Following a series of worker suicides, Foxconn International Holdings Ltd. raised wages for employees at its factory in southern China where the iPod, iPhone and other consumer electronics are manufactured. The company announced earlier this year that it would likely pass some of those additional costs to clients and a report from Reuters last week cited a Citibank analyst in announcing that the price increase would happen this month. Will increased manufacturing costs affect the retail prices of some of your favorite electronics? Analysts disagree.
If the Reuters report is true, wrote analyst Daniel Tello, who blogs about Apple at Deagol's AAPL Model, in an email, then negotiations between Apple and Foxconn's parent company, Hon Hai Precision Industry Co. Ltd., have probably been underway for for some time now. It's likely that Apple would have taken any additional costs into account when they rolled out their latest batch of iPods last month, he wrote. Even if they didn't, the falling cost of materials could offset increased manufacturing costs. "So definitely no effect for consumers, and probably a net positive for Apple's margins when component cost declines are taken into account," he said.