Sunday, June 06, 2010

Foxconn Suicides = Chinese push against competing firm

Candied goodies at the Matsu Temple in Dajia.

The Foxconn suicides have been in news lately. If you were suspicious that the whole thing was a media construction, the Falun Gong's Epoch Times has the report for you: they argue that it is part of the usual Chinese punishment of businesses that compete with Chinese firms in the same segment, like the attacks on Google.
In 2008, the nightmare for Foxconn began when Gou complained to Beijing authorities about its major local competitor BYD. BYD is headed by Wang Chuanfu, a member of the Standing Committee of the National People's Congress—the most powerful body of the Communist Party.

The tension between Foxconn and BYD started in 2003 when, according to Foxconn, BYD poached more than 400 key employees from Foxconn’s Nokia team. Internal company documents and information flowed to BYD with them. Foxconn also accused BYD of copying its business model.

In 2006, Terry Gou sued BYD for stealing trade secrets. BYD won the suit and countersued Foxconn for bribery and falsifying evidence, resulting in the arrest of some Foxconn employees.

During the same period, BYD captured a significant amount of businesses from Foxconn by undercutting their Taiwanese competitor. In 2008, BYD outperformed Foxconn in revenue and earnings per share. In 2009, Warren Buffett’s Berkshire Hathaway bought 10 percent of BYD for $230 million.

Gou decided to seek help from the central government, which, according to a former high-level Foxconn manager, was Gou’s fatal mistake. “Since then,” the retired manager said, “Terry Gou has had a very hard time surviving there.”

Kao Weipang of VICA said such communications with the central government often cause danger.

“As far as I know, over the years no Taiwanese victim has ever got justice [from higher authorities],” said Kao.
Epoch is not always reliable, but this has, as one of my favorite TV characters once remarked, "just the right ring of desperation." It smells very plausible. Note that Honda in China was also the subject of a strike recently. Epoch also claims that after discussion of the alleged work environment at Foxconn, which was certainly not much different than any other firm in China:
Then suddenly, reports and discussions about Foxconn were banned from Chinese media and major websites. This happened as commentators started looking beyond Foxconn management problems toward underlying issues with the nation’s political, administrative and legal systems.
I haven't much commented on this because I was wondering what the backstory was since it was obvious from the stats that the suicides were not unusual, and the whole thing was a media blitz. Read the whole piece, it offers some other interesting information.

Oh yeah, can't wait to sign ECFA with China! Already I can hear the planes full of Cargo circling to land on our Cargo Cult runways.....
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richard said...

what ET writes is actually common sense. stories of Taiwanese entrepreneurs who were put of of business circulate in Taiwan (when they decide to retire and take their investment back or move their factory to another country).

the German Spiegel had a cover story few years ago and already back then wrote, that most multinationals with some know-how, have to show all their core technology to Chinese engineers before they kick-off.
a bunch of local specialists will show up, go through the blueprints and patents and then the decision will be made.

Anonymous said...

The Foxconn worker suicide rate is highly likely overall LOWER than that of the Chinese population at large. What's missing is Foxconn worker suicides outside of work, but they pretty much live and work at Foxconn. Foxconn has such a huge number of workers that suicides, statistically, are just going to happen. None of the Western reporters masturbating over how the suicides confirm their stereotypes of Chinese working conditions has bothered to consider the suicide rate OVERALL in China. I hope Foxconn management itself realizes this...

Anonymous said...

...None of the Western reporters masturbating over how the suicides confirm their stereotypes of Chinese working conditions has bothered to consider the suicide rate OVERALL in China....

Here we go again assuming the press-release repeating media would investigate anything.

Apart from "western" media looking for an angle to a story, how exactly would they be able to report on overall suicide rates? The CCP doesn't release this kind of 'bad news', and even if they did, the data would probably be regional and not national.

Paul said...

Well, from what I understand, the article is not too far off the mark. BYD did steal a bunch of Engineers from Hon Hai and they did take a lot of Hon Hai's IP with them. Of course, Hon Hai sued but of course there is not much protection for them. Same old story in China. I mean Huawei allegedly did the same thing ( They rose to prominence by allegedly ripping off Cisco.

This will be China's big challenge I feel. Although they have had amazing economic growth over the last 30 years, they haven't nurtured innovation in the same way Taiwan did so they are going to have a lot of trouble developing their own stuff. You can only copy and steal for so long.

As for whether or not the suicides are a media construction, I will leave that for others to decide/debate.

Anonymous said...


What happened to Hi Tech Taipei? I miss the blog. There appears to be something funny going on--it's not completely down, but nothing is linked and you just get a page from the blog from 2008.

Meanwhile there are some quite exciting things happening in Taiwan financially. It's not good for government finances, but 17% corporate tax rate now; also, some $100 million a year US startup just IPO'd in Taiwan! That's something when US companies decide that Taiwan's capital markets are better for technology than the US's!

(Zero capital gains as well, which is old news, but not everyone knows about it).