Bowen Liu / Apple

At least that’s the word from Foxconn chief Terry Gou, who said as much during today’s groundbreaking ceremony for the company’s new Shanghai headquarters.

“We’ve discovered that [improving factory conditions] is not a cost. It is a competitive strength,” Gou told reporters today. “I believe Apple sees this as a competitive strength along with us, and so we will split the initial costs.”

Gou didn’t elaborate on the size of Apple’s financial commitment, or its terms. Nor did he explain if this investment is a new one, or simply part of the same deal that’s seen the two companies invite audits by the Fair Labor Association. But it’s clear that Apple is bolstering its efforts to improve labor conditions at factories where devices like the iPhone and iPad are built. And any forward movement there is welcome.

Apple declined comment on Gou’s remarks.

Hon Hai has a workforce of over one million worldwide, and as human beings are also animals, to manage one million animals gives me a headache.

– Hon Hai chairman Terry Gou, who went on to say that he wants to learn from the director of Taipei Zoo regarding how animals should be managed

Foxconn has in recent years seen its share of negative press. There was an explosion that killed three people at one of its plants in June. Prior to that there was a disturbing string of suicides that so shocked the sensibilities of Western consumers that it prompted demands for better working conditions and two lengthy cover stories in Wired and Bloomberg Businessweek. The concern was significant, in no small part because of the shadow the matter cast over Foxconn’s most prominent customer, Apple, which has done its best to force Foxconn to make the lives of its workers better.

Manufacturing electronics by the millions isn’t exactly mentally stimulating. The Wired story used the phrase “repetitive, exhausting, and alienating,” and it’s not hard to imagine going stir-crazy after doing it for any length of time. That’s why it’s interesting to see the news out of China today that Foxconn is going to boost the number of robots doing those repetitive tasks on its assembly line.

The story from Xinhua News, China’s state-controlled news agency, is headlined “Foxconn to replace workers with 1 million robots in 3 years,” and relates that the announcement came from Foxconn CEO Terry Gou himself at a company dance party.

Eerily absent is any comment on the reaction of those employees in attendance. Did they cheer at the thought of being freed up by robots from the least-popular jobs on the line? Or did they begin to worry anew, grasping the economic realities that additional factory automation bring with it?

Robots are efficient, they don’t get tired, and aside from routine maintenance, they don’t take breaks. They also don’t complain about soul-killing work conditions. All of this makes them appealing to Foxconn management and its growing list of clients.

But as anyone who knows even the barest details of the history of factory automation in the U.S. auto industry is aware, robots have a funny way of causing job losses. While Foxconn already uses some 10,000 robots now, the story says, the number is going to multiply by a factor of 100, to one million robots within three years. If those numbers turn out to be accurate, there is simply no mathematical way that some portion of the 1.2 million people currently in Foxconn’s employ can avoid losing their jobs. And that can’t help but cause other unexpected ripple effects throughout the Chinese economy.

(The image is a screen grab from the trailer for the 2004 Will Smith film “I, Robot,” which I obviously selected with tongue in cheek. Real robots used in the assembly of electronics look more like the one assembling cellphone speakers in the video below, from a Florida-based company called AccuPlace.)

The reason’s simple, says Hon Hai Chairman Terry Gou: The iPad is really hard to make.

“It’s very difficult to make Apple’s new products and while our cooperation with Apple has given us many opportunities, it has also posed many challenges,” Gou said during a company shareholder conference today. “But we’re confident in our manufacturing because our defect rate of some super-thin products, including handsets and touch models, is under 5 percent, which is better than our rival, Samsung Electronics.”

But evidently not good enough to keep the company’s financials where investors would like them. Between 2005 and 2010, Hon Hai’s operating margin fell to 2.87 percent from 5.43 percent. Gou is working actively to change this, but obviously it’s slow going.

[Image credit: iFixit]

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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A Hon Hai spokesman said the wage change discussion, which predates a wave of suicides at its giant Longhau factory in Shenzhen, flowed from concerns about a tight supply of workers in the southern industrial city where Hon Hai employs more than 400,000 staffers. “It is not related to the suicides,” he said.

Another Hon Hai worker tried to kill himself Thursday, becoming the 13th person to commit suicide or attempt to do so this year at the Longhau complex. Police said the 25-year-old man survived after cutting himself in his dormitory room at the factory, the state-run Xinhua News Agency reported.

The Hon Hai spokesman denied Thursday reports in two Taiwanese newspapers and at least one newspaper in China that Hon Hai Chairman Terry Gou said Wednesday the company would increase its minimum wage levels by 20 percent.

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