OMRNY Omron Corp (PK)

Electronics manufacturer Hon Hai Precision Industry Co. (2317.TW) will discuss raising product prices with clients to offset planned wage increases for its employees, Executive Vice President C.L. Huang said during a news conference Wednesday.

Wage increases in China at Hon Hai and other firms have helped fuel speculation that companies could increasingly shift their manufacturing operations from China to other countries. A spate of employee suicides at Hon Hai, along with labor protests at other companies, has also drawn international scrutiny of the working conditions at factories in China.

Huang's comments came after Hon Hai's chairman, Terry Gou, in early June played down the impact of its wage increases and said it was accelerating automation to reduce its reliance on labor, while the company's Hong Kong-listed subsidiary, Foxconn International Holdings Ltd. (2038.HK), announced it would conclude price negotiations for its products with clients in the third quarter to mitigate the impact from the wage increases.

Huang said the extent of the price increases will differ according to the client or product. However, the company has yet to arrive at a definitive plan because the wage increases won't take effect until Oct. 1, she said.

Hon Hai, which uses the trade name Foxconn, assembles iPhones and iPads for Apple Inc. (AAPL) and mobile phones for Nokia Corp. (NOK)

In the first five months of this year, 10 employees at Hon Hai's 400,000-worker Shenzhen operation jumped to their deaths in separate incidents, prompting the company to take a series of measures to improve conditions, including large-scale wage increases in June.

Recent wage increases in China have also affected companies including Yum Brands Inc. (YUM), Honda Motor Corp. (HMC) and Toyota Motor Corp. (TM). Labor costs this year have risen between 20% and 25% in the Pearl River Delta and the Yangtze River Delta, two major manufacturing regions that extend inward from China's east coast, a spokesman for China's Ministry of Industry and Information Technology said earlier this week.

Hon Hai held an emergency press conference Wednesday, after a worker Tuesday fell to his death at a southern China factory of its affiliated company, Chimei Innolux Corp. (3481.TW). Huang said Chimei Innolux operates independently, but Hon Hai has drawn criticism from the Taiwanese media.

"We are now struggling on whether to invest more on Taiwan or not," Huang said, "We really love Taiwan, but any of our moves seem to spark criticism here."

As part of the efforts to offset the wage increases and to meet growing demand for its products, Huang said the company is now evaluating as many as four expansion projects in China's inland regions.

In late June, China's state-run Xinhua News Agency reported that Hon Hai would set up a new plant in Zhengzhou city, capital of Henan province. Xinhua quoted a spokesman with the municipal government and an official with the provincial employment promotion department.

Separately Wednesday, workers at a southern China factory owned by Japanese firm Omron Corp. (6645.OK) went on strike and demanded higher salaries, Xinhua reported, in the country's latest instance of labor unrest.

An undetermined number of workers at Omron (Guangzhou) Automobile Electronics Co.'s factory in Guangzhou staged a walkout to pressure the company to raise their monthly salaries to CNY1,800 each from CNY1,300 ($191), Xinhua said, citing local sources, adding Omron supplies electronic components to Honda and Toyota.

The company's management is in negotiations with workers, the sources were cited as saying. A spokesman for the Omron plant said it was unknown if the strike would affect production by customers like Honda, according to Xinhua.

In a sign of official concern about labor protests, South China's Guangdong province Wednesday reviewed a draft of the country's first law covering labor disputes and wage negotiations amid efforts to ease labor tensions in the country, according to another Xinhua report.

One of the major purposes of the revised draft of the Regulation on the Democratic Management of Enterprises in Guangdong is to establish a legally binding wage negotiation mechanism, Xinhua said. Among the regulation's 83 articles, 25 concern wage negotiations.

The draft law says the relevant union should organize wage negotiations between elected worker representatives and the employer when more than a fifth of workers demand a pay rise.

If the employer refuses to hold or join wage negotiations, the workers would be entitled to stop working and the employer shouldn't fire them for doing so, according to the draft law, Xinhua reported.

The regulation is the most comprehensive labor law in China, Liu Mu, head of the labor law department of the standing committee of the Guangdong Provincial People's Congress, was cited as saying.

"It will establish a mechanism so workers can legally voice demands for pay raises."

-By Ting-I Tsai and Owen Fletcher, Dow Jones Newswires; 8610 8400 7702; owen.fletcher@dowjones.com

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