Foxconn Billionaire Hints at Robotic Apple Factory, Criticizes Dead Employees
June 30, 2014 12:24 PM
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Comments come two years after he called employees unruly "animals" and comparing himself to a cattlemaster
Terry Gou, 63 -- the CEO and major shareholder of Hon Hai Precision Industry Comp, Ltd. (
) -- is making headlines again for interesting comments he made at his company's annual shareholders’ meeting.
I. Mission to Replace Migrant Workers With Machines is Moving Ahead
At one point he dropped a hint that Hon Hai's massive subsidiary Foxconn may have completed work on an automated plant for its top consumer electronics client, Apple, Inc. (
). The factory lies in Chengudu, China he says,
We haven’t talked much about the factory, but it’s manufacturing a product from a very famous company.
Foxconn also makes motherboards and laptops for most major PC OEMs, with orders of several million for most of the world's top PC makers. It also manufactures all of the current generation of video game consoles
, Inc.'s (
Foxconn's new robots are seeing signs of success. [Image Source: AFP/News9]
But it seems likely that Apple would get first privilege at Foxconn's new automated assembly line for a number of reasons. As the primary manufacturer of the roughly
60 million iOS devices Apple sold in Q1
, Apple is likely far and away Foxconn's largest client, with annual device orders approaching a quarter billion units.
Apple is also one of the most demanding clients, as it is always trying to squeeze its manufacturers' to lower costs, while demanding
some of the industry's most challenging smartphone assembly techniques
an uncompromising level of secrecy
. That makes robots particularly attractive as they never ask for raises or leak prototypes of your upcoming product designs.
Foxconn CEO Terry Gou
If Apple is the recipient of the new factory, it could be a rather interesting relationship as Foxconn's robotics effort is
backed by a key alliance with Apple's nemesis, Google
). After initially
struggling in its automation bid
, it appears that Foxconn is
finally turning the corner
. Foxconn's latest robots -- enhanced by
Google's growing robotics prowess
-- are being manufactured in-house at a rate of roughly 30,000 robots per year. For now, Foxconn is closely holding these robotic workers. Mr. Guo comments:
We don’t sell them, because we don’t have enough for our own use yet.
Some are less than happy with the Taiwanese CEO, complaining that he's abusing his workers, while looking to replace them with robots. But that's what's come to be expected in recent years as Foxconn's success -- and controversies -- have exploded.
II. Billionaire -- "[My employees] are also animals... [and] animals gives me a headache"
While he prefers to be referred to by his Anglicized name, Terry Gou, Mr. Gou's true name is Gou Tai-ming. He got in on the ground floor of the U.S. outsourcing trend, designing connectors for the Atari console at a small startup factory in Taiwan in 1980. By 1988 he had moved to China, setting up a factory in Shenzhen.
Today, Foxconn has expanded astronomically to account for a whopping 40 percent of all consumer electronics manufacturing worldwide. While it has facilities in Europe, Mexico, and South America, the heart of its manufacturing empire still lies in China where it has 13 factories in nine cities. Foxconn is China's biggest employer and its Shenzhen facility is a veritable "city" of its own, with between 250,000 and 450,000 seasonal employees.
Most of the assembly of Apple products has traditionally been done in Shenzhen.
Controversy began in July 2009 when an employee who lost an iPhone prototype was
beaten by plant guards and then fell to his death
. Foxconn claimed that the employee committed suicide, but some believed that he was murdered.
And if there was any ambiguity in that case,
a spate of suicides
in 2010 was far less ambiguous. Reportedly
a total of 14 employees
Foxconn's Apple-geared plant
that year. While this
wasn't that high a suicide rate compared to U.S. suicide rates
, it nonetheless drew controversy as local media reports indicated
a "hellish" working environment
. Foxconn admitted to making many employees work 12 hours a day, six days a week. And some employees were reportedly working even longer -- working up to 18 hours.
Chinese protest Foxconn's harsh working conditions. [Image Source: AP]
Aside from the employees who committed suicide -- who were compensated under the company's insurance plan -- at least one employee was
allegedly "worked to death"
. Foxconn refused to give that employee's family anything.
