Electronics Production | September 15, 2011

Report criticises Nokia, Flextronics, Salcomp & Foxconn

Finnwatch, Somo and Cividep have published a joint report on working conditions in mobile phone manufacturing in India. The report looks at facilities from Nokia, Salcomp, Flextronics and Foxconn located in Sriperumbudur.

The report focuses on labour rights in the mobile phone industry in India and addresses working conditions in export processing zones (known as Special Economic Zones in India). It focuses on four mobile phone factories, namely Nokia, Salcomp, Flextronics and Foxconn, based in Sriperumbudur around Chennai, Tamil Nadu. One of the recent developments in the industry has been the unionisation of Nokia in India. Nokia’s mobile phone factory in Sriperumbudur is its largest in the world employing over 11'300 workers. Salcomp with 4'000 workers makes chargers for, among others, Nokia in India. Flextronics’ factory has about 1'700 employees and produces mainly chargers. Foxconn has two locations in Sriperumbudur with the main one in the Nokia Telecom SEZ, both employing nearly 6'000 people in total. Foxconn produces the casing for Nokia mobile phones. The four factories operate on a three shift basis with eight hours per shift, six days per week. The findings are:Mobile phone manufacturing depends upon a young and single workforce. One of the most remarkable features of the mobile phone manufacturing workforce in India and many other countries is its youth. The average age of the workers in the factories is 22 years. Workers shared their anxiety about the diminishing chances of being employed elsewhere in the industry as they get older. Workers recruited by mobile manufacturers have no prior experience of employment or standards of comparison with regard to expectations of wages, and importantly, knowledge of their rights and entitlements. It becomes very difficult for workers, especially women, to continue working for the companies after marriage and parenthood. • The supply of labour exceeds its demand. Basic requirements for entry-level jobs as trainees at Nokia, Salcomp and Foxconn are ten years of high school plus two years of higher secondary education. Similarly, Flextronics required completion of 10 years of school and Industrial Training Institutes (ITI) diplomas. Completion of 10 years schooling qualifies workers as Nokia’s contract labour. Many workers reported working in jobs below their qualifications, but were unable to obtain better jobs given the limited job prospects in the area. • Most of the workers are migrants from other parts of Tamil Nadu and have long commutes. Most of the workers lived in rented rooms and had a daily commute of over one hour each way. Although the buses in which workers commuted to work were provided by the companies for free, the commute lengthened an already long work-day. Around Chennai, a room with a kitchen costs about Rs. 3,000 (48 euros) per month. Such a room is typically shared by five to seven workers to cut costs. Many workers may visit their families three to four times per year. • Contract labourer remains on contract for years facing a dead-end track. Mobile phone manufacturing is characterised by a two-tier system of employment with permanent employees and contract workers. Nokia did not have a policy on the time limit that workers remain on contract and did not know for how long on average contract workers worked at its factory. The proportion of contract workers varied between 10 per cent at Salcomp and 60 per cent at Flextronics. Both companies confirmed contract workers. Contract workers do not have the same security, wage rises and possibilities for career advancement than permanent employees. • Workers work as trainees and probationers for even two years - without training. Most of the workers who were on the direct payroll of Nokia, Salcomp and Foxconn started as ‘trainees’ and were kept in this status for 15 months or more, even though their training lasted for a month. The only company that did not use trainees was Flextronics. Salcomp’s and Foxconn’s trainees are subsequently put on probation and finally, are ‘confirmed’ as full-fledged employees. Workers in Salcomp worked as trainees for the first 18 months followed by a probationary period of six months. After completing the ‘training’ workers have no claim to being hired permanently. • Nokia and Foxconn pay higher wages than Salcomp and Flextronics due to wage settlements. Nokia has become a wage leader in the industry by agreeing to union settlements. According to Nokia, the monthly salary of permanent assembly workers varied between Rs. 6,000 (95 euros) and Rs. 11,666 (186 euros). Foxconn’s wage settlement with the union raised permanent workers’ wages by 75–80%, to Rs. 9,100 (145 euros) per month for those with three or four years of work experience. Salcomp paid permanent workers