In this case, the state that's being ignored is one in which companies are able to make products and workers are treated like human beings. You can argue why it can't happen, or why workers don't deserve to be treated like human beings, but ignoring it is a dishonest tactic.

            • Re: (Score:2)

              by marnues ( 906739 )
              It isn't ignored at all. You completely missed couchslug's point. He listed 3 real jobs that are comparable in a socioeconomic sense. Of course we all want a good job with intelligent and responsible management, but how about we stick to the discuss instead of bringing up random tangents?

      • Re:Great...? (Score:5, Insightful)

        by eepok ( 545733 ) on Tuesday June 07, 2011 @11:11AM (#36362594) Homepage

        Oddly enough, this is historically correct. I'd mod you up if I had points.

        It doesn't make it right or good, but regions (not nations) have been shown to go through industrial and economic changes in roughly the same pattern:

        1) Dominance/Slavery/Colonialism
        2) Once dominance becomes too unsavory or colonialism becomes too dangerous, enter "Exploitative Industrialism" (China is here.)
        3) Once wealth has been spread sufficiently to empower the majority, reliable Workers' Rights comes in.
        4) After Workers' Rights prevents the exploitation of local labor, companies find international sources of labor to exploit. (The "1st World" is here.)
        5) ??? We're all hoping this will be "Automation becomes main labor source and the profits are shared with those that would otherwise be working in the form of social welfare and education..." but it will likely be "Automation makes things ever more profitable, people laid off, economy slides because no one has income, company fails."

        • 5 is the stage where the lower class is no longer needed, which creates instability and unrest, which leads to revolution, which kills all the smarties, redistributes the wealth, back to Stage 3.

        • Re:Great...? (Score:4, Insightful)

          by scamper_22 ( 1073470 ) on Tuesday June 07, 2011 @12:21PM (#36363480)

          I work with computers all day.
          I often wonder what people think computers are all about.

          They're all about replacing human labor. I find it odd working in this field and talking to people outside it.

          People outside the field seem to think that every age has a 'new economy' but everything else stays the same... as if nothing has changed in history. So they talk as if the 'green' economy will provide everyone with jobs... just 'green' jobs. Or they think we'll all be doing analytical work.

          The problem is typically these people lack an understanding of scale. It's odd how so many academics lack an understanding of scale as well. All the 'good' jobs of the future are jobs that do not scale with the population. They are for small groups of highly skilled people.

          So Google can do all it does with a mere 30K people or so. That is enough to serve the whole world. Just to put it in context. BlockBuster employed 60K people and it represents just a sliver of what Google can do (content delivery).

          The single biggest problem is that the private sector is increasingly not scaling with population. Small highly efficient operations are there.

          The public sector typically does scale with population. More nurses, doctors, police officers, teachers... are needed as the population grows. Now we can certainly try and automate parts of these jobs (online class delivery...), but in general we're not there technologically or the unions won't allow it.

          So we have a structural imbalance. The only way out of it... is to go to the start... computers are doing what they were meant to do... kill human labor. We should all be working less... job sharing. the result is a much more egalitarian society... with potentially a very rich upper class at the top of some of the automation companies.

          However that would kill people's position of privilege in society. Public sector workers expect a premium over the average person. Ditto for bankers...

          IMHO, we need to embrace deflation and the lack of work and redirect people to the jobs that still need doing. Maybe we need vast numbers of people to work on the farms 2 weeks a year. Other need to go mine for rechargeable batteries.

          One of the biggest problem we still face is the emphasis on 'educated' labor. Just as the industrial revolution automated manufacturing jobs. The information revolution automates so much educated labor. We need a few experts, but computing can do the rest.

          So we need to get rid of the idea that just because you're educated, you should be paid more. Most of the legal and financial jobs are unproductive today. Just there to keep educated people in a premium position over society. We could for example automate and simplify the entire tax field and get rid of most accountants.

          But as I said, people are used to their position of privilege. Egalitarianism is a hard concept... even though people talk about it. When people talk about good jobs, they mean jobs better than someone else.

          It's definitely going to be a rough time... especially since technology is deflationary... but governments and banks are inflationary. We certainly can't embrace deflation as governments have so much debt and banks are dependent on people taking loans... and guess who is in charge of most countries (bankers and governments...)

          Expect a rough time.

          • Re: (Score:2)

            by sjames ( 1099 )

            What we need to get rid of is any concept that the economy is anything but a construct of man that should serve all people within it.

            If it doesn't do the moral and just thing, then it is broken and must be fixed.

            Apparently, in the U.S. there isn't enough work that needs doing to occupy the entire adult population 5 days a week 8 hours a day. That COULD be a very good thing except that we insist on a bizarre all or nothing scheme for employment. Perhaps we should go to a 30 hour week and employ the unemploye

          • Expect a rough time.