Perhaps more than anything, Mr. Guo's response rubbed many the wrong way. At his 2012 annual shareholders meeting two years ago, he remarked in Chinese [translated]:
Hon Hai has a workforce of over one million worldwide and as human beings are also animals, to manage one million animals gives me a headache.
The attitude struck many as heartless for someone with so much money governing a workforce that he paid so little. Indeed many of his policies -- including punishing employees who talk while working on the assembly line or
who take too many lavatory breaks
-- seem to
border on inhumane
Foxconn's weary workers are asked to skip meals to attend unpaid meetings and are punished for taking too many bathroom breaks. [Image Source: Southern Weekly]
In 2010 when the suicides struck, Foxconn employees were making around $140 USD a month ($1,680 USD/year),
, while Mr. Guo's 13 percent stake in Hon Hai made him worth roughly $5.9B USD.
Others countered such criticism pointing to the charitable work Mr. Guo had done in his parents’ former hometown in Gewan, Shanxi Province, China.
III. Foxconn Owner Continues to Blame Dead Sweatshop Workers for Suicides
Today criticism about Foxconn's
rising levels of unpaid employee overtime
and its admission to
using underage "interns"
-- illegal under China's laws -- continues to draw ire from international observers, even as his defenders counter such such accusations.
His defenders, though, will have a tough time defending some of his remarks at the shareholders meeting. He first characterized the dead workers as greedy gold-diggers, complaining:
We at first gave a compensation that was so high, the families of the suicide victims’ would never be able to spend it all.
To put that claim in context, employees who attempted suicide, but failed were given
in a one-off "humanitarian" payment -- or about $29,000 USD. The families of those who actually succeeded in killing themself on average were
paid around CN¥100,000
-- or roughly ~$16,000 USD. At the 2010 national average wage for migrant manufacturers (
$196 USD per month
) that's roughly
seven years worth of pay for the workers who killed themselves
or 12 years for those who failed. It's a lot of money for a migrant worker's family, to be certain, but "more than they could spend" seems like a pretty harsh exaggeration.
But he didn't stop there. He cited a statistic he claimed to have read in "some news article" that stated that mosquitos were the leading cause of death worldwide, followed by suicide. Actually
neither suicide nor malaria
are in the top ten causes of death, let alone the top two, according to the
World Health Organization
From that flawed statistic, his rant took an even more troubling turn. He remarked:
This [the suicides] is what happens when your company reaches a certain scale. It wasn’t because the workers were tired. Some of it was because the work is monotonous, but 90 percent of it had to do with personal relationships or because of family disputes.
It's sad to see such comments, but this isn't the first time we've seen them, certainly. In 2010
If a worker in Taiwan commits suicide because of emotional problems, his employer won't be held responsible, but we are taken to task in China because they are living and sleeping in our dormitories.
That claim seems highly specious as the family members and friends of the dead workers almost all claimed that their chief reason for wanting to kill themselves was feelings of hopelessness about their harsh job and low pay. Many family members said their deceased sons or daughters had sadly wanted to send a message about Foxconn's abusively low pay.
And ironically, if that was the employees' intent it worked. Perhaps Mr. Guo is more bitter that today base employee wages for Foxconn's migrant workers in China are roughly CN¥2500 (~$402 USD/month) on average -- nearly three times what they were in 2010. The unruly "animals" had
cut into Mr. Guo's profit
While his employees are reportedly enduring hellish working conditions, billionaire Foxconn chief is enjoying a dream life. He recently married his much younger dance teacher (left).
[Image Source: Taiwan News/Forbes]
In his book,
The Sayings Of Terry Gou
, which employees are virtually forced to read and quote, he comments:
A leader must have the decisive courage to be a dictator for the common good... Behind every accomplished disciple, there is a stern mentor... You can't go wrong trying to stick with the strictest and most demanding boss.
Together his words paint a picture that this billionaire king of Chinese manufacturing views himself as a wrangler of sorts, forever driving his obedient herd about in its pens. In Mr. Guo's own words his employees are animals -- and like many ranchers he seems to have little sympathy if one of his herd "falls off". After all, to him they're just animals -- he can always find more to replace those that fall, be they men or machines.
