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Apple Won't Charge Customers for Foxconn's Pay Raise

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Have you ever stared at the craftsmanship of your iPhone, marveled at the design of your Xbox 360, or gazed at the glare-free screen of your Kindle and wondered, "Who could make such a magnificent and affordable product?" Well, it may have been one of the several overworked and underpaid Foxconn employees who subsequently leapt to their deaths during this year.

Rivaling BP for the Worst Public Image of 2010 award, Foxconn has been saddled with accusations of cruel working conditions and military-style discipline for employee error. The 13 suicides only underscored what long hours and low wages could allegedly push a person to do.

In an attempt to save face and avoid further controversy, the Taipei-based supplier agreed to boost wages by 30% in June and an additional 66% in October. Founder Terry Gou said in a statement the raises are in order to "safeguard the dignity of workers."

Of course, that meant passing the cost of the raises on to the clients.

According to International Business Times, Foxconn clients Apple, Nokia, Microsoft, and Sony Ericsson would see an increase in costs to help push fourth quarter earnings after the employee wage hikes took effect. However, Rodman and Renshaw analyst Ashok Kumar doesn't believe that Apple would raise the price of its products to shoulder the burden of higher supply costs. He told IBT that the increase in component prices would likely be spread across the supply chain -- especially on the iPhone.

"The prices of $199 or $299 are static price points," Kumar said. "They have to stay competitive with Android and four to five dollars in added costs won't make a difference."

Fellow analyst at iSuppli Jordan Selburn echoed Kumar's thoughts and said Apple can easily make up the loss in volume.

"If you take a look at hardware design cost, for the latest processing technology, it costs substantially more than the state of art processors from a few years ago," Selburn said. "However, if you're building at a higher volume, it actually lowers the manufacturing cost. If you look at the A4, the processor in all the latest Apple devices, the reason Apple can afford to have that expensive chip built is they are building it in the tens of millions of units. It amortizes the high up front cost."

Phew, that is a relief.

I don't know about you but I would hate to see the cost of my iPhone go up as much as five dollars to ensure that some Chinese worker doesn't have to work the weekend to afford food for his kids. I mean, I've got fart apps to buy, you know?
POSITION:  No positions in stocks mentioned.