FLA president says Apple/Foxconn agreement raises bar, but will it raise prices?

The results of the Fair Labor Association’s investigation into Apple’s suppliers beginning with three Foxconn facilities officially published yesterday. While finding excessive working hours and many violations of Chinese labor law, Foxconn and Apple agreed to reduce workweek and overtime hours within Chinese law to 49 hours per week and 36 overtime hours per month based on the FLA’s recommendations. Foxconn will also hire tens of thousands of new employees and implement a compensation package to make sure workers’ salaries remain the same amid reduced working hours.

In the interview above with Reuters, head of the FLA Auret van Heerden talked about the investigation and noted the agreement could set a new standard for working conditions throughout China. One unanswered question is whether the agreement will lead to higher prices for consumers (which is not necessarily a bad thing)…

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Apple squeezes suppliers, cuts costs by nearly 50 percent

A report from Digitimes claims that, although touch panel orders from the iPhone and iPad 2 have increased significantly for the third quarter, Apple is allegedly placing orders at nearly half the cost of previous shipments. This leads us to believe they are either trying to reduce BOM (and increase margins) at the expense of suppliers, or they’re prepping for the usual price cuts in the wake of new product releases (iPhone 5, we’re looking at you).

The report notes:

Wintek has received touch sensor orders from Apple at prices nearly 50% lower than the ones previously offered by the client. The impact of Wintek’s low-margins is expected to ripple out to other downstream players

The move is expected to result in lower than usual profit-margins for the supplier and also affect other suppliers down the chain. The report is also quick to point out that “Wintek has previously rejected low-margin orders from Apple”.  We’ll keep you posted as more becomes available.