Hon Hai set to kill the goose that laid the golden egg

Jobs are likely to go in mainland China after Taiwanese outsourcer Hon Hai  put up the wages of staff but warned that meant increased automation in Taiwan today.

According to the Wall Street Journal, Hon Hai chairman Terry Gou minimised the impact of putting up wages at its factories in the wake of several suicides that have put the reclusive company in the limelight.

According to Taiwanese wire Digitimes today, other contract companies such as equally reclusive Compal and Wistron have watched events unfold with interest, and told the newspaper there are no plans to put up wages at their factories in the wake of Hon Hai’s decision.

Compal and Wistron are probably hoping that contracts from Dell and Apple will fall in their lap. Like Hon Hai, both of these companies rely on the People’s Republic of China cheap labour to produce machines for a variety of customers.

Compal, Wistron and Hon Hai find themselves between a ROC and a hard plaice. Multinational companies like Dell and Apple are constantly forcing down prices to keep competitive in an increasingly competitive market.

The multinationals put pressure on the contract electronic companies to keep prices down, and so they do, in order to keep the contracts.

The whole situation can’t go on like this forever, unless the multinationals can find electronics companies to produce their machines in countries where labour costs are even cheaper than mainland China. The Hong Kong based  South China Morning Post said last Thursday that Foxconn’s decision to increase wages would put it nine percent above the average wage in Shenzhen.

Eventually something is going to give.