Foxconn to Step Up Production, Keep Up With Apple

Chairman Terry Gou of Foxconn's parent company, Hon Hai Precision Industry, told shareholders at an annual meeting that Foxconn must step up its game if it wants to succeed. Apple's iPads and iPhones are "very difficult to make", he acknowledged, but added the company has taken measures to improve its efficiency that should start to kick in later this year.

Beyond simply increasing output, Gou went on to suggest Foxconn begin to leave behind the contract manufacturing business and become a technology firm in its own right.

"We are a high-tech manufacturer", Gou stressed. "We're not a traditional contract maker".

Gou added that Foxconn doesn't aim to create its own brand and will still work for Apple, the company's main customer.

"We've helped Apple make a lot of money", he said. "If our customers make money, then we can also make money. I most fear customers that don't make money".

Apple has certainly turned a profit from Foxconn's hardware, as its popular mobile devices brought Apple $6 billion in the first quarter. Foxconn too has benefited from working for Apple, raking in a net of $3 trillion last year. With the iPad 2's debut in March, Apple and Foxconn are poised to make even more, even if supply chain disruptions quiet down.

As it stands, consumers must now wait four to five weeks for their iPad 2s because Apple is facing "the mother of all backlogs" on tablet production. High demand coupled with disruptions from the Japan earthquake has led to long and occasionally even violent waiting lines.

In the Beijing Apple store, customers awaiting the launch of the iPad 2 recently got into a scuffle that ended in injuries and a smashed store window.

Foxconn too has felt the pressure of keeping up with the iPad's high demand. Fourteen factory workers killed themselves last year, allegedly because of illegal overtime, poor working conditions and routine abuse. Detractors describe Foxconn's factories as "labor camps" where employees and sometimes even children exist as indentured servants.

These allegations were compounded when dust from a polishing wing in the Chengdu factory spontaneously combusted on May 23, killing three workers and injuring many others. Foxconn closed the plant for several days, insisting however that the closure did not impact iPad 2 production.

As Foxconn strives to improve its efficiency and expands to become a credible technology firm, it will need to balance profits with its public image.