Foxconn pay hikes 'driving tech titans into Philippines'

More signs have emerged that China’s rising labour costs are driving electronics firms out of the country: Philippine officials claim that foreign biz barons are looking to relocate to the small south-east Asian nation.

Philippine trade secretary Gregory Domingo reported “very strong interest” from Japanese electronics, ship building and steel companies, and more investor fact-finding missions from foreign firms than ever before, according to news wire AP.

To an extent, Domingo is doing what all trade secretaries do, hyping up the opportunities for investors in his own country, but there is no doubt that China is being increasingly squeezed.

The People’s Republic has for some time now attracted major investment from the likes of Apple contract manufacturer Foxconn thanks to low production and labour costs, but things are beginning to change.

The country’s five-year plan, ending in 2015, mandates that minimum wage increases should top 13 per cent on average each year and in Shenzhen, where Foxconn has its main plant, the local government has already forced pay up by nearly 16 per cent to 1,500 yuan (£150) per month.

On a nationwide basis, average minimum wage rises topped 20 per cent over the past two years, according to the Financial Times.

Granted, 20 per cent of not very much is still not very much, although that has never bothered shareholders and board members of large tech companies.

In fact, HP and Dell both warned last month that prices at the till may have to rise as a result of Foxconn increasing its workers’ pay packets by up to 25 per cent, with salaries starting at 1,800 yuan (£181) per month.

Campaigners, most notably the non-profit Students and Scholars Against Corporate Misbehaviour (SACOM), have argued that the wage hikes at Foxconn and generally across China still don’t go far enough, and that working conditions generally are not up to scratch.

However, the depressing fact is that unless there is a consumer backlash a la Apple, technology companies are always likely to shop around for the cheapest sources of production, and don’t much care whether that’s Shenzhen or Manila. ®