Hon-Hai finds the iPhone a double-edged sword

No doubt Hon Hai Precision Industry was pleased with itself when it won the contract to produce a mobile phone for Apple.

More business would mean more profit for the company, headquartered in Taiwan but able to access the world's largest pool of cheap labour in the 'People's' Republic of China.

But the iPhone is a double-edged sword. Media darling that Apple has become, each of its moves comes under intense scrutiny from an industry seeing the benefit of having any iGadget mentioned in its headlines - we've certainly seen evidence of this ourselves.

But when workers at Hon Hai's Foxconn plants began jumping from its windows and roofs in suicide bids that are either work related, or a consequence of the firm having the highest buildings in the neighbourhood, the same media were all over the phenomenon. No-one batted an eyelid if workers making notebooks for the likes of Dell or HP topped themselves, but workers making such sleek and sensitive devices must surely be filled with a similar glow of pride that consumers get when they open up the iPackaging for the first time?

Apparently not.

Foxconn's response, aside from the desperate attempt to install nets around its facilities with which to catch the falling bodies, has been to offer an increase in wages. First the firm announced a 20 per cent hike, then 30. This has eventually jumped to a staggering 70 per cent offer.

Of course, the money for the wage increases has to come from somewhere. Hon Hai's share price takes a battering each time a pay bump is mooted. Unsurprisingly, it is untouched when a worker jumps to their death. Hon Hai has stated that the wage increases would adversely affect its profits in the fourth quarter this year and continue into next year's first quarter.

At a shareholder meeting in Hong Kong, Hon Hai chairman, and Taiwan's richest individual, Terry Gou, outlined a cunning plan to move some production from China to automated plants in Taiwan but if the automated plants were ready they'd already be in full flow. Gou admitted the price of the wage hike would have to be passed on to its customers and consequently consumers in the West.

But worker power is growing in China - it seems bizarre to state it of a regime essentially branded Communist in the West. The sad fact of the matter, however, is that suicide is proving a more effective weapon than industrial action.

Reuters spoke to a Taiwanese labour group, the Worker Injury Association, whose secretary general Huang Hsiao-ling said: "I think Gou is trying to use salary hikes to cover up how his production line is killing people. It's a crime in management and we really despise it."

Wage competition is fierce in China and there are any number of industrial giants churning out electronics gear for brands such as Apple, Dell, HP and Acer. These lesser-known names include the likes of Quanta, Compal, Pegatron and Merry.

Acer is another Taiwanese company that was a manufacturing force in China, but it had the foresight to ditch the mucky business of manufacturing, learning from the US giants that branding is more important than owning factories when it comes to the bottom line.

Such companies are able to switch suppliers and at low cost because of the size of the orders they are likely to place - you don't have to own a factory to effectively run it.

The likes of HP, Dell and Acer might be able to switch suppliers willy-nilly, but with the media circus that surrounds it, Apple might find it more difficult to avoid the spotlight.

Unlikely as it may seem, the iPhone is actually promoting workers' rights in China.

It remains to be seen how deeply consumers will dig into their pockets in order to give the people that actually make it a living wage.