What Do Apple and Foxconn's Workforce Woes Mean For iPhone 5?

Which came first, the chicken or the egg? The Chinese New Year or the kerfuffle in Apple's supply chain?

Perhaps neither.

Although Apple remains the undisputed heavyweight champion of the domestic smartphone market, a recent flurry of rumors regarding the company's principal component fabricator, Foxconn, has many worried that the iPhone — venerable paragon of all things iOS — may soon be overtaken by its competitors.

In February, Foxconn announced a hiring freeze that immediately sparked rumors of dropping demand for the iPhone 5. The market responded in kind and shares of Apple fell precipitously, with the company's market capitalization sinking below $400 billion for the first time in over a year.

Foxconn promptly and characteristically rushed to its benefactor's defense, saying that the halt in recruitment was not due to any single company or device. It cited a bevy of alternative explanations, including a higher-than-expected rate of return for vacationing employees coming back from Lunar New Year festivities. It was also speculated that the hiring freeze was related to the installation of robotic workers that were promised by Foxconn after a string of employee suicides last year.

On Sunday, however, TechCrunch reported that Foxconn was grappling not with a surplus of workers, but rather a dearth.

According to a Bloomberg News article, Foxconn, as well as several of its competitors, including Pegatron, Wistron and Quanta Computer, are moving away from manufacturing centers in Guangdong and going inland toward western Sichuan province and central Henan.

"The trend is toward inland, and it's driven by manufacturers' need to keep finding workers," said Bloomberg Industries technology analyst Jitendra Waral.    

After the Chinese government mandated an increase in the federal minimum wage, workers from inland provinces have had less impetus to leave their hometowns in pursuit of manufacturing jobs near coastal production hubs.

"Faster-rising wages inland have the effect of both reducing possible incentives for migrants to travel thousands of miles for work, and forcing wages higher as employers compete for labor," according to Ma Jiantang, head of China's National Bureau of Statistics.

Whatever the case in China may be, it's probably fair to say that new releases from HTC and Samsung have stolen a bit of thunder from Cupertino's favorite corporate citizen this year.

(Edited by Lois Heyman)

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