between Rs. 4,600 (73 euros) and Rs. 6,000 (95 euros) per month, and Flextronics paid up to Rs. 6,000 per month. • Wages are far from sufficient and not a living wage. Contract workers and trainees are paid in general less than permanent workers and are exempted from wage rises. Salcomp and Flextronics claimed that the wages for contract and regular workers are the same. Nokia paid for contract workers 25 per cent above the legal minimum wage, i.e. around Rs. 4,400 (70 euros) per month. Flextronics paid them Rs. 4,130–5,500 (66–88 euros), Salcomp Rs. 4,200 (67 euros) and Foxconn Rs. 5,000 (80 euros) per month. According to the Asia Floor Wage campaign, the minimum living wage for India would be Rs. 7,967 (127 euros). In the workers’ opinion, a living wage would be between Rs. 9,000 and Rs. 15,000 (145–240 euros) per month. With that money, they could marry, rent their own room and start a family. • Nokia and Foxconn have recognised unions, while Salcomp and Flextronics have workers' committees. Both Nokia and Foxconn have recognised and negotiated wage settlements with the LPF union, the labour arm of the erstwhile ruling DMK party in Tamil Nadu, which have made a difference to workers’ wage and benefits packages. In both cases, there is however a question about the extent to which the union represents the workforce. In 2011, Nokia replaced the LPF by recognizing an “independent” union open to contract workers. At Salcomp and Flextronics, workers can raise issues through a number of workers’ committees. In the companies’ own words, they do not work against unions. However, these are untested words. • Foxconn, like Nokia, had a difficult 2010 in terms of worker relation. Nokia’s workforce in South India formed a union as a result of a successful strike in August 2009, followed by two more strikes in January and July 2010. Major strikes resulting in police intervention took place in October 2010 at Foxconn. While LPF remains the recognised union, many Foxconn workers expressed their support for CITU during their strike, which was illegal from Foxconn’s and the local government’s point of view. Foxconn wanted to keep out the CITU union, known in Tamil Nadu for its pro-worker nature. Three hundred Foxconn workers were arrested and imprisoned during the strike. A few workers remain suspended. At the time of writing, Foxconn held ‘hearings’ with suspended workers individually on the company’s premises. Workers were not allowed to bring a lawyer, a co-worker or any other representative in support. • Workers are frustrated and disillusioned with employment built upon the contract labour and trainee systems. In their own words, workers are not fully informed about the lengthy process toward regular, permanent employment. The contract labour and trainee systems trap workers in an unfair and exploitative position. In the survey, many workers shared that they arrived at multinationals with the expectation of good salaries and employment benefits, but were bitterly disappointed not only with the salary but also the insecurity of their jobs. It is not clear what the future holds for those who do not manage to secure permanent jobs as full-fledged employees within the industry. 4 mobile phone manufacturing facilities Nokia has had a long presence in India but it was only in 2005 that the company decided to set up a mobile phone factory at Sriperumbudur on the outskirts of Chennai, Tamil Nadu, in Southern India. A number of reports have critiqued the Nokia Telecom SEZ over the years, especially from tax policy and worker rights perspectives. The four examined companies are all - except Flextronics - part of the Nokia Telecom SEZ, a walled compound located on the Chennai-Bangalore national highway close to Sriperumbudur village outside of Chennai. In this 200 acre plot exist facilities for Nokia, Foxconn and Salcomp (part of the Finnwatch study), but also facilities of Wintek, Perlos and Aspocomp. Jabil used to be part of this SEZ but has closed its factory. Flextronics has a separate facility, also a Special Economic Zone (Chennai Industrial Park) in Sunguvarchatram, a few kilometres away on a 250 acre plot which is currently very underutilised. Nokia The factory in Sriperumbudur is now Nokia’s largest in the world followed by one in Southern China (which used to be the biggest). Since the start in 2006 the factory has been expanded twice to now have 11'300 workers producing about 300'000 phones per day. In the last year the company recruited 4'000 people as part of its latest expansion program. Nokia does not provide separate accounting for its Chennai factory, or indeed for its India manufacturing activities (which would include the Nokia- Siemens network equipment factory based at the Oragadam SEZ close to Sriperumbudur).
In the factory, Nokia makes 40 different mobile phone models where each comes in five to six different varieties.
