Tag Archive for Outsourcing

| April 27, 2011
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Wage Inflation Drives Foxconn Out of China

Wage Inflation Drives Foxconn Out of ChinaFoxconn, the largest exporter out of China and a major assembler of Apple (AAPL) products like the iPhone and the iPad wants to set up shop in Brazil. Reuters reports the company is considering a $12 billion investment in Brazil manufacturing.

The company, the quintessential Chinese manufacturer, is known for its brutal conditions and plant suicides according to Business Insider. Foxconn finds itself at the vanguard of Chinese labor problems, notably inflation and shortages.

Inflation is driving Foxconn out of China

Apple Computers logoThe inflation is driving Foxconn out of China. Reuters says that the Brazilian government and Foxconn are now negotiating a range of details, including facilities location, financing, taxes, broadband infrastructure, and logistics. “We’ve been talking to them for three months,” said Aloizio Mercadante, Brazil’s science and technology minister.

Mr. Mercadente also told reporters Foxconn is planning to begin assembling Apple’s iPad tablet PC at its plants in the South American country by the end of November. “The negotiations are far from complete but I’m confident,” said Mr. Mercadente.

Calls to Foxconn’s spokesperson went unanswered. Apple declined to comment.

Wage inflation in China has raised questions over the country’s future as the preferred outsourcing destination for multinationals in search of cheap labor. Financier George Soros recently told the SFGate that Chinese wage inflation is “Somewhat out of control.” And the Financial Times cites a recent US Bureau of Labor Statistics report which shows that between 2002 and 2008, real hourly wages in China’s manufacturing sector doubled, while they rose by barely 20 percent in the U.S..

Wage inceases in China outpace US wages

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The race to the bottom continues, apparently, Apple believes that $0.80/hour is too expensive for Chinese workers to build iPads. Who is going to buy a shiny new iPad when nobody can afford to buy them because we are all working a McDonald’s?

What do you think?

Could you afford an iPad3 at $0.80/hour?

Will America ever make anything again?

Related articles
  • Foxconn in Talks on $12 Billion Brazil Expansion, Rousseff Says (businessweek.com)

 

Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.

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| March 21, 2010
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Michigan Firms Barred From H-1B Program

eWeekMichigan Firms Barred From H-1B's is reporting that the U.S. Department of Labor’s Wage and Hour Division has debarred two Michigan-based firms for being willful violators of laws that regulate H-1B visas for foreign workers. During the debarment period, these companies are not allowed to apply for or obtain H-1B visas for foreign workers. These IT companies have “committed either a willful failure or a misrepresentation of a material fact,” according to Labor Department statistics.

Employer: R-Tech Group, Ltd. (also known as R-Tech, Ltd.)
City: Keego Harbor, Michigan
Debarment Period: 1/1/2009 to 12/31/2010

Employer: Amtech Electrocircuits
City: Troy, Michigan
Debarment Period: 3/1/2008 to 2/28/2010

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Umm isn’t Michigan’s unemployment rate over 14%?

 

Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.

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| April 5, 2009
Comments Off on Tech Layoffs Continue to Mount

Tech Layoffs Continue to Mount

Tech Layoffs Continue to Mount351,202 families’ lives have been disrupted in the tech sector since October 2008, when the banks lead us into the current depression recession economic downturn.  32,820 layoffs have been announced in the tech sector during March 2009.

The tech layoff leaders for March 2009

The March total is the lowest since the depression recession economic downturn started.

  • February 2009 = 48,064
  • January 2009 = 150,014
  • December 2008 = 36,278
  • October 2008 = 50,204

This does not include the chaos the President Obama’s abandonment of the working class, by sending GM and Chrysler into likely bankruptcy. We are seeing the further dismemberment of the middle class as Chrysler has outsourced its IT to India’s  Tata Consultancy Services in “a multi-year contract” worth about $120 million.

