Hon Hai Downplays Wage Increases

Amid rising concerns about profitability and a tumbling stock price, Hon Hai Precision Industry Co. Chairman Terry Gou downplayed Tuesday the impact of recent wage increases and said it is accelerating automation to reduce its reliance on labor.

Separately, the chairman of its Foxconn International Holdings Ltd. handset manufacturing unit, which assembles handsets for Motorola Inc. (MOT) and Nokia Corp. (NOK), told shareholders in Hong Kong Tuesday it plans to conclude price negotiations for its products with clients in the third quarter to mitigate the impact from recent wage increases, suggesting price increases may be in store.

The wage-increase phenomenon “is negative to [Hon Hai's profit margin] in the short term, but we believe it is positive in the long term,” Mr. Gou said Tuesday at the company’s annual shareholders meeting.

Hon Hai, which employs some 800,000 workers in China, is now accelerating automation to reduce its reliance on labor.

“In the long term, the number of our employee might decrease,” he said, declining to be specific about how the company might want to adjust its work force.

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