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Could the iPad see a "China wage" price increase? Some analysts think so. They say that many products including consumer electronics and clothing may become more expensive as Chinese workers are paid more.

Many workers in China today don't make enough to properly support their families. That is slowly changing, though, thanks to internation scrutiny on companies that manufacture in China.  (Source: East Day)
Improvements in working conditions may give firms just the excuse they need to bump prices

According to The New York Times, increases in the labor costs of manufacturing in China may lead to price increases in the U.S. and abroad.

The issue of Chinese workers' wages has been brought into the media spotlight following a string of deaths of workers at Foxconn's facility that manufactures the iPad and iPhone.  Most of the deaths were suicides, but at least one worker has reportedly died of exhaustion after being forced to work long hours.

Foxconn, which manufactures numerous computer motherboards and much of the world's top electronics -- including Nokia cell phones, iPads, iPods, iPhones, and motherboards for gaming consoles (the Wii, Xbox 360, and PS3) -- responded by offering employees up to a 30 percent raise, plus an additional performance-based raise.

Those raise increase the average plant worker's salary to 2,000 renminbi (China's currency) — about $300 USD.  Those increases, combined with appreciation of the renminbi currency may have a ripple effect resulting in rising manufacturing costs for a variety of retail products, including clothing and electronics.

Dong Tao, an economist at Credit Suisse, "For a long time, China has been the anchor of global disinflation.  But this may be the beginning of the end of an era."

In the short term, these cost increases remain relatively small compared to corporate profit margins.  For example, the new Foxconn wages are estimated to raise the cost of labor on the base model iPad by roughly 0.7 percent of the unit's cost, or approximately $3.50.  Apple makes approximately $200 in profit per iPad sold, though.  And while much of that profit goes to Apple's design and engineering costs, the company still is stockpiling cash each quarter.

The ripple effect is already being witnessed.  Honda announced it will also raise its average pay at one of its southern China plants to $300 USD.  And Beijing announced that the minimum wage would be bumped 20 percent to 960 renminbi, or about $140 USD.

As costs rise, some predict manufacturers will bump their prices.  A $50 price increase on the iPad, justified by improved Chinese worker conditions, would both make the company look good in the eyes of some and increase its profit margins.  Such increases, while distasteful to some, may soon become reality.

Ultimately, whatever the ramifications, the salary increases in China are long needed.  A long-standing shortage of jobs versus job-hunters has caused wages to sink dangerously low over the last decade.  Workers in the country have found it hard to support their families and pay for proper medical care.  Now that wages are rising employees may finally be able to afford the essentials.

Some manufacturers will likely flee to cheaper countries -- Bangladesh or Vietnam -- but others will likely remain in China.  After all, wherever they go, companies will eventually face these same issues.  As Marshall W. Meyer, a China specialist at the Wharton School at the University of Pennsylvania, comments, "There is no way out."

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RE: This was coming
By XSpeedracerX on 6/8/2010 1:51:24 PM , Rating: 2
The laborers of China can learn of and demand a higher class of life style, but it doesn't make it their's.

Awesome strawman. Too bad nobody said china's wages will magically rise just because they want them to. Chinese will demand higher pay from manufactures, and by demand I mean strike until they get their way, and if the situation in hondas own chinese production facilities is any indication, they're going to get their way.

The service they provide is that of a mindless robot repeating the same action day after day. They only receive the low income they do, because it's cheaper than paying a bunch of engineers and technicians to design and maintain a piece of machinery that does their job.

Get real. You don't live in a 30th century era dystpoian 'Ghost in the Shell' society. You live in this one, where robotic technology, while quite advanced is no where near completely replacing a human being on a production line. The 'bot that posseses the manual dexterity needed to snap together a typical iPhone does not exist and will not exist for several more decades, and will remain exponentially more expensive that human labor when it appears.

Also, LOL at 'bots being cheaper than people, since ASIMO costs honda $1,000,000 a pop. Get ready for your $20,000 iPhone if you want to pull a deus ex machina out of foxconn. Also, we'll need to teach it not to fall on its ass downstairs like any human wouldn't before we trust apple's core business to it, let alone allowing it to carry a cart full of iPhones.

"If a man really wants to make a million dollars, the best way would be to start his own religion." -- Scientology founder L. Ron. Hubbard

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