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By | Phil Muncaster 24th February 2012 13:01

HP, Dell warn of price hikes after Foxconn wage rise

Consumer backlash passed on to, er, consumers

Tech giants HP and Dell have revealed that they are keeping a close eye on developments in the Chinese labour market and may even be forced to put up their prices if wages keep increasing in the region.

It was reported last week that Taiwanese hardware giant Foxconn – which is the world’s largest component maker and builds products for companies including Apple, Dell, Nokia and HP – had raised its wages from 16 to 25 per cent after a consumer backlash over working conditions at its Chinese plants.

Salaries now start at 1,800 yuan (£181) per month, double the 900 yuan workers got three years ago and reportedly represent the third wage increase there since 2010.

However, according to Reuters, margins are so tight at the tech titans that wage increases could eventually have a knock-on effect at the till.

"If Foxconn's labour cost goes up, their product cost to us will go up," HP boss Meg Whitman told the news wire.

"But that will be an industry-wide phenomenon and then we have to decide how much do we pass on to our customers versus how much cost do we absorb."

Dell said it was also monitoring the situation.

“It's not clear to us how that will play out in terms of our costs," the firms CFO Brian Gladden told Reuters. "It remains to be seen how that flows through the overall supply chain. We will continue to watch that."

The irony is that while they are claimed to be relatively generous, Foxconn wages barely give staff there enough to get by on once living costs at the plants dormitories are deducted, forcing employees to take on countless hours of overtime.

Debby Sze Wan Chan, a project worker for the non-profit Students and Scholars Against Corporate Misbehaviour (SACOM), told The Reg that Foxconn salaries vary by location and that the recent wage boost is unlikely to have impacted HP’s costs greatly given where most of its kit is made.

“The brands always threaten to increase the price of their products if there is pay rise. However, it is a matter of distribution of wealth between the brands, suppliers and workers,” she added.

“HP and Dell have to disclose how significant the labour cost is vis-a-vis the selling price of the product in order to convince consumers.”

Whether the comments from Dell and HP were a shot across the bows of their suppliers or a warning to customers of impending price rises remains to be seen, as neither one of the tech giants is doing particularly well financially at the moment.

Given the recent backlash over conditions at ODMs like Foxconn, however, it would appear many consumers are prepared to pay a little more for products not built by underpaid, clinically depressed workers. ®

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