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RE: stay on article
6/30/2014 4:20:14 PM
The job of the CEO (and really all employees of a company) is not to make his employees happy, it is to make money for the owners/shareholders. To tie their pay to that of a bottom level, no skill, menial labor makes no sense at all.
You claim that it should be a set ratio, but how would that work for different size companies? So a CEO of a $10m company should be paid the same as a CEO of a $200B company simply because their worker at the bottom make approximately the same? That makes no sense. A leader of a fortune 500, 100, etc has much more responsibility than somebody running a little mom and pop shop with 100 employees.
I understand some think the pay it way overblown, and I probably think the same, but that is up to the individual owners or shareholders to decide. Is the hundreds of million paid to a big name CEO worth it as opposed to paying somebody else less, but potentially not making as much?
RE: stay on article
6/30/2014 5:19:46 PM
I am a shareholder. I own LOTS of different stocks for both myself and for many people. So I'm fully aware of what the executive staff are responsible for.
As I see it, there are very little negatives for being a CEO other than giving up all your free time (you have none). Most are given huge "parachute" packages in case they fail. And if they do, they make out with millions in many cases. Sometimes you'll see them fired but more times than not they take home a great deal of money.
Some will argue that is to help alleviate them being afraid of taking risks. But really, that would be a valid argument if by messing up, they are no longer employable. Truth be told, you'll find them taking jobs elsewhere afterwards making a nice fat check once again.
No, the CEO doesn't need to make employees happy. They need to focus on the bottom line. But wouldn't an organization full of employees that have actual "ownership" in the outcome through either stock options, increased pay, profit sharing or other tangible, financial incentives want to work harder?
There's two ways to increase the bottom line--you can cut costs by firing, reducing expenditures and increasing efficency. Or, you can improve revenues, sales and quality through employee productivity. Granted, the first method costs very little (other than potentially lost employee aptitude) and the second method costs a great deal more. But in the end, what do you end up with?
Method one gives you a smaller, leaner company with a particular focus. Employee morale is slashed and they are full of fear--they work through this fear so they won't be a victim of further cuts.
Method two gives you employees that are motivated to work hard. They know their employer values them thus productivity potentially soars. You haven't sacrificed your business model, you maintain vertical diversity and breadth of capabilities and ultimately revenues increase faster due to more employees in the system thus ultimately, provided productivity increases as expected, profitability. Now, these aren't 1:1 with each other, but the results should be tangible and long-term, positive morale leads to greater retention of employees, reducing churn, reducing intellectual loss and a veteran, more capable workforce.
I have never, ever been a fan of the first method. I'll go so far to say if I do see a CEO executing the first one, I'll permanently sell out of a company until that mentality has been replaced. The results speak for themselves, however. More times than not I have seen lagging performance in a company's stock when they focus solely on method one.
There is one caveat: The stock market must be a healthy one. What we have right now is not healthy. It is sickly and boosted by artificial profit margins and manipulated earnings per share. What we have currently is not sustainable in the least unless we see matriculation of currency to the general populace because this is the only method pure, increasing cash flow can be sustained. Conversely the negative side-effect to all this will be realized inflation. What we have now is banked due to stagnancy of currency exchange. Either way, this will lead to true, future growth.
But lately, we still see a huge pay disparity between the CEO and line workers. We've seen a dramatic uptick in executive pay with little to the line worker. They aren't earning more, the money is locked in corporate vaults and financial institutions. And people wonder why the economy is lagging?
If you tie CEO pay to the worker, they are forced to keep money flowing through the system and if they want more, they must properly reward those who have done all the grunt work to get them there. A good CEO is paramount, but what good is the best CEO in the world if they have awful workers?
CEOs don't get to where they are by themselves. They get there because they properly lead the workers beneath them and in turn, they do good, hard work which produces results.
The line workers deserve pay increases as much as the CEO--every little bit. In some cases, more. Remember, there is only so much one person can do.
“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.” -- Newegg Chief Legal Officer Lee Cheng referencing patent trolls
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