It should nevertheless be expected that the Sriperumbudur plant has been a major success. The factory serves not only the Indian market but export phones to many countries around the world. It appears to be the case that the newer ‘smartphones’ are not made in India however, limiting the profitability in the very price sensitive lower end of the mobile phone market. Within the factory, there is ENO (Engine Operations) and SOP (Supply Operations) departments or “supermarkets”. The engine is the internal electronics plus display parts which form the core of the phone. Supply operations are mainly about packaging but also loading customer specific software and adding regional language keypads to the phones. Supply operations are different from shipping and warehousing (both of which seem to be manned by contract staff ). There are 23 lines operating simultaneously in the ENO where each line is capable of producing a new phone every two to four seconds throughout the day. This could mean a production of 162'000'000 phones per year in the factory assuming a phone every four seconds with 25 days per month operations. The factory operates on a four-shift basis where one shift is always off. There are 2'500 people working in each shift. One shift lasts eight hours including a half hours’ lunch break. Salcomp Salcomp makes chargers for Nokia and other companies like Samsung and LG. The overwhelming majority of production seems to be for the neighbouring Nokia plant however. The company’s capacity is some 100 million chargers per year. At the time, Salcomp India was producing some 270'000 chargers per day. The factory has about 4'000 workers. Salcomp’s biggest facility is in China and there is a third factory in Brazil. With only three factories and a small headquarter in Finland, Salcomp is of a significantly smaller size than any of the other companies examined in this report.
Salcomp India is in direct competition with charger manufacturers in China, as well as Flextronics who also has a charger manufacturing facility in Sriperumbudur. In a product like charger, competition is mostly based on price.
The main problem for Salcomp is that chargers are always bundled with the mobile phones. Even as a spare part, potentially a more lucrative market, the chargers are sold via the brand companies which seem to imply that Salcomp’s margins will be very tight. In India, Salcomp has gone from 100% import of supplies when they started to 60% of value coming from local suppliers. For example, they get plastic covers from a company in Bangalore. Originally the plant was only making chargers. Since late 2010, they have also been making transformers and cabling which is part of the chargers. For now there is not much more physical space to grow further within the present facility. Workers work in three shifts, eight hours per day (including breaks), six days per week. Night shift allowance is Rs. 8 per day totaling Rs. 48–57 per month. Flextronics Flextronics engagement with India is quite recent however and started when the company bought a unit from Motorola in Bangalore in 2001. In 2004, a repair centre was added to the unit but this was later moved to Chennai. Chennai’s most attractive feature for Flextronics is its 80'000 technical graduates every year.
Nowadays the Chennai facility does not make any mobile phones. There is a hint that they used to make Sony-Ericsson phones but this is never confirmed. The factory manufactures mobile chargers, mechanical enclosures and other PCB assemblies for both domestic and overseas customers.
Other benefits mentioned includes the SEZ status, technical talent, government incentives (presumably state incentives on top of the SEZ package), and a local supply base. Flextronics established an industrial park in Chennai in 2006, but has only been able to expand to having about 1'700 employees. For now it seems as if the Indian market is not very receptive for this form of flexible electronics manufacturing however. At the moment chargers form about 50 per cent of the business and the rest seems to mainly rely on the seemingly not very profitable metal case business. The factory operates on three-shift basis with eight hours per shift. Like the other factories Flextronics is open six days per week. Foxconn In India, Foxconn’s operations are significantly smaller than what is the case elsewhere. It has two locations in the Sriperumbudur area where the main one in the Nokia Telecom SEZ is employing about 5'000 people. The registered headquarter is close to the Flextronics facility, only a few kilometres from the Nokia Telecom SEZ, but only has 1'000 workers employed.
Foxconn, like Nokia, had a difficult 2010 in terms of worker relations. Major strikes resulting in police intervention and the suspension of 24 workers took place in September-October.
Foxconn produces the housing or covers for Nokia mobile phones within the Nokia Telecom SEZ. The company also has the ability to make other components for the phones but management interviews did not yield any results as to what exactly they make. It was also not possible to visit the actual factory floor during investigations. In addition, there was an accident with a pesticide which resulted in the hospitalisation of 42 workers in July 2010. In the end, the company recognised a union. ----- Source:
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