            The solution to what you write above is very simple. The word is cull. It won't be computers that will be culled. It will be us. Maybe I have a waped view of what the future entails but I don't think I do. I actually hope I am wrong.

        • No, automation meets the first step.

          It is far easier to automate the gamut of tasks that a person with a <100 IQ can do, versus a person with >100 IQ. The former will be automated out of the picture, and therefore will be ridiculously cheap. We're going back to the good old days when your average middle-classman could afford a maid, a butler, a city home, and a country home.

        • #5 is also known as Communism. As I grew up in China, I remember the teaching in the middle school political science class was that Marx claimed the very advanced capitalistic society would adopt communism successfully. I don't know if Marx had actually said the same, but the theory is certainly used to justify the extreme capitalistic economic reform since the 1980's without changing the political brand name. At the time, I doubted this theory, partially because nobody believed whatever the government said

          • Clarification: I meant this part ""Automation becomes main labor source and the profits are shared with those that would otherwise be working in the form of social welfare and education..." of the #5, not the second part. The second part cannot be sustained because it will lead to revolution -- it is probably the final stage of advanced capitalism.

      • they have one of the worst safety records in the history of coal mining, and if you talk about it you get put in a labor camp

        hell, they just imprisoned a guy who ran a website about the poisoned baby-milk scandal. Zhao Lianhai.

    • FTFA: "Both companies target China as a market for their products rather than as a place to make goods cheaply for export."
    • They are 'exploiting' the labor because the happy socialist regime allows this to happen. If there was a sensible minimal wage law a Yuan equivalent of say $10000/year then this would suddenly stop and Apple would be forced to finally automate the manufacturing and even bring it back home.

      • You illustrated in your own post why this doesn't work. Companies leave, there is no job, and suddenly the people are worse off.
        You haven't been to China if you think you need $10000 as a living wage.

        • Re: (Score:2)

          by ewieling ( 90662 )
          USA Federal min wage works out to be $15,080/yr. I would not call that a "living wage". Not in the USA.

      • Re: (Score:2)

        by eepok ( 545733 )

        I almost agree. If there were a wage increase, Apple (and most other companies) would do their best to find another reliable and exploitable people. If that can't be found, only then would they seek skilled labor to oversee automated operations... but even then, it would be cheaper to run such plants overseas due to taxes, cost of land, cost of skilled labor, etc.

        Well, or they could reduce their own profit margins so the product could still be "affordable" to local consumers and be made in the USA. But, rea

        • Re: (Score:2)

          by h4rr4r ( 612664 )

          There is a limit to that game, the nation you want to move labor to has to have infrastructure of a reasonable nature. These days the time between reasonable infrastructure and enough middle class to enact workers rights is getting pretty short. I fully expect the Chinese to be there in the next 20 years, probably less. India is probably going to be shortly there after, and while much of Africa has labor that works for very little infrastructure issue really hinder many of those nations from being used for

        • Re: (Score:1)

          by Anonymous Coward

          "Well, or they could reduce their own profit margins so the product could still be "affordable" to local consumers and be made in the USA. But, really, what company would do that?"

          I worked for ~4 years at a sporting goods company that makes archery products. Every single product is designed, built, powder coated, assembled and packaged right here in the USA, in Kentucky and Idaho. And, the Aluminum is from the USA as well. The price point is slightly higher than the competition, though profits aren't qui

      • Umm, China is officially communist. That little tidbit aside, I will paraphrase Jim Cramer. He says that we can learn a thing or two about capitalism from the Chinese. The leadership in China knows that by keeping labor costs low in addition to keeping their currency artificially low by fixing its value to the dollar, that it can export to many countries. It is part why it is so lucrative for US companies to export the labor and production there.

        I think lately that China has allowed its currency's value

        • Are the material required to make the electronic components heavily dependent on imports?

          have you seen what QEx did to commodity prices? Everybody and their dog uses commodities as a hedge against the inflation thus making producers' life harder.

          This is really just helping China more on the relative cheapness of their exports.

          there is one major problem with the currency peg for the Chinese. US prints money and doesn't keep it in its borders. Printed money goes abroad to pay for imported stuff, thus exporting the inflation to producer nations. Chinese print yuan to match dollar pool to maintain the peg, so they end up with inflation and to make things worse they have to sit o

      • Yes, because Apple is the only customer of Foxconn. Wait, pretty much every US electronics company uses Foxconn labor to some amount.

    • Re: (Score:2)

      by AmiMoJo ( 196126 )

      You misunderstand. Foxconn makes products that most Chinese people can't afford so is basically locked out of its home market. I can only make stuff for other companies that sell abroad. These two new companies sell their products in China so as wages (and thus production costs) rise their prices can rise too.

