Apple, Foxconn To Split Costs To Upgrade Factory Working Conditions

By Benjamin Reeves | May 10 2012 11:39 AM

Apple Inc. (NASDAQ: AAPL) and primary iPad and iPhone supplier, Taiwan's Foxconn Technology Group (Taipei: 2354), will share the costs of improving labor conditions at the Chinese factories, Foxconn CEO Terry Gou said Thursday.

Reuters

Apple CEO Cook visits the iPhone production line at the newly built Foxconn Zhengzhou Technology Park

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While Gou didn't disclose the amount of the investment, he said the company now considers improving factory conditions to be fundamental to continued growth, Reuters reported.

We've discovered that this (improving factory conditions) is not a cost. It is a competitive strength. I believe Apple sees this as a competitive strength along with us, and so we will split the initial costs Gou said, according to Reuters.

Not specified: how the partners will split ongoing expenses.

Apple, based in Cupertino, Calif., has been pressuring Foxconn to improve conditions. Foxconn raised wages between 16 and 25 percent in mid-February after Lunar New Year and reached an agreement with Apple in March to hire tens of thousands of new employees to cut down on overtime. Foxconn's flagship Hon Hai Precision Industry Co. reported flagging first-quarter earnings, which have been attributed to rising labor costs.

Apple's relationship with Foxconn and the difficult working conditions at the Chinese company's factories, including several suicides, have been at the center of a controversy since at least 2006. Earlier this year, Apple hired the Fair Labor Association to audit working conditiions.

The industry backed association found significant issues with working conditions at three factories in China, its official report in March said.

Critics said the audit may not have been thorough or glossed-over issues at Foxconn to protect Apple. On his China trip in March, Apple CEO Timothy Cook visited Foxconn plants and personally pledged to improve conditions with regard to overtime.

Sportswear giant Nike Inc. (NYSE: NKE) faced similar charges of using child labor in sweatshops during the 1990s, a PR nightmare which eventually led it to contract with the Fair Labor Association. Although abuses still continued into last year, Nike management has been credited with incrementally improving conditions throughout the industry.

Foxconn Technology Group (Taipei: 2354) shares fell 1 new Taiwan dollar to NT $102.50 (US $3.49) a share. Apple (NASDAQ: AAPL) shares rose $3.84 to $573.02 in midday trading.