Unskilled labor the missing link in IT manufacturing?

Foxconn subverted local labor laws when it replaced qualified workers with student interns, but the increasing use of unskilled labor could be the missing link for technology manufacturers eager to completely automate production--and boost profits.

The Taiwanese electronics manufacturer, which major clients include Apple and Acer, over the past few years has suffered damage to its reputation over its association with students, robots and suicides at its plants in China. Investigations by various interest groups have delivered mixed results, but they fail to answer questions about the future of China's most valuable resource: people.

Students and workers are pessimistic about their future prospects, noted university lecturer Ellen David Freidman, who for the past seven years taught labor studies in the school of government at Sun Yat-Sen University in Guangzhou, China.

"Increasingly, so much work is de-skilled. There's a small sector of workers who increasingly need to be trained for high levels of technological and scientific acuity in their work, but the more important trend is actually de-skilling," said Freidman, who has campaigned for American worker rights for several decades. "Foxconn is a great example. They want to robotize to deal with their labor problems, but the more they do that, the more it's going to be some human being pushing a button."

Foxconn had come under scrutiny after over a dozen employees in 2010 committed suicide over low wages and long working hours. Worker lobby groups demanded hours be shortened, wages lifted, and working conditions improved. In response, Foxcon's management team erected suicide prevention nets beneath worker dorms, and made workers sign anti-suicide pacts.

The Chinese government also raised the minimum wage and capped employee overtime.

The public backlash forced Foxconn's biggest client, Apple, to better protect worker rights in its supply chain policies. This climaxed in February when the Cupertino-based iPhone maker ordered Foxconn to open its factory doors to inspectors from the industry group, Fair Labour Association.

After a month-long investigation of three factories in Guanlan, Longhua, and Chengdu, Foxconn committed to fully comply with Chinese legal limits and FLA's standards on working hours by July 2013. The manufacturer completed all 195 remedial actions due by May 31, 2012, including protecting worker pay while fully complying with the Chinese legal limit of 40 hours per week and maximum 36 hours overtime per month. It also cut the number of student interns from 519 to 46, and the FLA declared two of its three factories intern-free.

The initial investigation warned Foxconn could subvert labor laws by hiring student interns. "Under Chinese labor law, interns are not defined as employees and legally, no employment relationship exists between the factory and the interns. This means general protections of the labor law do not apply to interns, including social security benefits normal workers receive," the FLA wrote in its report. "While regulations applying to interns exist in Guangdong Province and the Ministry of Education has issued policy regarding interns, their employment status remains vague and represents a major risk."

ZDNet Asia contacted Foxconn but the company did not respond with comments for this report. 

Student interns the answer to labor crunch?
Foxconn, amid the suicides at its plants, had negotiated with the Henan provincial government--which was keen to attract the investment--to build a new factory in Zhengzhou, along with the guarantee workers will be available to exclusively produce the iPhone.

According to a report by worker rights group Students & Scholars Against Corporate Misbehavior (Sacom), Foxconn received full support from the Henan government in terms of construction of the factory, providing dormitory, recruitment of workers, and so on. "Due to the high turnover rate at Foxconn and an influx of orders from Apple, local governments are pressed by the provincial government to send more workers to Foxconn. Each of the local governments has to meet the quota."

In August 2012, the Henan government recruited over 30,000 workers to work at Foxconn, with almost 1,000 student interns sent from local Technician Institutes at the behest of the Henan government, Sacom said.

Unlike other industries, though, technology manufacturers are in a unique position to use unskilled labor, such as student interns, to perform disciplined, repetitive actions required to assemble some devices, according to National University of Singapore's visiting senior research fellow, Amitendu Palit.

However, in the pursuit to manufacture and distribute increasing volumes of products across the globe, technology companies inevitably reach a point when it is no longer cost-effective to employ humans.

These limits have been severely tested by Apple, and its primary supplier Foxconn, which must imagine, develop and distribute iPhones on a massive scale and volume--all while delivering maximum profit to shareholders.

Palit said: "For a company like Foxconn, the kind of success Apple has been enjoying--in terms of staged and phased levels of innovative outputs it is churning--obviously means it has to respond more in terms of volume and scale, while maintaining the quality levels unchanged, or even improving them."

Missing link in robot evolution
In fact, the need to improve efficiency and address rising labor costs drove Foxconn to reveal plans to replace factory workers with a million robots. Founder and chairman, Terry Guo, said the company's robot army was expected to grow 100-fold over the next three years.

The Apple-Foxconn partnership is a benchmark for the industry, Palit said. "In spite of having your workers, who could be very well-trained, very well-customized, you're likely to have more human errors. [By using robots] those human errors are likely to be missing from these technology-intensive manufacturing where these products are generated.

"And when it comes to responding to unexpected demands, it's possible to step up [production] by utilizing these inputs better. I think it's these technology-intensive, volume-driven industries where we're likely to see these," he noted.

He added student workers could be the missing link in the evolution to a completely mechanized manufacturing workforce--a migration that has already begun. "It does signal fundamental changes we're likely to witness in the global workforce over the next 10 to 15 years, and many of these changes are going to be considerably radical," Palit said. "I do think to look at the possibility of robots gradually replacing human workers in certain basic-skilled operations, to achieve the scale efficiencies, that's a given."

"Maybe this will not happen at an equal pace across the world, or across industries within a particular economy, but it will happen," he said.

Mahesh Sharma is a freelance IT writer based in Australia.