Foxconn and Chinese Labor Issues
By Chris on June 27, 2010
China has enjoyed a terrific ride as an outsourcer of manufacturing, essentially taking control of critical supply chains for the industrial world. Recently though, we have all read about Foxconn and its problems with labor relations, strikes, and employee suicides.
In this entry, we’ll use Recorded Future to dig into the issues plaguing Foxconn as well as their effects on surrounding companies and see if we can identify patterns using media analytics to examine labor unrest.
We start off by looking at events involving Foxconn in 2009-2010 where on the timeline below we can see general media momentum regarding the company pick up dramatically in 2010.
Prior to the recent uptick in momentum, we can observe a series of positive announcements from 2009 including business partnerships with leading manufacturers such as Dell, Sony, Asustek, HP and a rumored deal with Apple (not known at the time) to manufacture the then yet to be named iPad.
However, amidst the business growth we find that news surrounding employee suicides also emerged back in 2009. We see reports to a Foxconn employee’s death on the timeline way back in July 2009 coming from a local Shanghai blog.
Given this background, we can then explore relationships between Foxconn and other companies connected by business relationships, geography, or supply chains. This research could uncover potential future labor problems that would be valuable information for investors, FoxConn competitors, and geopolitical analysts among others.
First, we look at business relations between Foxconn and other companies, which is easily done using Recorded Future’s “Network” visualization.
We can quickly see how partnerships emerge over time with groups clustered temporally. These associations can be further drilled into regarding company affiliates as well as actual joint ventures.
From this view we may conclude that companies like Apple, Dell, HP, IBM, Sony, China Mobile, or others could be vulnerable to disruptions similar to those Foxconn that can cause issues ranging from supply chain to branding to market value. We can use news analytics to drill into the future of business affiliates of Foxconn as well as competitors that may also be at risk.
Now, company relations such as Apple’s dependance on Foxconn as a supplier are interesting, but let’s look at another, perhaps more subtle angle.
Geography may be an even more critical relationship than company partnerships with regard to labor relations in the sense that local workers may informally compare salaries or participate in cross-company unions.
When we explore the “Network” of recent labor unrest related to Foxconn we find it mostly in Shenzhen, China.
Seeking geo-related labor issues, we may then search for other companies showing unrest in Shenzhen at same time. Our example below identifies Honda Motor Co.
Now, Shenzhen is a big city, but it’s just part of a major manufacturing area. Looking to expand our research we can shift our query from Shenzhen to its overarching province Guangdong to identify the full set of “Company Labor Issues” within the region.
Here, we find reports on issues at a whole set of auto companies: Guangzho Automobile Corp, Toyota Motor Corp, Toyoda Gosei, Honda Motor Co., Denso Corp., etc.
Supply Chain Connections
This discovery may trigger a desire to investigate the automobile sector at large where we reveal whole nets of relationships. Right at the center, we find Honda Motor Co., which has elsewhere been called out as the company with the most severe labor problems.
We can easily provide some geospatial reference to how these patterns spread temporally, exporting the data sourced within Recorded Future to Google Earth.
The Future of Foxconn
Foxconn and its Western partners certainly have some interesting issues in front of them. The company is looking to offer pay increases as they get into contract negotiations for next year.
FoxConn’s founding company Hon Hai Precision Industry Co. is also looking to open 100 Apple stores in China, potentially deepening the relationship between Foxconn and Apple.
At the same time, Foxconn is creating a joint venture with German group Metro AG to run electronic outlets in China.
Labor unrest can drive many problems including the inhibition of supply chains, damage to brand reputations and affliction of company and affiliate stock prices.
Using Recorded Future, we can “get under the skin” of labor unrest and as seen with our example of Foxconn:
– Understand what companies and affiliates are affected by unrest
– Identify where unrest may travel – across geography, industries, and supplier relationships
– Be notified in case of labor unrest at Foxconn:
We can also use the underlying data for deeper analysis. For example, one might imagine trading on labor unrest by systematically shorting companies and their affiliates (supply chain, geography) where there are labor issues.
Finally, it might be quite compelling to try understanding what sequences of events lead to labor unrest in order to identify early signals or perhaps even learn how to induce unrest(!).