      Wage increases cause inflation, but it isn't a problem if the same people earning more are also the ones now able to spend more on your products. Foxconn's problem is that while Chinese wages are going

    • Re: (Score:1)

      by Anonymous Coward

      I think you need a lesson in capitalism.
      It's not how exploitative the companies are that matters, its how profitable they are.
      It could actually be the case that Foxconn aren't exploitative enough!

    • it's certainly better than other options for the poor in china

      i always want to ask people who complain about the exploitation of factory workers in poor countries: what's your alternative? go back to the farm and starve?

      factories in poor countries are exploitation RELATIVE to standards in the west. but RELATIVE to where these workers are coming from, conditions are BETTER

      here, from us history:

      http://en.wikipedia.org/wiki/Triangle_Shirtwaist_Factory_fire [wikipedia.org]

      this is basically china, today

      what came of horrible ind

    • Re: (Score:1)

      by gl4ss ( 559668 )
      not just exploitative - UNPROFITABLE TOO. i've been wondering about that, it must have cost an arm and leg in mortages to build their sites(build a city on loan money, I don't think apple&others were paying them high enough profit margins for them to pay off all the investments that went into kickstarting their huge drone assembly operation), it will cost a lot to keep the guys there and it costs a lot to keep them entertained or working - and optimizing the workflows doesn't work when you're tied to th

  • No more iPads.

    Guess they better learn to control inflation. The way America did.
     

  • Nappy? (Score:1, Funny)

    by stopacop ( 2042526 )
    What the hell is a nappy? I'll ask Don Imus!

    • Re: (Score:2)

      by ep32g79 ( 538056 )
      For North American readers, a "nappy" is a diaper.

      • In the finest slashdot tradition, not only did I not RTFA, I barely skimmed TFS. Somehow, I came to the conclusion that Apple was switching away from Foxconn to Hengan for their manufacturing. This said to me that Apple was tacitly acknowledging that their iProducts were full of crap.

        I guess I pretty seriously misread that. It's not really an Apple article at all, which was terribly disappointing.

      • Re: (Score:2)

        by Mashiki ( 184564 )

        That might apply to Americans, and possibly some asian countries. But us Canucks know what they are. You know that whole 'let off the british leash' ~30 years ago when we repatriated.

  • Foxconn is investing $12bn in Brazil [bbc.co.uk]. Citing the rising labor costs in China for this expansion.

    • Re: (Score:2)

      by Fastball ( 91927 )

      And Brazilian labor is already pushing back [yahoo.com]. Interesting to see how this plays out over time and which culture ultimately wins out. If only the Chinese had a Great Artist they could dispatch to culture bomb Rio De Janiero.

    • Re: (Score:1)

      by gl4ss ( 559668 )
      ahaha, so the the fix is to dump 12 billion into repeating the same? so they're cheaper labor in brazil, but how does that equate to foxconn getting more money? it's not like they can decide where they assemble the stuff and how and where the parts happen to be.
  • I wonder if it'll ever happen where companies abduct the starving, diseased children in Africa or India (again), drop them in a hidden or secured and un-visitable facility (E.g. no press), and farm their own population of slaves to 'solve the problem of world hunger' and still make a disgusting amount of profit off of the end-buyer.

    • They would already be doing it (and perhaps they *are* and we just don't know). Since China tends to favor the Chinese, I think they would abduct populations and turn them into "Soylent Green" to feed their own population first.

      Secondly, there's ALREADY a cheap supply of labor right next door to them, it's called North Korea. The only problem is that NK has zero infrastructure. I think they are waiting for the current regime to die, and then they will waltz in and take over. And it will actually be a good t

      • They would already be doing it (and perhaps they *are* and we just don't know).

        Do some research on the Marianas islands.

      • Chinese do this to themselves already. Theres been a number of reports that have managed to seep out about this kind of thing. Generally happens with items that remain inside Chinese borders however. People get told to get on the trust for work for a few months, and aren't heard from until a police raid happens because the owner doesn't pay off the right officials anymore. Hell, it happens right in plain sight far too often. Hell, I was in a bath house in Shenzen. Cute little minx going to town on my legs

  • Is way off base.

    Foxconn makes products under contract. Many many of the products they make are sold into China.

    They do make few products under their own name plates which is maybe why the reporter is confused?

    Also I think the reporter may be confused about what the company actually is. Hon Hai Precision is Foxconn.

  • Foxconn will still make money, they'll still treat their workers poorly, and we'll still keep buying their products.

    Foxconn has their hands in EVERYTHING. From sockets to full products under contract with other companies. They do it all when it comes to semiconductors.

  • Didn't we cover here the story that Foxconn's suicide rate was well below population averages in China? Do the other Chinese 'blue-chip' companies have even lower suicide rates?

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