Foxconn criticized for yo-yo hiring and layoffs

Source:Global Times Published: 2019/3/3 19:38:40

Illustration: Xia Qing/GT

As the world's largest original equipment manufacturer (OEM) with more than 1.2 million workers, Taiwan-based Foxconn Technology Group has established more than 30 industrial parks across the Chinese mainland. According to incomplete statistics, seven of its industrial parks employ at least 980,000 workers.

While Foxconn offers an obvious boost to local employment and economic development, its development model also brings many side-effects, which is why local governments should be wary of the "Foxconn pitfalls" these large-scale OEMs bring.

The global economic slowdown has led to a sharp drop in sales of Apple's smartphones, which has also had a significant negative impact on Foxconn. Early in October 2018, there were already media reports that due to lower-than-expected iPhone XS sales, Apple had told Foxconn to cut back production by 10 percent, leading to massive layoffs at the OEM. In the face of media reports about layoffs of 50,000 workers from its factory in Zhengzhou in Central China's Henan Province, Foxconn on January 22 said in a statement that changes in employee numbers were part of its usual adjustment based on global strategy and customers' needs, and that it was trying to recruit more than 50,000 positions in the mainland during the first quarter of 2019.

Taiwan's Central News Agency then reported on February 18 that Foxconn is expected to add 50,000 workers at its Zhengzhou factory and 20,000 people at its Shenzhen factory in South China's Guangdong Province, as it has received orders from Huawei Technologies. Moreover, after the Chinese New Year holidays, recruitment efforts have also been in the works at other plants across the mainland, including Central China's Hunan Province and East China's Jiangsu Province.

It is undeniable that Foxconn has made important contributions to the local economy by creating a large number of jobs. However, there is still plenty to worry about when it comes to the impact of OEM industry companies like Foxconn on the urban economy. Considering the huge boost Foxconn and other OEMs have had on local economic growth, it is totally justified for local governments to invite Foxconn to invest and build local factories. But as public policy makers, local authorities sometimes need to think about the issues from another angle. For companies like Foxconn, the orders they receive determine their production capacity, and this translates to the number of jobs. When they need hands, they may add tens of thousands of positions, but when they downsize, the number of layoffs is also large. Thus, the cuts and increases of tens of thousands of jobs will have great impact on local economies, which is not conducive to social stability. And local governments may not even be able to deal with the changing employment market in a timely and proper manner.

Another problem may arise from Foxconn's large employment scale. At present, hundreds of thousands of young people are doing assembly work on the production lines. As time goes by, they will generally miss the most important window for learning. If they lose their jobs, they basically have no ability to start a business for a better future. In the OEM industry, the probability of unemployment is very high. Therefore, local governments should bear some moral responsibility for the future of these young people.

When China enters a certain development stage, we should take a new look at OEMs like Foxconn. These OEMs, which have large demand for various resources, may bring economic benefits, but at the same time may also constitute a "strong intervention" in the original economic system with side-effects that cannot be overlooked. In a period of rapid economic growth and rapid urbanization, the OEM industrial model may benefit the local economy a lot, but when economic development enters another stage, in which supply and demand of various resources such as labor, environment, energy, land and space gradually become more balanced, the Foxconn model will inevitably encounter problems and will also create problems.

In short, while Foxconn and other OEMs may provide a remarkable lift to the local economy, their development model will also cause many side-effects. Therefore, local governments should be aware of the "Foxconn pitfalls" and take a cautious attitude toward holding large-scale OEMs, which cannot last forever.

The article was compiled based on a report by Beijing-based private strategic think tank Anbound.

Posted in: INSIDER'S EYE

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