UPDATE 3-Foxconn wants to raise prices to offset wages

* Hon Hai, Foxconn AGMs after spate of worker suicides

* Planning to shift some production back to Taiwan

* Small protests outside AGMs in Taipei and HK

* Hon Hai, Foxconn shares slide, down 10 pct in 2 days

(Adds analyst comment on PC maker impact)

By Faith Hung and Kelvin Soh

TAIPEI/HONG KONG, June 8 (BestGrowthStock) – iPhone maker Foxconn
International Holdings Ltd (2038.HK: ) said it will seek higher
prices from clients to help offset wage increases at a plant in
southern China that has been hit by a series of suicides.

Meeting shareholders in Hong Kong for the first time since
the deaths, executives at Foxconn, owned by Taiwan’s Hon Hai
Precision Industry Co Ltd (2317.TW: ), said the company hoped to
reach a consensus with customers this month.

Hon Hai, the world’s biggest contract electronics maker,
with a client list that includes Apple Inc (Read more about Apple stock future.) (AAPL.O: ), Dell Inc
(DELL.O: ) and Hewlett-Packard Co (HPQ.N: ), has been wrestling
with the fallout from 10 suicides in the last five months.

The suicides and controversy come amid growing labour
unrest in southern China, the world’s top manufacturing region,
where millions of migrant workers from the country’s poor
hinterlands churn out goods for top global companies.
TAKE A LOOK on China labour issues [ID:nSGE65103V]
Reuters Insider on China wages: http://r.reuters.com/vax67k
BreakingViews on Henry Ford lessson for China [ID:nLDE6531FP]

At a separate shareholder meeting in Taipei, Hon Hai
Chairman Terry Gou defended the company he founded in 1974 to
make plastic switches for televisions, saying a report he
commissioned showed no clear link between the suicides and work

“We have to carry the 12 crosses, we have no options,” Gou
told shareholders, referring to the 10 suicides and two other
attempted suicides.

But in a sign of changes ahead, Taiwan’s richest man said
the company was looking for locations in Taiwan to shift some
unspecified production from China to automated plants in Taiwan
and wanted local authorities in China to manage its worker

Analysts said already razor-thin margins at Foxconn and Hon
Hai would likely suffer as they wait to pass on the cost
increases and the shares of both companies continued to slide,
taking losses over the past two days to more than 10 percent

“In the near term it’s quite unlikely they can pass the
cost increase to customers, but in longer term it is reasonable
… customers may need to share part of the cost,” said Chialin
Lu, an analyst at Macquarie Equities Research in Taipei.

“It will have bigger (earnings) impact, especially in the
second half of this year, as most of the salary rise will come
into effect in July.”

Hon Hai said the wage increases would hit profits in the
fourth quarter and into next year’s first quarter.


Kaufman Bros analyst Shaw Wu did not see a major impact for
now on global computer makers from a Foxconn price rise, but
said lower-margin players — such as Dell — could get squeezed
to some extent.

Depending on the magnitude of any price rises, he thought f
Apple and Hewlett-Packard could easily absorb the extra cost.
But Foxconn would have to be careful not to drive business
toward rivals.

“The guys that have thinner margins and less diverse
business models would feel any impact, like Dell, Acer and
Lenovo,” he said. “These OEMs have a choice, they don’t have to
go with Foxconn. They could go with Quanta, Compal, Pegatron.
At the same time, Foxconn is hugely important, everybody uses

Apple, HP and Dell all declined comment.

Other international companies have also been hit by
industrial unrest in China, which usually acts quickly to quash
any threats to social order.

Japanese car maker Honda Motor Co Ltd (7267.T: ) faced a new
strike at a parts supplier just days after settling a dispute
at a separate supplier [ID:nTOE65701L], while Taiwan components
maker Merry Electronics Co Ltd (2439.TW: ) said workers at its
Shenzhen plant briefly stopped work on Sunday in a dispute over
shift work.

Hon Hai has announced two wage rises in the past two weeks
for workers at the sprawling plant in Shenzhen, where some
400,000 staff assemble iPhones and other gadgets. Gou also told
shareholders on Tuesday he would limit overtime at plants in
China to no more than three hours a day.

A group of about 30 protesters gathered outside Hon Hai’s
meeting, including labour activists, green and gay groups and
even some representing prostitutes, drawn mostly from Taiwan’s
league of “professional protesters” seeking the attention they
would get from a top media story.

“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,” said Huang Hsiao-ling,
secretary general of the Worker Injury Association, a labour

About a dozen protesters stood outside the Hong Kong
shareholders’ meeting calling on Apple to act on Foxconn. Apple
CEO Steve Jobs expressed concern last week over the deaths, but
said the plants were not sweatshops.

Holding placards reading “Workers are not machines. They
have self-esteem” and a picture of a rotten apple, protesters
handed a petition to a company representative.

Gou, 59, also announced plans to more than double the size
of a share issue to fund future expansion for Hon Hai,
including into cloud computing and LEDs, among others. Guo said
the company will issue up to 880 million shares in depositary

Stock Market Money

(Additional reporting by Roger Tung and Christine Lu in
TAIPEI, Donny Kwok and Bobby Yip in HONG KONG and Gabriel
Madway in San Francisco; writing by Jonathan Standing; editing
by Lincoln Feast, Ian Geoghegan and Andre Grenon)

UPDATE 3-Foxconn wants to raise prices to offset wages