(MoneyWatch) In 2010, 18 employees making iPhones and iPads at the Foxconn factory in China attempted suicide. Much was made of this in the media at the time -- although few people paid attention to the fact that Taiwanese-based Foxconn, the largest private sector company in China, also works for Microsoft, IBM, Samsung, Amazon, HP, Dell and Sony. Nevertheless, with the focus on Apple, Steve Jobs gamely insisted that the factory, with swimming pools and cinemas, was far better than required. The Foxconn communications director Liu Kun, argued that with more than a million employees in China alone, the rate of "self-killing" wasn't far from China's relatively high average. Everyone pledged to do better and the story went away.
Well, not quite away. A team of courageous researchers, Students and Scholars against Corporate Misbehavior (SACOM), pursued the story. Working as a team to protect themselves and their interviewees, Jenny Chan and her colleagues interviewed Tian Yu, a 17-year-old-girl who had attempted suicide after her first month at Foxconn. She survived but suffered multiple spinal and hip fractures and was left paralyzed from the waist down. Her story, now published in the academic journal New Technology, Work and Employment, sheds an extraordinary light on the process that feeds us new gadgets every day.
Yu stood in line an entire morning to apply for the job, filling out the job application, taking a blood test and having her fingerprints scanned. She got a staff number and an employee handbook full of motivational encouragement: "'Hurry toward your finest dreams, pursue a magnificent life. At Foxconn, you can expand your knowledge and accumulate experience. Your dreams extend from here until tomorrow." At orientation, she and her fellow new hires were told stories of entrepreneurs Bill Gates and Steve Jobs as inspiration for their new careers.
She was late for work the first day because the site is so vast and confusing that she got lost. "The factory directory shows that there are ten zones listed from A to H, J, and L, and they are further subdivided into A1, A2, A3, L6, L7, J20, and so on. It takes almost an hour to walk from the south main gate to the north main gate, and a.m.another hour to walk from the west to the east gate. I did not know what each building was, nor did I know the meaning of the English acronyms that could be seen written everywhere, such as FIH [Foxconn International Holdings] and the JIT [just-in-time] Hub."
Yu's job was inspecting screens to ensure they weren't scratched. She woke at 6:30 a.m., attended an unpaid meeting at 7:20 a.m. and started work 20 minutes later. Lunch was at 11 a.m. and she usually skipped dinner to work until 7:40 p.m. -- a 12 hour day. Technicians from the engineering department time every task and, if workers can meet the quotas, the targets are increased. Anyone unable to meet their hourly quota is not allowed to rest. Conversation in the workshop was forbidden.
Quotations from Foxconn's CEO, Terry Gou, adorn the walls: "Growth, thy name is suffering," and "Execution is the integration of speed, accuracy and precision."
Then there was, "Achieve goals or the sun will no longer shine."
To achieve targets, Yu had to adopt a particular posture, her stool had to stay within yellow and black lines; every movement was studied, rationalized and standardized for maximum efficiency. Although Yu made no mistakes, she saw others punished by being made to stand at attention for hours or endure a public humiliation of reading statements of self-criticism.
Sleeping in a company dormitory, Yu made no friends because her shifts were always being changed, making it hard to develop personal relationships. Her roommates also were from different parts of China, so there were significant linguistic barriers. Those might have been overcome with time -- except there was no time. The factory was, she said, "a massive place of strangers."
At the end of her first month, Yu received no wages because of an administrative error that no one helped her to resolve. She had to take a bus to another factory of 130,000 people where she had to try to find someone to locate her wage card. No one would help her. The second-hand cell phone her father had given her when she had left home broke and she had no money left. With no friends, no communication and no money, she jumped from her dormitory window.
Because of her injuries, Yu can no longer be a migrant worker. Although she eventually went back to her family in the country, she can't be a farm worker either. She has managed to learn to brush her teeth, dress herself and sit up and has started to weave slippers to earn a little income.
Foxconn's response has been, fundamentally, to blame the workers. CEO Gou insists that if he were running the factory in his homeland Taiwan, he would not be held responsible for the suicides; only in China is he forced to bear this burden. Now, new hires must sign an anti-suicide pledge, promising that if they kill themselves, the company won't be blamed or pursued for compensation "so that the company's reputation would not be ruined and its operation remains stable." Only after an outcry did the company retract the document.
It put up safety nets instead.
Labor unions have operated within Foxconn since 2006, but they are more symbolic than real. The chief union liaison is the CEO's special personal assistant, who is on record as saying, "Suicide is foolish, irresponsible and meaningless." Wages have been increased by 9 percent, but quotas have risen by 25 percent. A worker making 5,120 phone casings per day now has to make 6,400 per day. A company phone helpline isn't trusted. The young workers who had hoped they might be able to work hard, save up and leave to start their own businesses mostly fail. Their dreams of professional advancement give way to exhaustion.
Chinese sociologists have warned that the suicides should be seen as loud cries for help from the population of migrant workers. Taiwanese scholars have called for an end to military discipline in factories. Foxconn has replied with a commitment to increase productivity and replace some jobs with robots.
The problem here is not shortage of funds. Apple is the second-most profitable company in the Global Fortune 500. Samsung ranks 12th, Microsoft 17th. Trading as Hon Hai Precision Industry, Foxconn ranks No. 40 in the Global Fortune 500, with profits of $3.2 billion in 2013. It's clear who gets the lion's share of this relationship.
According to other Research by Chan, "Foxconn's operating margins have declined steadily over the past six years, from 3.7 percent in the first quarter of 2007 to a mere 1.5 percent in the third quarter of 2012, even as total revenues rose in the same period with the expansion of orders. By contrast, Apple's operating margins peaked at 39.3 percent in early 2012 from initial levels of 18.7 percent in 2007."
You don't have to be an economist to appreciate that this is fundamentally a redistribution of wealth, from the productivity of Foxconn workers to the shareholders. What that means is that the employees of Foxconn don't just make our phones; they also fund our portfolios.