Chrysler layoffs

Chrysler’s remaining 2,100 person information technology department, mostly in Auburn Hills, MI will immediately lose 200 salaried technology workers. The balance of the layoffs will come from the ranks of contract workers in that department. They will leave in greater numbers, but Jan Bertsch Chrysler vice president and chief information officer didn’t offer specifics in the Detroit News article.

Some employees may be hired by Tata or Computer Sciences, she said, and some work will be moved entirely off-site. According to the media, Tata will provide support, maintenance, and services that “will encompass a portion of the functional areas within Chrysler, such as Sales and Marketing and Shared Services.”

 

Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.

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| March 31, 2009
Comments Off on IBM Plans Layoffs, Seeks Stimulus

IBM Plans Layoffs, Seeks Stimulus

IBM Plans Layoffs, Seeks StimulusIBM is planning layoffs of 5,000 high-skill U.S. workers in its Global Business Services unit, transferring some of the work they performed to India, according to media reports. The cuts will affect mainly information technology and consulting work in such areas as customer relations management and supply chain management, says Lee Conrad, national coordinator of Alliance@IBM,

IBM layoffsArmonk NY-based IBM has been eliminating U.S based jobs for many years. IBM has previously reduced U.S. employment by 6,000 workers in 2008. Since 2003, the company has hired approximately 90,000 people in India and more than 5,000 in Brazil to do IT and business-process outsourcing [BPO] services work.

IBM is working to secure pieces of the give-away American Recovery and Reinvestment Act of 2009 $787 billion stimulus measure enacted in February. IBM CEO Samuel J. Palmisano was one of 13 executives who met with President Barack Obama in January in an appearance aimed at pressuring the House of Representatives to pass the economic stimulus bill. IBM is seeking a share of the $8 billion the U.S. plans to spend on high-speed rail and part of the $20 billion in the stimulus plan to digitize the U.S. healthcare system. as well as resurrecting BPL as earlier noted here The give-away American Recovery and Reinvestment Act of 2009 includes $11 billion to be spent on ‘smart grid‘ systems to monitor and manage the nation’s electrical network.

he American Recovery and Reinvestment Act of 2009 (ARRA)According to CIO Today, some economists have estimated that taxpayers are paying an average of $225,000 for each job created in the economic stimulus package. According to Martin Kenney, a professor of political economy at the University of California, Davis,: “Taxpayers are saying, ‘I don’t want to give them money if they’re moving jobs offshore.'”

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The give-away American Recovery and Reinvestment Act of 2009 is turning out to be a $787 billion bailout of dubious firms like AIG and IBM and just keeps getting worse and worse for those of us who still work in America.

 

Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.

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| September 5, 2008
Comments Off on Time to Rethink Off-Shoring

Time to Rethink Off-Shoring

Time to Rethink Off-ShoringMcKinsey Consulting published an article, Time to Rethink Off-Shoring in the September 2008 edition of the McKinsey Quarterly that may be a silver lining in the current U.S. economic recession. McKinsey identifies three factors in the current economic conditions that may cause firms to re-evaluate off-shoring practices. The consultants believe that energy costs, wage inflation, and the weakness in the US dollar are factors that firms should evaluate as part of their off-shoring analysis.

Energy costs According to the article, CIBC World Markets estimates that in 2000, when oil prices were near $20 a barrel, the costs embedded in shipping were equal to a 3 percent tariff on imports. Today, that figure is 11 percent, representing a threefold increase in shipping costs since 2000. The article goes on to point out that increasing energy costs not only impact exports but also increases the price manufacturers pay for raw materials. As an example, McKinsey points out that it now costs about $100 to ship a ton of iron from Brazil to China-more than the cost of the mineral itself.

Wage inflation McKinsey states, that in dollar terms, annual wage inflation in China has averaged 19 percent since 2003. An average production worker paid $1,740 a year in 2003, makes $4,140 today. By contrast, wage inflation in the United States has averaged only 3 percent.

McKinsey suggests that the combination of increased shipping expenses driven by higher energy costs, wage inflation in off-shore countries, and the weak U.S. dollar has eliminated the cost benefits that many firms sought by off-shoring jobs.

 

Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.

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