Consumers shouldn’t have to pay more for iPads, iPhones and other Apple devices despite the increase in wages promised by Apple’s supplier factories. However, the pay rise could lead to higher unemployment rates in China a year’s time, according to a report.
Wages have been on the rise since several Foxconn employees committed suicide in the factories in 2010, a New York Times article accused Apple’s factories of misconduct earlier this year and most recently after an investigation carried out by the Fair Labour Association (FLA) revealed ‘significant issues’.
But business writers Joe McDonald and Michael Liedtke don’t think this will mean an increase in the price of devices. The report, published on KBOI1.com, highlights that the pay rise has not yet affected the price of electronics so far and Foxconn’s factories also make parts for other companies such as Microsoft, HP and Dell, which have also avoided putting up their prices. This is because the cost of labour usually amounts to less than ten per cent of the total cost for most electronic devices and ever less so for Apple with it’s popularity meaning consumers are willing to pay more for its products, according to HIS iSuppli analyst Thomas Dinges.
iSuppli has estimated that Apple pays under $8 for the assembly of a 16GB iPhone 4S and $180 for the components. In Australia, that model of iPhone is available for $799. The increase in wages will mean that Apple has to pay out just an extra $2 per phone, says iSuppli.
The wage rise could mean trouble for some other technology companies such as Microsoft, who’s Xbox 360 costs just $80 less than the retail price to make. And Amazon has already been reported to sell its Kindle Fire at a loss.
Technology analyst Rob Enderle said: “It’s too early to tell how this is going to work out. My expectation is that a lot of these Foxconn workers who are getting higher salaries are going to be unemployed a year from now because they were quietly left go or the work moved elsewhere.”